AGREEMENT AND PLAN OF MERGER DATED AS OF SEPTEMBER 5, 2005 AMONG ARH MORTGAGE INC., AIRLIE OPPORTUNITY MASTER FUND, LTD. AND UNITED FINANCIAL MORTGAGE CORP.
Exhibit
2.1
DATED
AS OF SEPTEMBER 5, 2005
AMONG
ARH
MORTGAGE INC.,
Table
of Contents
|
Page |
ARTICLE
I
|
CERTAIN
DEFINITIONS
|
2
|
Section
1.01
|
Certain
Definitions
|
2
|
ARTICLE
II
|
THE
MERGER
|
11
|
Section
2.01
|
The
Merger
|
11
|
Section
2.02
|
Closing
|
11
|
ARTICLE
III
|
CONSIDERATION;
EXCHANGE PROCEDURES
|
11
|
Section
3.01
|
Consideration
|
11
|
Section
3.02
|
Rights
as Shareholder
|
12
|
Section
3.03
|
Exchange
Procedures
|
12
|
Section
3.04
|
Company
Options and Restricted Stock
|
13
|
Section
3.05
|
Company
Preferred Stock
|
14
|
Section
3.06
|
Warrants
|
14
|
Section
3.07
|
Dissenting
Shares
|
14
|
|
||
ARTICLE
IV
|
ACTIONS
PENDING ACQUISITION
|
15
|
Section
4.01
|
Covenants
of the Company
|
15
|
Section
4.02
|
Covenants
of the Purchasers
|
18
|
|
||
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES
|
18
|
Section
5.01
|
Representations
and Warranties of the Company
|
18
|
Section
5.02
|
Representations
and Warranties of the Purchasers
|
36
|
|
||
ARTICLE
VI
|
COVENANTS
|
38
|
Section
6.01
|
Commercially
Reasonable Efforts
|
38
|
Section
6.02
|
Shareholder
Approval
|
39
|
Section
6.03
|
Proxy
Statement; Regulatory Filings
|
39
|
Section
6.04
|
Press
Releases
|
40
|
Section
6.05
|
Access;
Information
|
40
|
Section
6.06
|
No
Solicitation by the Company
|
41
|
Section
6.07
|
[Reserved]
|
42
|
Section
6.08
|
Indemnification.
|
42
|
Section
6.09
|
Employees;
Benefit Plans
|
43
|
Section
6.10
|
Merging
Subsidiary
|
44
|
Section
6.11
|
Advice
of Changes
|
44
|
Section
6.12
|
Current
Information
|
45
|
Section
6.13
|
Transition
|
45
|
Section
6.14
|
Stock
Option Plan
|
45
|
Section
6.15
|
Company
Preferred Stock Repurchase Agreement
|
45
|
i
ARTICLE
VII
|
CONDITIONS
TO CONSUMMATION OF THE MERGER
|
46
|
Section
7.01
|
Conditions
to Obligations of the Parties to Effect the Merger
|
46
|
Section
7.02
|
Conditions
to Obligations of the Company
|
46
|
Section
7.03
|
Conditions
to Obligations of the Purchasers
|
47
|
Section
7.04
|
Frustration
of Closing Conditions
|
48
|
|
||
ARTICLE
VIII
|
TERMINATION
|
48
|
Section
8.01
|
Termination
|
48
|
Section
8.02
|
Effect
of Termination and Abandonment.
|
50
|
|
||
ARTICLE
IX
|
MISCELLANEOUS
|
53
|
Section
9.01
|
Survival
|
53
|
Section
9.02
|
Waiver;
Amendment
|
53
|
Section
9.03
|
Counterparts
|
53
|
Section
9.04
|
Governing
Law
|
53
|
Section
9.05
|
Expenses
|
53
|
Section
9.06
|
Notices
|
53
|
Section
9.07
|
Entire
Understanding; No Third Party Beneficiaries
|
54
|
Section
9.08
|
Severability
|
55
|
Section
9.09
|
Enforcement
of the Agreement
|
55
|
Section
9.10
|
Interpretation
|
55
|
Section
9.11
|
Assignment
|
55
|
Section
9.12
|
Alternative
Structure
|
55
|
SCHEDULE
I
SCHEDULE
II
COMPANY
DISCLOSURE SCHEDULE
ANNEX A
|
Form of Voting Agreement |
ANNEX B | Company Preferred Stock Repurchase Agreement |
ANNEX C | Form of Consulting Agreement among the Purchaser, the Company and Xxxxxx Xxxxxxxx |
ANNEX D | Form of Employment Agreement among the Purchaser, the Company and Xxxxx X. Xxxxxxxx |
ANNEX E | Form of Opinion of the Purchasers’ Counsel |
ANNEX F | Form of Opinion of the Company’s Counsel |
ii
AGREEMENT
AND PLAN OF MERGER, dated as of September 5, 2005 (this “Agreement”), among ARH
Mortgage Inc., a Delaware corporation (the “Purchaser”), Airlie Opportunity
Master Fund, Ltd., a Cayman Islands limited partnership and the sole shareholder
of the Purchaser (the “Purchaser Parent,” and together with the Purchaser, the
“Purchasers”), and United Financial Mortgage Corp. (the “Company”), an Illinois
corporation.
RECITALS
WHEREAS,
the respective boards of directors of the Purchaser and the Company, and
the
partners of the Purchaser Parent, have determined that it is in the best
interests of their respective companies and their shareholders or partners,
as
the case may be, to consummate the transactions being considered herein pursuant
to which the Purchasers shall acquire control of the Company through the
merger
of the Merging Subsidiary, as defined below, with and into the Company (the
“Merger”) with the Company being the surviving corporation (the “Surviving
Corporation”); and
WHEREAS,
pursuant to the terms of this Agreement, each issued and outstanding share
of
Company Common Stock (excluding Dissenting Shares and Treasury Stock), each
as
defined below, shall be exchanged for cash in an amount equal to $5.64 per
share, and each issued and outstanding share of common stock of the Merging
Subsidiary, as defined below, shall be exchanged for one (1) share of common
stock of the Surviving Corporation, no par value per share; and
WHEREAS,
as a material inducement to the Purchasers to enter into this Agreement,
simultaneously with the execution of this Agreement, each Director Shareholder,
as defined below, is entering into an agreement, in the form of Annex
A
hereto
(collectively, the “Voting Agreements”), pursuant to which the Director
Shareholders have agreed, subject to the terms and limitations set forth
in the
Voting Agreements, among other things, to vote their shares of Company Common
Stock in favor of this Agreement; and
WHEREAS,
the parties desire to make certain representations, warranties and agreements
in
connection with the Merger and also to prescribe certain conditions to the
consummation of the Merger;
NOW,
THEREFORE, in consideration of the premises and of the mutual covenants,
representations, warranties and agreements contained herein, and intending
to be
legally bound hereby, the parties agree as follows:
ARTICLE
I
CERTAIN
DEFINITIONS
Section
1.01 Certain
Definitions. The
following terms are used in this Agreement with the meanings set forth
below:
“Acquisition
Proposal” means any proposal or offer with respect to any of the following
(other than the transactions contemplated hereunder) involving the Company:
(i)
any merger, consolidation, share exchange, business combination or other
similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other
disposition of assets and/or liabilities that constitutes a substantial portion
of the net revenues, net income or assets of the Company in a single transaction
or series of transactions; (iii) any tender offer or exchange offer for 10%
or
more of the outstanding shares of its capital stock or the filing of a
registration statement under the Securities Act in connection therewith;
or (iv)
any public announcement by any Person (which shall include any regulatory
application or notice, whether in draft or final form) of a proposal, plan
or
intention to do any of the foregoing or any agreement to engage in any of
the
foregoing.
“Acquisition
Transaction” means any of the following (other than the transactions
contemplated hereunder) involving the Company: (i) any merger, consolidation,
share exchange, business combination or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of
assets
and/or liabilities that constitutes a substantial portion of the net revenues,
net income or assets of the Company in a single transaction or series of
transactions; or (iii) any tender offer or exchange offer for 10% or more
of the
outstanding shares of its capital stock or the filing of a registration
statement under the Securities Act in connection therewith.
“Agency”
means the FHA, the FHLMC, the FMHA (now RHCDS), the FNMA, the GNMA, HUD,
the VA,
RHS or a State Agency, as applicable.
“Agreement”
means this Agreement, as amended or modified from time to time in accordance
with Section 9.02.
“AmPro”
means AmPro Mortgage Corporation.
“AmPro
Acquisition” means the acquisition by the Company pursuant to the AmPro
Agreement.
“AmPro
Agreement” means the definitive agreement between AmPro and the Company, dated
May 4, 2005, pursuant to which the Company has agreed to acquire certain
business divisions of AmPro, as such agreement may be amended, revised,
supplemented or otherwise modified from time to time.
“Business
Day” means Monday through Friday of each week, except a legal holiday recognized
as such by the U.S. Government or any day on which banking institutions in
the
State of Illinois are authorized or obligated to close.
“Certificate”
means a certificate evidencing shares of Company Common Stock.
“Closing”
and “Closing Date” have the meanings set forth in Section 2.02.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Company”
has the meaning set forth in the preamble to this Agreement.
“Company
Articles” means the Articles of Incorporation of the Company, as
amended.
2
“Company
Benefit Plans” has the meaning set forth in Section 5.01(o)(i).
“Company
Board” means the Board of Directors of the Company.
“Company
Bylaws” means the Bylaws of the Company, as amended.
“Company
Common Stock” means shares of the common stock of the Company, no par value per
share.
“Company
Disclosure Schedule” has the meaning set forth at the beginning of Section
5.01.
“Company
Employees” has the meaning set forth in Section 5.01(o)(i).
“Company
Financial Advisor” means Xxxx Xxxx & Co., Inc.
“Company
Financial Statements” has the meaning set forth in Section 5.01(g).
“Company
Group” means any “affiliated group” (as defined in Section 1504(a) of the Code
without regard to the limitations contained in Section 1504(b) of the Code)
that
includes the Company or any predecessor of or any successor to the Company
(or
to another such predecessor or successor).
“Company
Loan Property” has the meaning set forth in Section 5.01(q).
“Company
Meeting” has the meaning set forth in Section 6.02.
“Company
Options” means the options to acquire Company Common Stock issued under any
Company Stock Incentive Plan.
“Company
Pension Plan” has the meaning set forth in Section 5.01(o)(ii).
“Company
Preferred Stock” means shares of the preferred stock of the Company, no par
value per share.
“Company
Preferred Stock Repurchase Agreement” has the meaning set forth in Section
3.05.
“Company
Restricted Stock” means the Company’s restricted stock under any Company Stock
Incentive Plan.
“Company
Restricted Stock Award” means a grant of restricted stock under any Company
Stock Incentive Plan.
“Company
SEC Reports” has the meaning set forth in Section 5.01(bb).
“Company
Stock” means, collectively, the Company Common Stock and the Company Preferred
Stock.
3
“Company
Stock Incentive Plan” means, either or both, as appropriate, the Company’s 1993
Non-Qualified and Incentive Stock Option Plan or the Company’s 2004 Stock
Incentive Plan.
“Company
Termination Reimbursement Amount” has the meaning set forth in Section
8.02(c)(ii).
“Confidentiality
Agreement” means the Confidentiality Agreement, dated as of August 9, 2005,
between the Company and Airlie Enterprises LLC.
“Consideration”
has the meaning set forth in Section 3.01(a).
“Custodial
Account” means all funds held or directly controlled by the Company with respect
to any Mortgage Loan, including, but not limited to, all principal and interest
funds and any other funds due, buydown funds, suspense funds, funds for the
payment of Taxes, assessments, insurance premiums, ground rents and similar
charges, funds for the payment of bankruptcy and fraud coverage, funds from
hazard insurance loss drafts and other mortgage escrow and impound amounts
(including interest thereon for the benefit of mortgagors, if
applicable).
“Delinquent
Loan” means those Mortgage Loans which, as of the Closing Date, are more than
sixty (60) days delinquent or past due more than two (2) payments.
“Derivative
Transactions” has the meaning set forth in Section 5.01(t)(iii).
“Director
Shareholder” means each director of the Company who is a
Shareholder.
“Dissenting
Shares” has the meaning set forth in Section 3.07.
“Environmental
Laws” has the meaning set forth in Section 5.01(q)(ii).
“Equal
Credit Opportunity Act” means the Equal Credit Opportunity Act, as
amended.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
“Exchange
Agent” means Corporate Stock Transfer, Inc., or such other exchange agent as may
be designated by the Purchasers and reasonably acceptable to the Company
to act
as agent for purposes of conducting the exchange procedures described in
Section
3.03.
4
“Exchange
Agent Agreement” means the agreement among the Purchasers and the Exchange
Agent, to be entered into subsequent to execution of this Agreement, relating
to
the obligations, rights and procedures set forth in Section 3.03 hereto,
the
terms of which shall be reasonably acceptable to the Company.
“Fair
Housing Act” means the Fair Housing Act, as amended.
“FHA”
means the Federal Housing Administration.
“FMHA”
means the Farmers Home Administration, now known as RHCDS, or Rural Housing
and
Community Development Services.
“FNMA”
means the Federal National Mortgage Association.
“FHLMC”
means the Federal Home Loan Mortgage Corporation.
“GAAP”
means accounting principles generally accepted in the United States of
America.
“GNMA”
means the Government National Mortgage Association.
“Governmental
Authority” means any federal, state or local court, administrative agency or
commission or other governmental authority or instrumentality.
“Hazardous
Substance” has the meaning set forth in Section 5.01(q)(ii).
“HUD”
means the United States Department of Housing and Urban
Development.
“Illinois
Business Corporation Act” means the Illinois Business Corporation Act of 1983,
as amended from time to time.
“Indebtedness”
with respect to any Person means (a) any obligation of the Person for borrowed
money, including, without limitation: (i) any obligation or liabilities incurred
for all or any part of the purchase price of property, stock or other assets
or
for the cost of property or other assets constructed or of improvements thereto,
other than accounts payable included in current liabilities and incurred
in the
ordinary course of business (whether accrued, absolute, contingent, unliquidated
or otherwise, known or unknown, whether due or to become due);
(ii) obligations incurred for all or any part of the purchase price
of
property or other assets or for the cost of property or other assets constructed
or of improvements thereto, other than accounts payable included in current
liabilities and incurred in respect of property purchased in the ordinary
course
of business (whether or not the Person has assumed or become liable for the
payment of the obligation) secured by Liens; (iii) the face amount of all
letters of credit issued for the account of the Person and all drafts drawn
thereunder; (iv) capitalized lease obligations; (v) all guarantees of the
Person; (vi) annual employee bonus obligations that are not accrued on the
Company’s most recent balance sheet provided to the Purchasers; (vii)
installment purchases; and (viii) unpaid retroactive insurance premium
obligations.
5
“Indemnified
Party” and “Indemnifying Parties” have the meanings set forth in Section
6.08(a).
“Insurance
Policies” has the meaning set forth in Section 5.01(x).
“Insurer”
means the FHA, VA, RHS or any private mortgage insurer that insures or
guarantees all or any portion of the risk of loss upon default by a Mortgagor
under any Mortgage Loan or any other insurer that provides policies of life,
hazard, disability, title or other insurance with respect to any of the Mortgage
Loans or the collateral securing a Mortgage Loan.
“Investment
Commitment” means the optional or mandatory commitment of the
Company to sell to any Person, and a Person to purchase from the
Company, a Mortgage Loan or an interest in a Mortgage Loan
owned or to
be acquired by the Company.
“Investor”
means FNMA, FHLMC, GNMA or any other Person having the beneficial interest
in a
Mortgage Loan, or any purchaser or prospective purchaser of a Mortgage
Loan.
“Investor
Commitment” means the commitment of an Investor to purchase a Mortgage Loan
owned by the Company.
“Investor
Requirements” means any requirement, guide or indication set forth by the
Investor(s) with which the Company is obligated to comply in the delivery
of
Mortgage Loans under an Investor Commitment or the Servicing of the Mortgage
Loans, including but not limited to applicable rules, regulations, directives,
guidelines, and instructions and the Servicing Agreements.
“IRS”
means the Internal Revenue Service.
“Knowledge”
as used with respect to the Company (including references to the Company
being
aware of a particular matter) means those facts that are known by the directors
of the Company or, upon reasonable inquiry, to any of Xxxxx X. Xxxxxxxx,
Xxxxx
X. Xxxxxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxx or Xxxxxxxxx X. Xxxxxxx,
and
includes any facts, matters or circumstances set forth in any written notice
from any Governmental Authority or any other written notice received by the
Company. “Knowledge” as used with respect to any other Person (including
references to such Person being aware of a particular matter) means those
facts
that are known by the senior officers and directors of such Person, or in
the
case of the Purchaser Parent, the senior officers and general partners of
the
Purchaser Parent, and includes any facts, matters or circumstances set
forth
in any written notice from any Governmental Authority or any other written
notice received by that Person.
“Leases”
means all leases, subleases, licenses and other agreements under which the
Company uses or occupies or has the right to use or occupy, now or in the
future, real property.
6
“Lending
Policies” means the written policies and procedures used by the Company in the
origination and administration of the Mortgage Loans and any applicable rules
or
regulations of Governmental Authorities.
“Liens”
means any charge, mortgage, pledge, security interest, restriction, claim,
lien
or encumbrance.
“Loan
Documents” means each agreement, contract, instrument or other document
evidencing or governing, or executed and delivered by an obligor in
connection with, any Mortgage Loan, including documentation in respect
of
guarantees and security interests granted or delivered by an obligor
in
connection with such Mortgage Loan.
“Loan
File” means all documents, whether on hard copy, computer record, microfilm,
imaged copies, or any other format, evidencing and pertaining or relating
to the
processing and origination of Mortgage Loans, as the case may be, including
without limitation, all documents in the Company’s possession that are necessary
to comply with or close a Mortgage Loan in accordance with applicable Mortgage
Loan Requirements.
“Loan
Reserve Policies” means any and all loan loss or loan reserve policies of the
Company.
“Material
Adverse Effect” means (a) with respect to the Company, any effect that is
material and adverse to the financial position, results of operations or
business of the Company or which would materially impair the ability of the
Company to perform its obligations under this Agreement or otherwise materially
impairs the ability of the Company to consummate the Merger; provided, however,
that Material Adverse Effect shall not be deemed to include the impact of
(i)
changes in laws relating to mortgage banking or mortgage lending and similar
laws of general applicability or interpretations thereof by Governmental
Authorities, (ii) changes in GAAP or regulatory accounting requirements
applicable to mortgage bankers, mortgage lenders or mortgage brokers generally,
(iii) changes in general economic conditions (including interest rates)
affecting mortgage bankers, mortgage lenders or mortgage brokers generally,
(iv)
factors affecting the financial markets as a whole (which factors do not
disproportionately affect the Company as compared to other companies in its
industry in any material respect), (v) any modifications or changes to valuation
policies and practices in connection with the Merger or restructuring charges
taken in connection with the Merger, in each case in accordance with GAAP,
(vi)
reasonable expenses incurred in connection with the Merger and (vii) the
effects
of any action or omission taken with the prior consent of the Purchasers
or as
otherwise expressly permitted by this Agreement (including compliance with
the
covenants contained in this Agreement); and (b) with respect to the Purchasers,
any effect that materially impairs the ability of the Purchasers to make
payment
on the Closing Date of the aggregate Consideration or otherwise materially
impairs the ability of the Purchasers to consummate the Merger.
“Material
Contracts” has the meaning set forth in Section 5.01(m)(i).
7
“Merger”
has the meaning set forth in the Recitals.
“Merging
Subsidiary” means a wholly-owned subsidiary corporation of the Purchaser to be
organized in the State of Illinois in connection with the execution of this
Agreement and for the sole purpose of effecting the Merger.
“Mortgage”
means a mortgage, deed of trust or other instrument pledging property as
security for payment of a Mortgage Note.
“Mortgage
Loan” means an individual mortgage loan that has been originated, serviced,
owned or financed by the Company in the course of its business and for which
under any legal theory, law or regulation the Company continues to hold an
interest or continues to have any liability or obligation, which may include
Servicing Rights and the obligations that would accompany such Servicing
Rights.
“Mortgage
Loan Requirements” means the (i) federal, state, local or foreign laws, rules,
standards, requirements, administrative rulings, orders, or processes applicable
to the processing, origination and servicing of Mortgage Loans, (ii) applicable
responsibilities and obligations set forth in any agreement between the Company
and an Agency, Investor or Insurer, and (iii) applicable requirements of
an
Investor, Agency or Insurer with respect to the processing or origination
of
Mortgage Loans.
“Mortgage
Note” means a promissory note evidencing a Mortgage Loan secured by a
Mortgage.
“Mortgagor”
means the obligor on a Mortgage Note.
“National
Labor Relations Act” means the National Labor Relations Act, as
amended.
“Pool”
means a group of Mortgage Loans that collateralize a mortgage-backed or
asset-backed security issue.
“Purchaser”
has the meaning set forth in the preamble to this Agreement.
“Purchasers”
has the meaning set forth in the preamble to this Agreement.
“Purchaser
Benefit Plans” has the meaning set forth in Section 6.09(a).
“Purchaser
Board” means the board of directors of the Purchaser.
“Purchaser
Parent” has the meaning set forth in the preamble to this
Agreement.
“Purchaser
Termination Reimbursement Amount” has the meaning set forth in Section
8.02(c)(i).
“Person”
means any individual, bank, corporation, general, limited or limited liability
partnership, association, joint-stock company, business trust, limited liability
company, unincorporated organization or other organization or firm of any
kind
or nature.
8
“Proxy
Statement” means the proxy statement, together with any amendments and
supplements thereto, to be delivered to holders of Company Common Stock in
connection with the solicitation of their approval of this
Agreement.
“Rights”
means, with respect to any Person, warrants, options, rights, convertible
securities and other arrangements or commitments which obligate the Person
to
issue or dispose of any of its capital stock or other ownership
interests.
“RHS”
means the Rural Housing Service of the U.S. Department of Agriculture, or
any
successor thereto.
“Sales
Commitments” means commitments of the Company to sell Mortgage
Loans.
“SEC”
means the Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
“Servicing
Agreement” means each agreement between the Company and another Person
(including an Investor) under which a Mortgage Loan is serviced or otherwise
affecting the Servicing Rights.
“Servicing
Rights” or “Servicing” means all of the Company’s obligations to service the
Mortgage Loans in accordance with the Mortgage Loan Requirements, and all
of the
Company’s rights to receive the servicing fee income and any and all ancillary
or other income including, without limitation, prepayment fees, premiums,
late
charge income, and all of the Company’s rights to hold and administer the
related escrows and the records arising from or connected to any of the
servicing of the Mortgage Loans that are owned by the Company as of the Closing
Date.
“Shareholders”
means shareholders of Company Common Stock immediately prior to consummation
of
the Merger.
“State
Agency” means any state agency with authority to (i) regulate the businesses of
the Company, including without limitation any state agency with authority
to
determine the investment, origination, lending or servicing requirements
with
regard to mortgage loans originated, purchased or serviced by the Company,
or
(ii) regulate the Company’s ability to originate, purchase or service mortgage
loans, or otherwise promote mortgage lending, including without limitation
state
and local housing finance authorities.
“Subsidiary”
means, with respect to any party, any corporation or other entity of which
a
majority of the capital stock or other ownership interest having ordinary
voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such
party.
9
“Superior
Proposal” means any bona fide written proposal made by a third party to acquire,
directly or indirectly, including pursuant to a tender offer, exchange offer,
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction, for consideration consisting of cash
and/or
securities, more than 50% of the combined voting power of the shares of Company
Common Stock then outstanding or all or substantially all of the assets of
the
Company and otherwise (i) on terms which the Company Board determines in
good
faith, after consultation with the Company Financial Advisor, to be more
favorable from a financial point of view to the Shareholders than the
Consideration, (ii) that constitutes a transaction that, in the Company Board’s
good faith judgment, is reasonably likely to be consummated on the terms
set
forth, taking into account all legal, financial, regulatory and other aspects
of
such proposal, and (iii) for which financing, to the extent required, is
then
committed or which, in the good faith judgment of the Company Board based
on the
advice from
the
Company Financial Advisor, is highly likely to be obtained by such third
party.
“Surviving
Corporation” has the meaning set forth in the Recitals.
“Tax”
and
“Taxes” mean all federal, state, local or foreign income, gross income, gains,
gross receipts, sales, use, ad valorem, goods and services, capital, production,
transfer, franchise, windfall profits, license, withholding, payroll,
employment, disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, custom duties, unemployment or other
taxes
of any kind whatsoever, together with any interest, additions or penalties
thereto and any interest in respect of such interest and penalties.
“Tax
Authority” and “Tax Authorities” means any Governmental Authority responsible
for the assessment or collection of any Tax.
“Tax
Returns” means any return, declaration or other report (including elections,
declarations, schedules, estimates and information returns) with respect
to any
Taxes.
“Termination
Fee” has the meaning set forth in Section 8.02(b).
“Treasury
Stock” means shares of Company Stock held by the Company, or by the Purchasers,
in each case other than in a fiduciary (including custodial or agency)
capacity.
“VA”
means the United States Department of Veterans Affairs, or any successor
thereto.
“Voting Agreements” has
the
meaning set forth in the Recitals.
“Warrant”
has the meaning set forth in Section 3.06.
10
ARTICLE
II
THE
MERGER
Section
2.01 The
Merger.
(a) The
Merger.
Subject
to the terms and conditions of this Agreement, the Merging Subsidiary shall
merge with and into the Company in accordance with the provisions of Article
11
of the Illinois Business Corporation Act. Upon consummation of the Merger,
the
separate corporate existence of the Merging Subsidiary shall terminate and
the
Company shall be the Surviving Corporation operating under the laws of the
State
of Illinois.
(b) Articles
and Bylaws.
The
Company Articles and Company Bylaws as in effect immediately prior to
consummation of the Merger shall be the Articles of Incorporation and Bylaws
of
the Surviving Corporation.
(c) Directors
and Officers of the Surviving Corporation.
The
directors of the Surviving Corporation shall be the directors of the Merging
Subsidiary immediately prior to the Merger. The executive officers of the
Surviving Corporation shall be the executive officers of the Company immediately
prior to the Merger.
(d) Authorized
Capital Stock.
The
authorized capital stock of the Surviving Corporation upon consummation of
the
Merger shall be as set forth in the Company Articles immediately prior to
the
Merger.
(e) Effect
of the Merger.
On the
Closing Date, all the property, rights, privileges, powers and franchises
of the
Company shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company shall become
the debts, liabilities, obligations, restrictions, disabilities and duties
of
the Surviving Corporation.
Section
2.02 Closing.
A
closing
(the “Closing”) shall take place at the principal offices of Xxxxxxx Xxxxxxxx
& Xxxx llp
(“Xxxxxxx Xxxxxxxx”) at 10:00 a.m., Eastern Time, on October 31, 2005 or such
other place, at such other time, or on such other date as the parties may
mutually agree upon (such date, the “Closing Date”). At the Closing, there shall
be delivered to the Purchasers and the Company the certificates and other
documents required to be delivered under Article VII hereof.
ARTICLE
III
CONSIDERATION;
EXCHANGE PROCEDURES
Section
3.01 Consideration.
Subject
to the provisions of this Agreement, on the Closing Date, automatically by
virtue of the Merger and without any action on the part of any
Person:
(a) Company
Common Stock.
Subject
to the provisions of this Agreement, automatically by virtue of the Merger
and
without any action on the part of any Person, (i) each share of Company Common
Stock issued and outstanding immediately prior to the Merger (excluding
Dissenting Shares and Treasury Stock) shall be converted into the right to
receive cash in an amount equal to $5.64 (the “Consideration”), and (ii) each
Certificate representing issued and outstanding Company Common Stock shall,
after the Closing Date, represent only the right to receive the Consideration
specified in clause (i) above. Shareholders of the Company shall not be required
or permitted to exchange Certificates evidencing Company Common Stock for
certificates evidencing common stock of the Surviving Corporation upon
consummation of the Merger.
11
(b) Outstanding
Merging Subsidiary Common Stock.
Each
share of common stock of the Merging Subsidiary issued and outstanding
immediately prior to the Closing Date shall automatically by virtue of the
Merger and without any action on the part of any Person be converted into
one
(1) share of validly issued, fully paid and nonassessable common stock of
the
Surviving Corporation, no par value per share.
(c) Treasury
Stock.
Each
share of Company Common Stock held as Treasury Stock immediately prior to
the
Closing Date shall be canceled and retired on the Closing Date and no
consideration shall be issued in exchange therefor.
Section
3.02 Rights
as Shareholder.
As of
the Closing Date, Shareholders of Company Common Stock shall cease to be,
and
shall have no rights as, shareholders of the Surviving Corporation other
than
the right to receive the Consideration provided under this Article
III.
Section
3.03 Exchange
Procedures.
The
parties hereto shall enter into the Exchange Agent Agreement prior to the
Closing Date, which shall provide the following:
(a) No
later
than three (3) Business Days following the Closing Date, the Purchasers shall
cause the Exchange Agent to mail or make available to each holder of record
of a
Certificate a notice and letter of transmittal disclosing the effectiveness
of
the Merger and the procedure for exchanging Certificates for the Consideration.
Such letter of transmittal shall specify that delivery shall be effected
and
risk of loss and title shall pass only upon proper delivery of Certificates
to
the Exchange Agent.
(b) At
or
prior to the Closing Date, the Purchasers, without duplication, shall deliver
to
the Exchange Agent for the benefit of the holders of Certificates (other
than
the holders of Dissenting Shares and Treasury Stock) an amount of cash equal
to
the aggregate Consideration for payment of the aggregate Consideration to
such
holders of Certificates.
(c) Each
holder of any outstanding Certificate (other than holders of Dissenting Shares
and Treasury Stock) who surrenders such Certificate (or other appropriate
documentation under Section 3.03(d) below) to the Exchange Agent will, upon
acceptance thereof by the Exchange Agent, be entitled to the Consideration.
The
Exchange Agent shall accept Certificates upon compliance with such reasonable
terms and conditions as the Exchange Agent may impose to effect an orderly
exchange in accordance with normal exchange practices. Each outstanding
Certificate which is not surrendered to the Exchange Agent shall evidence
ownership of only the right to receive the Consideration without
interest.
12
(d) The
Exchange Agent shall not be obligated to deliver the Consideration until
the
Shareholder surrenders a Certificate as provided in this Section 3.03, or,
in
default thereof, presents appropriate documentation as may be required in
each
case by the Exchange Agent. If any check is to be issued in a name other
than
that in which the Certificate is registered, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
or accompanied by an executed form of assignment separate from the Certificate
and otherwise in proper form for transfer and that the person requesting
such
exchange pay to the Exchange Agent any transfer or other Tax required by
reason
of the issuance of a check in any name other than that of the registered
holder
of the Certificate surrendered or otherwise establish to the satisfaction
of the
Exchange Agent that such Tax has been paid or is not payable.
(e) Any
portion of the cash delivered to the Exchange Agent by the Purchasers pursuant
to Section 3.03(b) that remains unclaimed by the Shareholders for six months
after the Closing Date shall be delivered by the Exchange Agent to the
Purchasers, as directed by the Purchasers. Any Shareholders who have not
theretofore complied with Section 3.03(c) shall thereafter look only to the
Purchasers for the Consideration. If outstanding Certificates are not
surrendered or the payment for them is not claimed prior to the date on which
such payment would otherwise escheat to or become the property of any
Governmental Authority, the unclaimed items shall, to the extent permitted
by
abandoned property and any other applicable law, become the property of the
Purchasers (and to the extent not in the Purchasers’ possession shall be
delivered to the Purchasers), free and clear of all Liens of any Person
previously entitled to such property. Neither the Exchange Agent nor any
of the
parties hereto shall be liable to any Shareholder for any consideration paid
to
a public official pursuant to applicable abandoned property, escheat or similar
laws in accordance with this Section 3.03(e). The Purchasers and the Exchange
Agent shall be entitled to rely upon the stock transfer books of the Company
to
establish the identity of those persons entitled to receive the Consideration,
which books shall be conclusive with respect thereto.
(f) The
Exchange Agent or the Purchasers shall be entitled to deduct and withhold
from
the Consideration otherwise payable pursuant to this Agreement to any holder
of
Certificates an amount of Taxes that is attributable to the making of such
payment under the Code, or any provision of state, local or foreign Tax law,
including without limitation, all sales, use, transfer, income and other
applicable Taxes. To the extent that amounts are so withheld by the Exchange
Agent or the Purchasers, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Certificates in
respect of which such deduction and withholding was made.
Section
3.04 Company
Options and Restricted Stock.
Prior to
and effective as of the Closing Date, the Company shall take all such action
as
is necessary to terminate the Company Stock Incentive Plan and shall provide
written notice to each holder of a then-outstanding Company Option (whether
or
not such Company Option is then vested or exercisable) that such Company
Option
shall be, as at the date of such notice, fully vested and exercisable in
full
and that such Company Option shall terminate on the Closing Date and that,
if
such Company Option is not exercised or otherwise terminated on or before
the
Closing Date, such holder shall be entitled to receive in cancellation of
such
Company Option a cash payment from the Company at the Closing in an amount
equal
to the excess of the Consideration over the per share exercise price of such
Company Option, multiplied by the number of shares of Company Common Stock
covered by such Company Option, subject to any required withholding of Taxes.
Similarly, prior to and effective as of the Closing Date, the Company shall
provide written notice to each holder of a then-outstanding unvested Company
Restricted Stock Award that such Company Restricted Stock Award shall be
cancelled as of the Closing Date and such holder shall be entitled to receive
in
cancellation of such Company Restricted Stock a cash payment from the Company
at
the Closing in an amount equal to the Consideration multiplied by the number
of
shares of Company Common Stock covered by such Company Restricted Stock Award
which has been cancelled, subject to any required withholding of Taxes. The
Company shall obtain the written acknowledgement of each holder of a
then-outstanding Company Option and then-outstanding unvested Company Restricted
Stock Award with regard to the cancellation of such Company Option or Company
Restricted Stock Award and the payment therefor in accordance with the terms
of
this Agreement.
13
Section
3.05 Company
Preferred Stock.
The
Company has entered into an agreement with the sole owner of the Company
Preferred Stock, a copy of which is attached hereto as Annex
B
(the
“Company Preferred Stock Repurchase Agreement”), in which the owner of the
Company Preferred Stock has agreed to sell and the Company has agreed to
purchase all of the outstanding Company Preferred Stock, effective immediately
prior to the Closing Date, at which time such owner shall be entitled to
receive
a purchase price in consideration for such Company Preferred Stock in an
amount
equal to $5,000 per share of Company Preferred Stock, plus a pro-rated cash
dividend per share of Company Preferred Stock for the period beginning May
1,
2005 through, but not including, the Closing Date (based on an annual cash
dividend per share of $611.11). The Company shall take all such action as
is
necessary to repurchase and retire the Company Preferred Stock effective
immediately prior to the Closing Date. The Company shall obtain the written
acknowledgement of the sole owner of the Company Preferred Stock with regard
to
the repurchase and retirement of such Company Preferred Stock and the payment
therefor in accordance with the terms of this Section 3.05 and the Company
Preferred Stock Repurchase Agreement.
Section
3.06 Warrants.
Prior to
the Closing Date, the Company shall provide written notice to Maxim Partners,
LLC as the holder of a certain warrant dated December 15, 2003 by and between
the Company and Maxim Partners LLC (the “Warrant”) to the effect that, from and
after the Closing Date, the holder(s) of the Warrant will be entitled to
receive, upon proper exercise of the Warrant, a cash payment in an amount
equal
to the Consideration multiplied by the number of shares of Company Common
Stock
for which the Warrant is exercised.
Section
3.07 Dissenting
Shares.
A
Shareholder who has perfected his or her right to dissent from the Merger
under
Section 11.70 of the Illinois Business Corporation Act and who has not
effectively withdrawn or lost such rights as of the Closing Date with respect
to
his or her shares of Company Common Stock (the “Dissenting Shares”) shall not
have a right to receive the Consideration specified in Section 3.01(a) hereof,
and such Shareholder of Dissenting Shares shall be entitled only to such
rights
as are granted by such provisions of the Illinois Business Corporation Act.
If
any Shareholder of Dissenting Shares shall fail to perfect or shall have
effectively withdrawn or lost the right to dissent, such Shareholder shall
thereupon be treated as though it had the right to receive the aggregate
Consideration to which such Shareholder would be entitled pursuant to Section
3.01(a) hereof. The Company shall give the Purchasers prompt notice upon
receipt
by the Company of any such written demands for payment of the fair value
of
shares of Company Common Stock and of withdrawals of such demands and any
other
instruments provided pursuant to the Illinois Business Corporation
Act.
14
ARTICLE
IV
ACTIONS
PENDING ACQUISITION
Section
4.01 Covenants
of the Company.
During
the period from the date of this Agreement and continuing until the Closing
Date, except as expressly contemplated or permitted by this Agreement or
with
the prior written consent of the Purchasers, the Company shall carry on its
business in the ordinary course consistent with past practice and consistent
with prudent mortgage banking and mortgage lending practices and in compliance
in all material respects with all applicable laws and regulations. The Company
will use its commercially reasonable efforts to (i) preserve its business
organization intact, except as set forth in (iii) below, (ii) keep available
to
itself and the Purchasers the present services of the current officers and
employees of the Company, (iii) dissolve the Company’s wholly-owned
Subsidiaries, PlusFunding-Com, Inc. and PlusFunding Mortgage, Inc., and (iv)
preserve the goodwill of the customers of the Company and others with whom
business relationships exist. Without limiting the generality of the foregoing,
and except as set forth in Section 4.01 of the Company Disclosure Schedule
or as
otherwise expressly contemplated or permitted by this Agreement or consented
to
in writing by the Purchasers, the Company shall not:
(a) Capital
Stock.
Other
than pursuant to the exercise of Company Options set forth in Section 5.01(b)
of
the Company Disclosure Schedule: (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of capital
stock or any Rights or (ii) permit any additional shares of capital stock
to
become subject to grants of employee or director stock options or other
Rights.
(b) Dividends;
Etc.
(i)
Make, declare, pay or set aside for payment any dividend on or in respect
of, or
declare or make any distribution on any shares of Company Stock or (ii) directly
or indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire any shares of its capital stock.
(c) Compensation;
Employment Agreements, Etc.
Enter
into or amend or renew any employment, consulting, severance or similar
agreements or arrangements with any director, officer or employee of the
Company
or grant any salary or wage increase or increase any employee benefit or
grant
or pay any incentive or bonus other than commissions to loan officers paid
in
the ordinary course of business consistent with past practices pursuant to
compensation arrangements existing as of the date hereof and consistent with
Section 5.01(h)(iii)(A) of the Company Schedule.
(d) Hiring.
Hire
any person as an employee of the Company or promote any employee, except
(i) to
satisfy contractual obligations existing as of the date hereof and set forth
in
Section 4.01(d) of the Company Disclosure Schedule and (ii) persons hired
to
fill any vacancies arising after the date hereof and whose employment is
terminable at the will of the Company.
15
(e) Benefit
Plans.
Enter
into, establish, adopt, amend, modify or terminate (except (i) as may be
required by or to make consistent with applicable law, subject to the provision
of prior written notice and consultation with respect thereto to the Purchasers,
or (ii) to satisfy contractual obligations existing as of the date hereof
and
set forth in Section 4.01(e) of the Company Disclosure Schedule), any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or
similar arrangement) related thereto, in respect of any current or former
director, officer or employee of the Company or take any action to accelerate
the vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder, other than as specifically provided
in any Company Stock Incentive Plan or as contemplated by this
Agreement.
(f) Transactions
with Affiliates.
Except
pursuant to agreements or arrangements in effect on the date hereof, pay,
loan
or advance any amount to, or sell, transfer or lease any properties or assets
(real, personal or mixed, tangible or intangible) to, or enter into any
agreement or arrangement with, any of its officers or directors or any of
their
immediate family members or any affiliates or associates (as such terms are
defined under the Exchange Act) of any of its officers or directors other
than
compensation in the ordinary course of business consistent with past
practice;
(g) Dispositions.
Sell,
transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue
any
of its assets, business or properties except in the ordinary course of business
consistent with past practice and in a transaction that, together with all
other
such transactions, is not material to the Company.
(h) Acquisitions.
Acquire
(other than by way of foreclosures or acquisitions of control in a bona fide
fiduciary capacity or in satisfaction of debts previously contracted in good
faith, in each case in the ordinary and usual course of business consistent
with
past practice) all or any portion of the assets, business or properties of
any
other entity.
(i) Capital
Expenditures.
Make
any capital expenditures other than capital expenditures in the ordinary
course
of business consistent with past practice in amounts not exceeding $25,000
individually or $100,000 in the aggregate.
(j) Governing
Documents.
Amend
the Company Articles or Company Bylaws.
(k) Accounting
Methods.
Implement or adopt any change in its accounting principles, practices or
methods, other than as may be required by applicable laws or regulations
or
GAAP.
(l) Contracts.
Except
in the ordinary course of business consistent with past practice or as otherwise
expressly permitted by this Agreement, enter into, amend, modify or terminate
any Material Contract, Lease or Insurance Policy.
16
(m) Claims.
Enter
into any settlement or similar agreement with respect to any action, suit,
proceeding, order or investigation to which the Company is or becomes a party
after the date of this Agreement, which settlement, agreement or action involves
payment by the Company of an amount which exceeds $50,000 and/or would impose
any material restriction on the business of the Company.
(n) Operations.
Enter
into any new material line of business; change its material lending, investment,
underwriting, risk and asset liability management and other material operating
policies, except as required by applicable law, regulation or policies imposed
by any Governmental Authority; or file any application or make any contract
with
respect to branching or site location or branching or site
relocation.
(o) Derivatives
Transactions.
Enter
into any Derivatives Transaction, except in the ordinary course of business
consistent with past practice.
(p) Indebtedness.
Incur
any Indebtedness other than in the ordinary course of business consistent
with
past practice.
(q) [Reserved].
(r) [Reserved].
(s) Investments
in Real Estate.
Make
any investment or commitment to invest in real estate or in any real estate
development project (other than by way of foreclosure or acquisitions in
a bona
fide fiduciary capacity or in satisfaction of a debt previously contracted
in
good faith, in each case in the ordinary course of business consistent with
past
practice).
(t) Taxes.
Make or
change any material Tax election, file any material amended Tax Return, enter
into any material closing agreement, settle or compromise any material liability
with respect to Taxes, agree to any material adjustment of any Tax attribute,
file any claim for a material refund of Taxes, or consent to any extension
or
waiver of the limitation period applicable to any material Tax claim or
assessment, provided, that, for purposes of this subparagraph (t), “material”
shall mean affecting or relating to $100,000 of taxable income.
(u) Compliance
with Agreements.
Commit
any act or omission which constitutes a material breach or default by the
Company under any agreement with any Governmental Authority or under any
Material Contract, Lease or other material agreement or material license
to
which the Company is a party or by which the Company or any of its properties
is
bound.
(v) Environmental
Assessments.
Foreclose on or take a deed or title to any commercial real estate without
first
conducting a Phase I environmental assessment of the property or foreclose
on
any commercial real estate if such environmental assessment indicates the
presence of a Hazardous Substance in amounts which, if such foreclosure were
to
occur, would be material.
(w) Adverse
Actions.
Take
any action or fail to take any action that is intended or is reasonably likely
to result in (i) any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time at
or
prior to the Closing Date, (ii) any of the conditions to the Merger set forth
in
Article VII not being satisfied or (iii) a material violation of any provision
of this Agreement, except, in each case, as may be required by applicable
law or
regulation.
17
(x) Commitments.
Enter
into any contract with respect to, or otherwise agree or commit to do, any
of
the foregoing.
Section
4.02 Covenants
of the Purchasers.
From the
date hereof until the Closing Date, except as expressly contemplated or
permitted by this Agreement, without the prior written consent of the Company,
the Purchasers will not:
(a) Adverse
Actions.
Take
any action or fail to take any action that is intended or is reasonably likely
to result in (i) any of their respective representations and warranties set
forth in this Agreement being or becoming untrue in any material respect
at any
time at or prior to the Closing Date, (ii) any of the conditions to the Merger
set forth in Article VII not being satisfied or (iii) a material violation
of
any provision of this Agreement, except, in each case, as may be required
by
applicable law or regulation.
(b) Commitments.
Enter
into any contract with respect to, or otherwise agree or commit to do, any
of
the foregoing.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES
Section
5.01 Representations
and Warranties of the Company.
Except
as set forth in a schedule delivered by the Company to the Purchasers (the
“Company Disclosure Schedule”) on or prior to the date hereof setting forth,
among other things, items the disclosure of which is necessary or appropriate
either in response to an express provision of this Agreement or as an exception
to one or more of its representations and warranties set forth below or its
covenants in Article IV, the Company hereby represents and warrants to the
Purchasers as follows:
(a) Organization,
Standing and Authority.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Illinois. The Company is duly qualified to
do
business and is in good standing in each foreign jurisdiction where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified, except where the failure to be so qualified
has
not had and is not reasonably likely to have a Material Adverse Effect on
the
Company.
(b) Company
Capital Stock.
The
authorized capital stock of the Company consists solely of 20,000,000 shares
of
Company Common Stock, of which 6,042,943 shares are outstanding as of the
date
hereof, and 5,000,000 shares of Company Preferred Stock, of which 63 shares
are
outstanding as of the date hereof. As of the date hereof, 176,700 shares
of the
Company Common Stock were held in treasury by the Company or otherwise directly
or indirectly owned by the Company and no shares of Company Stock were reserved
for issuance, other than 495,450 shares of Company Common Stock reserved
for
issuance upon the exercise of Company Options in accordance with their terms
and
48,000 shares of Company Common Stock subject to Company Restricted Stock
Awards
(of which 38,400 shares of Company Restricted Stock are unvested). The
outstanding shares of Company Common Stock and Company Preferred Stock have
been
duly authorized and validly issued and are fully paid and non-assessable,
and
none of the outstanding shares of Company Common Stock and the Company Preferred
Stock have been issued in violation of the preemptive rights of any Person.
Section 5.01(b) of the Company Disclosure Schedule sets forth a true and
correct
list of the beneficial and record holder(s) of the Company Preferred Stock.
Section 5.01(b) of the Company Disclosure Schedule also sets forth for each
Company Option, the name of the grantee, the date of the grant, the type
of
grant, the status of the option grant as qualified or non-qualified under
Section 422 of the Code, the number of shares of Company Common Stock subject
to
each option, the number of shares of Company Common Stock subject to options
that are currently exercisable and the exercise price per share as well as
each
unvested Company Restricted Stock Award, the name of the grantee, the date
of
the grant, the number of shares of Company Common Stock subject to each Company
Restricted Stock Award and the number of shares of Company Restricted Stock
that
are currently unvested. Except as set forth in this Section 5.01(b), the
Company
does not have any Rights issued or outstanding with respect to Company Stock
and
the Company does not have any commitment to authorize, issue or sell any
Company
Stock or Rights.
18
(c) Subsidiaries.
Except
as set forth in Section 5.01(c) of the Company Disclosure Schedule, the Company
has no Subsidiaries. Except for securities and other interests held in a
fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted, the Company does not own
beneficially, directly or indirectly, any equity securities or similar interests
of any Person or any interest in a partnership or joint venture of any kind,
except as set forth in Section 5.01(c) of the Company Disclosure
Schedule.
(d) Corporate
Power; Minute Books.
The
Company has the corporate power and authority to carry on its business as
it is
now being conducted and to own all its properties and assets; and the Company
has the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby, subject to receipt of all necessary approvals of Governmental
Authorities and the approval of this Agreement by the Company’s Shareholders.
The minute books of the Company contain true, complete and accurate records
of
all meetings and other corporate actions held or taken since July 1, 2002
by the
Company’s Shareholders and the Company Board (including committees of the
Company Board).
(e) Corporate
Authority.
Subject
to the approval of this Agreement by the Shareholders of the Company, this
Agreement and the Merger have been authorized by all necessary corporate
action
of the Company and the Company Board on or prior to the date hereof. The
Company
Board has directed that this Agreement be submitted to the Company’s
Shareholders for approval at a meeting of such Shareholders and, except for
the
approval and adoption of this Agreement by the affirmative vote of the holders
of two-thirds of the outstanding shares of Company Common Stock, no other
vote
of the shareholders of the Company is required by law, the Company Articles,
the
Company Bylaws or otherwise to approve this Agreement and the Merger. The
Company has duly executed and delivered this Agreement and, assuming due
authorization, execution and delivery by the Purchasers, this Agreement is
a
valid and legally binding obligation of the Company, enforceable in accordance
with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors’ rights
or by general equity principles).
19
(f) Regulatory
Approvals; No Defaults.
(i) No
licenses, consents, approvals of, or waivers by, or filings or registrations
with, any Governmental Authority or with any third party are required to
be made
or obtained by the Company in connection with the execution, delivery or
performance by the Company of this Agreement, or to consummate the Merger,
except for (A) the approval of this Agreement by the holders of the outstanding
shares of Company Common Stock, (B) as set forth in Section 5.01(f)(i) of
the
Company Disclosure Schedule, and (C) licenses, consents, approvals, waivers,
filings or registrations, the failure to obtain or make (as applicable) which
will not have or is not reasonably likely to have a Material Adverse Effect
on
the Company. As of the date hereof, the Company is not aware of any reason
why
the licenses, consents, approvals or waivers set forth above and referred
to in
Section 7.03(i) will not be received in a timely manner.
(ii) Subject
to receipt, or the making, of the licenses, consents, approvals, waivers
and
filings referred to in the preceding paragraph, and the expiration of related
waiting periods, the execution, delivery and performance of this Agreement
by
the Company and the consummation of the Merger do not and will not (A)
constitute a breach or violation of, or a default under, the Company Articles
or
the Company Bylaws, (B) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to the Company or
any of
its properties or assets or (C) violate, conflict with, result in a breach
of
any provision of or the loss of any benefit under, constitute a default (or
an
event which, with notice or lapse of time, or both, would constitute a default)
under, result in the termination of or a right of termination or cancellation
under, accelerate the performance required by, or result in the creation
of any
Lien upon any of the properties or assets of the Company under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of
trust, license, lease, contract, agreement or other instrument or obligation
to
which the Company is a party or by which the Company or any of its properties
or
assets may be bound or affected, other than violations, conflicts, breaches
or
defaults under clause (C) that will not have a Material Adverse Effect on
the
Company or that will be cured or waived prior to the Closing Date.
(g) Financial
Statements.
The
Company has previously made available to the Purchasers copies of (i) the
balance sheets of the Company as of April 30 for the fiscal years 2003 through
2005, inclusive, and the related statements of income, shareholders’ equity and
cash flows for each of the fiscal years 2003 through 2005, inclusive, as
included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended
April 30, 2005 filed with the SEC under the Exchange Act, in each case
accompanied by the audit report of Xxxxx Xxxxxx and Company LLC, registered
independent public accountants with respect to the Company, and (ii) the
unaudited balance sheets of the Company and the related unaudited statements
of
income for the months ended May 31, 2005 and June 30, 2005 ((i) and (ii),
collectively, the “Company Financial Statements”). The April 30, 2005 financial
statements of the Company (including the related notes, where applicable)
fairly
present the financial position of the Company as of the date thereof, and
the
other financial statements referred to in this Section 5.01(g) (including
the
related notes, where applicable) fairly present, and the financial statements
to
be filed by the Company with the SEC after the date of this Agreement will
fairly present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount and the absence of footnotes),
the
results of operations and financial position of the Company for the respective
fiscal periods or as of the respective dates therein set forth; each of such
statements (including the related notes, where applicable) complies, and
the
financial statements to be filed by the Company with the SEC after the date
of
this Agreement will comply, with applicable accounting requirements and with
the
published rules and regulations of the SEC with respect thereto; and each
of
such statements (including the related notes, where applicable) has been,
and
the financial statements to be filed by the Company with the SEC after the
date
of this Agreement will be, prepared in accordance with GAAP consistently
applied
during the periods involved, except as indicated in the notes thereto or,
in the
case of unaudited statements, subject to recurring audit adjustments normal
in
nature and amount and the absence of footnotes. The books and records of
the
Company have been, and are being, maintained in accordance with GAAP and
any
other applicable legal and accounting requirements and reflect only actual
transactions. Xxxxx Xxxxxx and Company LLC has not resigned or been dismissed
as
independent registered public accountants of the Company as a result of or
in
connection with any disagreements with the Company on a matter of accounting
principles or practices, financial statement disclosure or auditing scope
or
procedure.
20
(h) Absence
of Certain Changes or Events.
(i) Since
April 30, 2005, there has been no change or development or combination of
changes or developments which, individually or in the aggregate, has had
or is
reasonably likely to have a Material Adverse Effect on the Company.
(ii) Since
April 30, 2005, the Company has carried on its business only in the ordinary
and
usual course of business consistent with past practice (except for actions
taken
with respect to the AmPro Acquisition and the incurrence of expenses and
other
actions taken in connection with this Agreement and the transactions
contemplated hereby).
(iii) Except
as
set forth in Section 5.01(h)(iii) of the Company Disclosure Schedule, since
April 30, 2005, the Company has not (A) increased the wages, salaries,
compensation, pension, or other fringe benefits or perquisites payable to
any
officer, employee or director from the amount thereof in effect as of April
30,
2005 (which amounts are included in Section 5.01(h)(iii) of the Company
Disclosure Schedule), granted any severance or termination pay, entered into
any
contract to make or grant any severance or termination pay, or paid any bonus,
(B) declared, set aside or paid any dividend or other distribution (whether
in
cash, stock or property) with respect to any of the Company Stock, (C) effected
or authorized any split, combination or reclassification of any of the Company
Stock or any issuance or issued any other securities in respect of, in lieu
of
or in substitution for shares of the Company Stock, except for issuances
of
Company Common Stock upon the exercise of Company Options, in each case awarded
prior to the date hereof in accordance with their present terms, (D) changed
any
accounting methods (or underlying assumptions), principles or practices of
the
Company affecting its assets, liabilities or businesses, including without
limitation, any reserving, renewal or residual method, practice or policy,
(E)
made any Tax election or any settlement or compromise of any income Tax
liability by the Company, (F) made any material change in the Company’s policies
and procedures in connection with underwriting standards, origination, purchase
and sale procedures or hedging activities with respect to any Mortgage Loans,
(G) suffered any strike, work stoppage, slow-down, or other labor disturbance,
(H) been a party to a collective bargaining agreement, contract or other
agreement or understanding with a labor union or organization, (I) had any
union
organizing activities or (J) made any agreement or commitment (contingent
or
otherwise) to do any of the foregoing.
21
(i) Controls
and Procedures.
(i) Financial.
During the periods covered by the Company Financial Statements, the Company
has
had in place internal controls over financial reporting which are designed
and
maintained to ensure reasonable reliability of financial reporting and the
preparation of the Company Financial Statements for external purposes in
accordance with GAAP, and such internal controls include policies and procedures
that (A) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets
of
the Company, (B) provide reasonable assurance that such transactions are
and
were recorded as necessary to permit preparation of the Company Financial
Statements in accordance with GAAP, and that receipts and expenditures of
the
Company are and were being made only in accordance with authorization of
the
Company’s management and the Company Board, and (C) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use
or
disposition of the Company’s assets that could have a material effect on the
Company Financial Statements. Except as set forth on Schedule 5.01(i)(i),
none
of the Company’s records, systems, controls, data or information are recorded,
stored, maintained, operated or otherwise wholly or partly dependent on or
held
by any means (including any electronic, mechanical or photographic process,
whether computerized or not) which (including all means of access thereto
and
therefrom) are not under the exclusive ownership and direct control of the
Company or its accountants.
(ii) Disclosure.
The
Company has established and maintains disclosure controls and procedures
as
required by Rule 13a-15 under the Exchange Act. As of the end of the period
covered by each applicable Company SEC Report, the Company has conducted
an
evaluation under the supervision and with the participation of its management,
including the Company’s Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of its disclosure controls
and
procedures, and the Company’s Chief Executive Officer and Chief Financial
Officer have concluded that its disclosure controls and procedures are effective
to ensure that information required to be disclosed in the Company SEC Reports
is recorded, processed, summarized and reported, within the periods specified
in, and in accordance with the requirements of, the SEC’s rules, regulations and
forms. Based on such evaluations, (A) there were no significant deficiencies
or
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
Company’s ability to record, process, summarize and report financial information
and (B) there was no fraud, whether or not material, that involved management
or
other employees of the Company who have a significant role in the Company’s
internal control over financial reporting.
22
(j) Regulatory
Matters.
(i) The
Company has timely filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, that were required
to be filed since April 30, 2002 with any Governmental Authority, and has
paid
all fees and assessments due and payable in connection therewith, except
to the
extent such failure will not have or is not reasonably likely to have a Material
Adverse Effect on the Company. Except for normal examinations conducted by
any
Governmental Authority in the regular course of the business of the Company,
and
except as set forth in Section 5.01(j) of the Company Disclosure Schedule,
no
Governmental Authority has initiated any proceeding, or to the Knowledge
of the
Company, investigation into the business or operations of the Company, since
April 30, 2002. To the Company’s Knowledge, there is no unresolved violation,
criticism, or exception by any Governmental Authority with respect to any
report
or statement relating to any examinations of the Company.
(ii) Neither
the Company nor any of its properties is a party to or subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with,
or a
commitment letter or similar submission to, or extraordinary supervisory
letter
from, any Governmental Authority charged with the supervision or regulation
of
mortgage lenders, mortgage bankers or mortgage brokers, or issuers of
securities. The Company has not been advised by, and the Company has no
Knowledge of facts which could give rise to an advisory notice by, any
Governmental Authority that such Governmental Authority is contemplating
issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding, commitment
letter, supervisory letter or similar submission.
(k) Legal
Proceedings.
(i) Section
5.01(k)(i) of the Company Disclosure Schedule contains a true and correct
summary description as of the date hereof of any pending or, to the Company’s
Knowledge, threatened legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against the Company, including the venue, the parties thereto, the subject
matter thereof and the amount of damages claimed or other remedies
sought.
(ii) Except
as
set forth in Section 5.01(k)(ii) of the Company Disclosure Schedule, the
Company
is not a party to any, and there are no pending or, to the Company’s Knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature against
the
Company in which, to the Knowledge of the Company, there is a reasonable
probability of any material recovery against or other Material Adverse Effect
on
the Company or which challenges the validity or propriety of the
Merger.
23
(iii) There
is
no injunction, order, judgment or decree imposed upon the Company or the
assets
of the Company. The Company has no Knowledge of the threat of any such
action.
(l) Compliance
With Laws.
(i) The
Company is in compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or decrees
applicable thereto or to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the Fair Housing Act,
the
Home Mortgage Disclosure Act, and all other applicable fair lending and fair
housing laws or other laws relating to discrimination, except for violations
which individually or in the aggregate do not and are not reasonably likely
to
have a Material Adverse Effect on the Company;
(ii) Section
5.01(l)(ii) of the Company Disclosure Schedule sets forth each jurisdiction
in
which the Company is conducting a mortgage banking, mortgage lending or other
mortgage business and the specific licenses obtained from such jurisdictions
or
whether licenses are not required in such jurisdictions to conduct a mortgage
business. The Company has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with,
all
Governmental Authorities that are required in order to permit the Company
to own
or lease its properties and to conduct its business as presently conducted
other
than permits, licenses, authorizations, orders, approvals, filings, applications
and registrations which, if not obtained or made (as applicable), will not
and
are not reasonably likely to, individually or in the aggregate, have a Material
Adverse Effect on the Company; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to the
Company’s Knowledge, no suspension or cancellation of any of them is threatened;
and
(iii) Except
as
set forth on Schedule 5.01(l)(iii), the Company has received, since April
30,
2002, no written (or to the Company’s Knowledge, oral) notification or written
(or to the Company’s Knowledge, oral) communication from any Governmental
Authority (A) asserting that the Company is not in compliance with any of
the
statutes, regulations or ordinances which such Governmental Authority enforces
or (B) threatening to revoke any license, franchise, permit or governmental
authorization (nor, to the Company’s Knowledge, do any grounds for any of the
foregoing exist).
(m) Material
Contracts; Defaults.
(i) Except
as
set forth in Section 5.01(m)(i) of the Company Disclosure Schedule, the Company
is not a party to, bound by or subject to any agreement, contract, arrangement,
commitment or understanding (whether written, or to the Company’s Knowledge,
oral) (A) with respect to the employment of any directors, officers, employees
or consultants, (B) which would entitle any present or former director, officer,
employee or agent of the Company to indemnification from the Company, (C)
which
is a material contract (as defined in Item 601(b)(10) of Regulation S-K of
the
SEC) to be performed after the date of this Agreement, (D) which is a consulting
agreement (including data processing, software programming and licensing
contracts) not terminable on sixty (60) days or less notice and involving
the
payment of more than $50,000 per annum, (E) which
materially restricts the conduct of the business in which the Company is
currently engaged or in which the Company currently expects to be engaged
other
than leases for real property and other than contracts for intellectual property
entered into by the Company in the ordinary course of business to the extent
such contracts include customary restrictions on the use and licensing of
such
intellectual property,
or (F)
with respect to any Indebtedness (collectively, “Material Contracts”). The
Company has previously delivered or made available to the Purchasers true,
complete and correct copies of each Material Contract.
24
(ii) To
the
Company’s Knowledge, the Company is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party, by which its assets, business, or operations may
be
bound or affected, or under which it or its respective assets, business,
or
operations receives benefits, and there has not occurred any event that,
with
the lapse of time or the giving of notice or both, would constitute such
a
default by the Company. No power of attorney or similar authorization given
directly or indirectly by the Company is currently outstanding.
(n) Brokers.
Neither
the Company nor any of its officers or directors has employed any broker
or
finder or incurred any liability for any broker’s fees, commissions or finder’s
fees in connection with any of the transactions contemplated by this Agreement,
except that the Company has engaged, and will pay a fee or commission to,
the
Company Financial Advisor in accordance with the terms of a letter agreement
between the Company Financial Advisor and the Company, a true, complete and
correct copy of which has been previously delivered or made available by
the
Company to the Purchasers.
(o) Employee
Benefit Plans.
(i) All
benefit and compensation plans, contracts, policies or arrangements covering
current or former employees of the Company (the “Company Employees”) and current
or former directors of the Company including, but not limited to, “employee
benefit plans” within the meaning of Section 3(3) of ERISA, and deferred
compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive and bonus plans (the “Company Benefit Plans”), are identified
in Section 5.01(o)(i) of the Company Disclosure Schedule. True and complete
copies of all Company Benefit Plans including, but not limited to, any trust
instruments and insurance contracts forming a part of any Company Benefit
Plans
and all amendments thereto, have been provided to the Purchasers.
25
(ii) All
Company Benefit Plans other than “multiemployer plans” within the meaning of
Section 3(37) of ERISA, covering Company Employees, to the extent subject
to
ERISA, are in substantial compliance with ERISA. Each Company Benefit Plan
which
is an “employee pension benefit plan” within the meaning of Section 3(2) of
ERISA (a “Company Pension Plan”) and which is intended to be qualified under
Section 401(a) of the Code, has received a favorable determination letter
from
the IRS, and the Company has no Knowledge of any circumstances likely to
result
in revocation of any such favorable determination letter or the loss of the
qualification of such Company Pension Plan under Section 401(a) of the Code.
There is no pending or, to the Company’s Knowledge, threatened litigation
relating to the Company Benefit Plans. The Company has not engaged in a
transaction with respect to any Company Benefit Plan or Company Pension Plan
that, assuming the taxable period of such transaction expired as of the date
hereof, could subject the Company to a material Tax or penalty imposed by
either
Section 4975 of the Code or Section 502(i) of ERISA.
(iii) The
Company has not at any time maintained or contributed to a Company Benefit
Plan
under Title IV of ERISA or any Company Benefit Plan subject to Section 412
of
the Code or Section 302 of ERISA.
(iv) All
contributions required to be made under the terms of any Company Benefit
Plan
have been timely made or have been reflected on the financial statements
of the
Company.
(v) The
Company has no obligations for retiree health and life benefits under any
Company Benefit Plan, other than coverage as may be required under Section
4980B
of the Code or Part 6 of Title I of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality. Except as set forth in Section
5.01(o)(v) of the Company Disclosure Schedule, the Company may amend or
terminate any such Company Benefit Plan at any time without incurring any
liability thereunder.
(vi) None
of
the execution of this Agreement, Shareholder approval of this Agreement or
consummation of the Merger will (A) entitle any employees of the Company
to
severance pay or any increase in severance pay upon any termination of
employment after the date hereof, (B) accelerate the time of payment or vesting
or trigger any payment or funding (through a grantor trust or otherwise)
of
compensation or benefits under, increase the amount payable or trigger any
other
material obligation pursuant to, any of the Company Benefit Plans, (C) result
in
any breach or violation of, or a default under, any of the Company Benefit
Plans
or (D) result in any payment that would be a “parachute payment” to a
“disqualified individual” as those terms are defined in Section 280G of the
Code, without regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(p) Labor
Matters.
The
Company is not a party to and is not bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union
or
labor organization, nor is the Company the subject of a proceeding asserting
that it has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel the Company to bargain
with
any labor organization as to wages or conditions of employment, nor is there
any
strike or other labor dispute involving the Company pending or, to the Company’s
Knowledge, threatened, nor is the Company aware of any activity involving
its
employees seeking to certify a collective bargaining unit or engaging in
other
organizational activity.
26
(q) Environmental
Matters.
(i) The
Company is in compliance with applicable Environmental Laws; (ii) to the
Company’s Knowledge, no real property (including buildings or other structures)
currently or formerly owned or operated by the Company or any property in
which
the Company has held a security interest, Lien or a fiduciary or management
role
(“Company Loan Property”), has been contaminated with, or has had any release
of, any Hazardous Substance except in compliance with Environmental Laws;
(iii)
to the Company’s Knowledge, the Company can not be deemed to be the owner or
operator of, and has not participated in the management regarding Hazardous
Substances of, any Company Loan Property which has been contaminated with,
or
has had any release of, any Hazardous Substance except in compliance with
Environmental Laws; (iv) to the Company’s Knowledge, the Company has had no
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) the Company has not received any written (or to the
Company’s Knowledge, oral) notice, demand letter, claim or request for
information alleging any violation of, or liability under, any Environmental
Law; (vi) the Company is not subject to any order, decree, injunction or
other
agreement with any Governmental Authority or any third party relating to
any
Environmental Law; (vii) to the Company’s Knowledge, there are no circumstances
or conditions (including the presence of asbestos, underground storage tanks,
lead products, polychlorinated biphenyls, prior manufacturing operations,
dry-cleaning, or automotive services) involving the Company, any currently
or
formerly owned or operated property, or any Company Loan Property, that could
reasonably be expected to result in any claims, liability or investigations
against the Company, result in any restrictions on the ownership, use, or
transfer of any property pursuant to any Environmental Law, or materially
adversely affect the value of any Company Loan Property; and (viii) the Company
has delivered to the Purchasers copies of all environmental reports, studies,
sampling data, correspondence, filings and other environmental information
in
its possession or reasonably available to it relating to the Company and
any
currently or formerly owned or operated property or any Company Loan
Property.
(ii) As
used
herein, the term “Environmental Laws” means any federal, state or local law,
regulation, order, decree, permit, authorization, opinion or agency requirement
relating to: (A) the protection or restoration of the environment, health,
safety, or natural resources, (B) the handling, use, presence, disposal,
release
or threatened release of any Hazardous Substance or (C) wetlands, indoor
air,
pollution, contamination or any injury or threat of injury to persons or
property in connection with any Hazardous Substance; and the term “Hazardous
Substance” means any substance that is: (A) listed, classified or regulated
pursuant to any Environmental Law, (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint or plumbing, polychlorinated
biphenyls, radioactive materials or radon or (C) any other substance which
is
the subject of regulatory action by any Governmental Authority in connection
with any Environmental Law.
27
(r) Tax
Matters.
(i) (A)
All
income Tax Returns and all other material Tax Returns that are required to
be
filed on or before the Closing Date (taking into account any extensions of
time
within which to file which have not expired) by or with respect to the Company
have been or will be timely filed on or before the Closing Date, (B) all
such
Tax Returns are or will be true and complete in all material respects, and
all
such Tax Returns correctly reflected or will reflect in all material respects
the facts regarding the income, business, assets, operations, activities,
status
and other matters of the Company and any other information required to be
shown
thereon, (C) all Taxes shown to be due on the Tax Returns referred to in
clause
(A) above have been or will be timely paid in full, (D) all deficiencies
asserted or assessments made as a result of examinations of the Tax Returns
referred to in clause (A) above conducted by any Tax Authority have been
paid in
full, (E) no material issues that have been raised by the relevant Tax Authority
in connection with the examination of any of the Tax Returns referred to
in
clause (A) above are currently pending, (F) to the Knowledge of the Company,
no
material issues are threatened to be raised by the relevant Tax Authority
in
connection with the examination of any of the Tax Returns referred to in
clause
(A) above, (G) the Company has not waived any statutes of limitation with
respect to any Taxes of the Company and (H) the Company is not currently
the
beneficiary of any extension of time within which to file any Tax
Return.
(ii) The
Company has provided to the Purchasers true and correct copies of the United
States federal income Tax Returns filed by the Company for each of their
three
most recent taxable years ended on or before April 30, 2004.
(iii) The
Company has no liability with respect to Taxes that accrued on or before
the end
of the most recent period covered by the Company Financial Statements in
excess
of the amounts accrued or subject to a reserve with respect thereto that
are
reflected in the Company Financial Statements, and will not exceed such accrual
or reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing Tax
Returns. The Company will not incur any liability for Taxes from the date
of
this Agreement through the Closing Date other than in the ordinary course
of
business and consistent with reasonable past practice.
(iv) The
Company is not a party to any Tax allocation or sharing agreement, is not
and
has not been a member of an affiliated group filing consolidated or combined
Tax
Returns (other than a group the common parent of which is or was the Company),
and otherwise has no liability for the Taxes of any Person (other than the
Company).
28
(v) No
closing agreements, private letter rulings or technical advice memoranda
have
been entered into with or issued by any Taxing Authority with respect to
the
Company.
(vi) The
Company does not maintain any compensation plans, programs or arrangements
the
payments under which would not reasonably be expected to be deductible as
a
result of the limitations under Section 162(m) of the Code and the regulations
issued thereunder.
(vii) (A)
No
Tax is required to be withheld pursuant to Section 1445 of the Code as a
result
of the Merger and (B) all Taxes that the Company is or was required by law
to
withhold or collect have been duly withheld or collected and, to the extent
required by applicable law, have been paid to the proper Tax Authority or
other
Person.
(viii) None
of
the Tax Returns filed by the Company contains a disclosure statement under
former Section 6661 of the Code or Section 6662 of the Code (or any similar
provision of state, local or foreign Tax law).
(ix) There
are
no Liens for Taxes upon any assets of the Company, other than Liens for Taxes
not yet due and payable.
(x) All
material elections with respect to Taxes affecting the Company, as of the
date
of this Agreement, are set forth in the Company Financial
Statements.
(xi) Section
5.01(r)(xi) of the Company Disclosure Schedule contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax is properly
payable
by the Company. No written (or to the Company’s Knowledge, oral) claim has ever
been made by a Tax Authority in a jurisdiction where the Company does not
file
Tax Returns that it may be subject to Tax in that jurisdiction. The Company
does
not have nor has the Company ever had a permanent establishment in any foreign
country, as defined in any applicable Tax treaty or convention between the
United States and such foreign country.
(xii) The
Company is not a party to or member of any joint venture, partnership, limited
liability Company or other arrangement or contract which could be treated
as a
partnership for federal income tax purposes.
(xiii) To
the
Knowledge of the Company after reasonable diligence, the Company has never
filed
a consent pursuant to former Section 341(f) of the Code, relating to collapsible
corporations, and former Section 341(f)(2) has not applied to any of the
assets
of the Company.
(xiv) The
Company does not own an interest in real property in any jurisdiction in
which a
Tax is imposed, or the value of the interest reassessed, on the transfer
of an
interest in real property and which treats the transfer of an interest in
an
entity that owns an interest in real property as a transfer of the interest
in
real property.
29
(xv) The
Company has not been either a “controlled corporation” or a “distributing
corporation” (within the meaning of Section 355(a)(1)(A) of the Code) with
respect to a transaction that was described in, or intended to qualify as
a
tax-free transaction pursuant to Section 355 of the Code.
(xvi) The
Company has no net operating losses or other Tax attributes presently subject
to
limitation under Sections 382, 383 or 384 of the Code, or the federal
consolidated return regulations (other than limitations imposed as a result
of
the transactions contemplated by this Agreement).
(xvii) The
Company has not agreed to make any adjustment under Section 481(a) of the
Code
(or any corresponding provision of state, local or foreign Tax law) by reason
of
a change in accounting method or otherwise.
(s) Representations
Regarding the Mortgage Banking Business.
(i) The
Company (A) has, and at all other relevant times had, all material federal,
state and local licenses, permits, franchises and other authorizations, rights
and privileges of Governmental Authorities, Investors and Insurers required
to
permit it to own its properties and to conduct its business, including but
not
limited to any required state mortgage banking and real estate licenses,
and is
in good standing under all material applicable federal, state and local laws
and
regulations thereunder as a mortgage broker, lender and servicer, (B) has
not
received any written (or to the Company’s Knowledge, oral) notice that
revocation is being considered with respect to any of such required material
licenses, permits, or authorizations, (C) is in compliance with all and has
not
violated in any material respect such material licenses, permits and
authorizations, and (D) has timely filed all applications for renewal (on
substantially the same terms and conditions) of any required material licenses,
permits and authorizations for which renewal applications must have been
filed
prior to the date hereof and the Closing Date; as of the date hereof and
the
Closing Date, there are no proceedings pending, or, to the Company’s Knowledge,
threatened, that could reasonably be expected to result in the revocation,
cancellation, modification or suspension of any such required material licenses,
permits or authorizations, and there is no pending or, to the Company’s
Knowledge, threatened cancellation or reduction of any mortgage loan sale
agreement to which the Company is a party and the obligations of the Company
under each such mortgage loan sale agreement and Investor Requirement are
being
performed by the Company in accordance with their respective terms. Without
limiting the generality of the foregoing, the Company is an FHA approved
mortgagee, a VA automatic lender, a GNMA issuer, a FNMA seller/servicer and
a
FHLMC seller/servicer, all in good standing and, to the Company’s Knowledge, no
event has occurred that would cause the Company to have such approval
revoked.
(ii) Except
as
set forth in Section 5.01(s)(ii) of the Company Disclosure Schedule, no Mortgage
Loans that are owned by the Company are (A) Delinquent Loans, in foreclosure,
in
bankruptcy or in litigation, (B) classified as “loss,”“doubtful,”“substandard,”
or “special mention” by any Agency, or the Company’s internal credit review
system, or (C) on a non-accrual status as a result of the Company’s loan review
procedures.
30
(iii) The
Company has complied in all material respects with all applicable Mortgage
Loan
Requirements with respect to the Company’s operations and activities, including
without limitation the origination, processing, underwriting and credit approval
of the Mortgage Loans, such as, among others, (A) those laws relating to
real
estate settlement procedures, consumer credit protection, truth in lending
laws,
usury limitations, fair housing, transfers of servicing, collection practices,
equal credit opportunity and adjustable rate mortgages, and (B) the handbooks
and guides (including without limitation, selling and servicing guides) of
and
contracts with any Investor. The Company has not done or failed to do, or
caused
to be done or omitted to be done, any act, the effect of which would operate
to
invalidate, materially impair or be a material breach of (AA) any approvals
of
any Agency or state or local Governmental Authority, (BB) any insurance or
insurance policy of any Insurer or commitment of any Insurer to insure, (CC)
any
fidelity bond, direct surety bond, or errors and omissions insurance policy
required by any Insurer, (DD) any surety or guaranty agreement, or (EE) any
agreement pursuant to which the Company sold Mortgage Loans to an Investor.
No
Agency, Investor, Governmental Authority, or Insurer has (AAA) provided written
notice to the Company that the Company has violated or has not complied on
a
recurring basis with the applicable compliance or underwriting standards
with
respect to Mortgage Loans sold by the Company to an Investor, (BBB) has provided
written notice to the Company that the Company has violated or not complied
with
any Mortgage Loan Requirements, (CCC) to the Company’s Knowledge imposed
restrictions on the activities (including commitment authority) of the Company
or (DDD) has provided written notice to the Company claiming a breach of
any
contract or agreement pursuant to which the Company sold Mortgage Loans to
an
Investor. Each Mortgage Loan sold by the Company complied with all of the
representations and warranties contained in the contracts or agreements pursuant
to which the Company sold such Mortgage Loan to an Investor.
(iv) Except
as
set forth in Section 5.01(s)(iv) of the Company Disclosure Schedule, all
of the
Mortgage Loans were secured by one-to-four-family residential real property
or,
to the extent that a Mortgage Loan was secured by property other than a
one-to-four-family residential property, such Mortgage Loan has not been
sold to
any Person where the Company could have any recourse obligation in the event
of
a borrower default.
(v) Except
as
set forth in Section 5.01(s)(v) of the Company Disclosure Schedule, none
of the
Mortgage Loans are or have been included by the Company in any Pool or
securitization. The Company has not sponsored or established any special
purpose
vehicle or entity that would be required to be consolidated with the Company
pursuant to Interpretation No. 46 or Interpretation No. 46R of the Financial
Accounting Standards Board.
(vi) Each
Mortgage Loan that is required to be covered by FHA insurance is insured
under
the National Housing Act or qualifies for insurance thereunder and timely
and
proper application has been made for such insurance. Each Mortgage Loan that
is
required to be guaranteed by the VA is guaranteed under the provisions of
Chapter 37 of Title 38 of the Code or qualifies for such guarantee and timely
and proper application has been made for such guarantee. As to each FHA
insurance certificate, each VA guarantee certificate and each Mortgage Loan
that
is required to be insured by private mortgage insurance, the Company has
complied with applicable provisions of the insurance or guarantee contract
and
all applicable laws.
31
(vii) Section
5.01(s)(vii) of the Company Disclosure Schedule contains a true and correct
list
of all of the audits, investigations and complaints of the Company by an
Agency,
a Governmental Authority, an Investor, or an Insurer commenced since April
30,
2002. Except for customary ongoing quality control reviews, no audit or
investigation is pending or, to the Company’s Knowledge, threatened that is
reasonably likely to result in:
(A) | a claim of a material failure to comply with applicable regulations; |
(B) | a repurchase of Mortgage Loans by the Company; |
(C) | indemnification by the Company in connection with Mortgage Loans; |
(D) | rescission of any insurance or guaranty contract or agreement, |
(E) | payment of a penalty to any Agency, an Investor or under a contract of private mortgage insurance; or |
(F) | revocation of any license or authority, including authority to do business. |
The
Company has made available to the Purchasers true, complete and correct copies
of all written reports and materials received in connection with such audits,
investigations, complaints and inquiries.
(viii) Except
as
set forth in Section 5.01(s)(viii) of the Company Disclosure Schedule, the
Company does not issue and has not issued mortgage or asset backed securities
and has not and is not conducting Servicing with respect to any Pools. Except
as
set forth in Section 5.01(s)(viii) of the Company Disclosure Schedule, all
Mortgage Loans originated by the Company, purchased by the Company from mortgage
brokers or correspondents, or acquired by the Company by way of merger or
acquisition have been sold on a “servicing released” basis.
(ix) Section
5.01(s)(ix) of the Company Disclosure Schedule sets forth as of the date
hereof,
a list of all Sales Commitments, together with the name of the other party
thereto, the type of commitment (i.e., mandatory, best efforts, etc.), the
total
amount of such commitment, the expiration date, and the types of Mortgage
Loans
covered thereby. Neither the Company nor, to the Company’s Knowledge, the other
party to any mortgage loan delivery commitment and Sales Commitment) is in
breach or default, and no event has occurred which, with notice or lapse
of
time, would constitute a breach or default on the part of the Company (or,
to
the Company’s Knowledge, on the part of the other party to the mortgage loan
delivery commitment or Sales Commitment) or permit termination, modification
or
acceleration thereunder against the Company (or to the Company’s Knowledge,
against the other party to the mortgage loan delivery commitment or Sales
Commitment). There are no oral agreements in effect as to any such mortgage
loan
delivery commitment or Sales Commitment.
32
(x) The
information contained in each Loan File and other documentation upon which
underwriters generally rely (such as verification of employment) are, in
all
material respects, complete and accurate and are in compliance with all
applicable Mortgage Loan Requirements.
(t) Derivative
Transactions.
(i) All
Derivative Transactions (as defined below) entered into by the Company or
for
the account of any of its customers were entered into in accordance with
applicable laws, rules, regulations and regulatory policies of any Governmental
Authority, and in accordance with the investment, securities, commodities,
risk
management and other policies, practices and procedures employed by the Company,
and were entered into with counterparties believed at the time to be financially
responsible and able to understand (either alone or in consultation with
their
advisers) and to bear the risks of such Derivative Transactions. The Company
has
duly performed all of its obligations under the Derivative Transactions to
the
extent that such obligations to perform have accrued, and, to the Knowledge
of
the Company, there are no material breaches, violations or defaults or
allegations or assertions of such by any party thereunder.
(ii) Except
as
set forth in Section 5.01(t)(ii) of the Company Disclosure Schedule, no
Derivative Transaction held by the Company would be classified by the Company
as
“Special
Mention,”“Substandard,”“Doubtful,”“Loss,”“Classified,”“Criticized,”“Credit Risk
Assets,”“Concerned Loans,”“Watch List” or words of similar import. The financial
position of the Company under or with respect to each such Derivative
Transaction has been reflected in the books and records of the Company in
accordance with GAAP consistently applied, and except as set forth in Section
5.01(t)(ii) of the Company Disclosure Schedule, no open exposure of the Company
with respect to any such instrument (or with respect to multiple instruments
with respect to any single counterparty) exceeds $50,000.
(iii) For
purposes of this Agreement, the term “Derivative Transaction” means any swap
transaction, option, warrant, forward purchase or sale transaction, futures
transaction, cap transaction, floor transaction or collar transaction relating
to one or more currencies, commodities, bonds, equity securities, loans,
interest rates, catastrophe events, weather-related events, credit-related
events or conditions or any indexes, or any other similar transaction (including
any option with respect to any of these transactions) or combination of any
of
these transactions, including collateralized mortgage obligations or other
similar instruments or any debt or equity instruments evidencing or embedding
any such types of transactions, and any related credit support, collateral
or
other similar arrangements related to such transactions.
33
(u) Loan
Repurchases.
Section
5.01(u) of the Company Disclosure Schedule sets forth a list of all loans
sold
by the Company which have been repurchased by the Company in the past three
(3)
years. The details relating to such repurchases are set forth on Section
5.01(u)
of the Company Disclosure Schedule.
(v) Intellectual
Property.
(i) Section
5.01(v) of the Company Disclosure Schedule sets forth a true, complete and
correct list of all Company Intellectual Property (as defined below). The
Company owns or has a valid license to use all the Company Intellectual
Property, free and clear of all Liens, royalty or other payment obligations
(except for royalties or payments with respect to off-the-shelf Software
at
standard commercial rates). The Company Intellectual Property constitutes
all of
the Intellectual Property necessary to carry on the business of the Company
as
currently conducted. The Company Intellectual Property owned by the Company,
and
to the Knowledge of the Company, all other Company Intellectual Property,
is
valid and enforceable and has not been cancelled, forfeited, expired or
abandoned, and the Company has received no written (or to the Company’s
Knowledge, oral) notice challenging the validity or enforceability of the
Company Intellectual Property. To the Knowledge of the Company, the conduct
of
the business of the Company does not violate, misappropriate or infringe
upon
the Intellectual Property rights of any third party. The consummation of
the
Merger will not result in the material loss or material impairment of the
right
of the Company to own or use any of the Company Intellectual
Property.
(ii) For
purposes of this Agreement, the term “Intellectual Property” means (A)
trademarks, service marks, trade names, Internet domain names, designs, logos,
slogans, and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing; (B) patents and
industrial designs (including any continuations, divisionals,
continuations-in-part, renewals, reissues, and applications for any of the
foregoing); (C) copyrights (including any registrations and applications
for any
of the foregoing); (D) computer programs, whether in source code or object
code
form (including any and all software implementation of algorithms, models
and
methodologies), databases and compilations (including any and all data and
collections of data), and all documentation (including user manuals and training
materials) related to the foregoing (collectively, “Software”); and (E)
technology, trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, and methodologies. For
purposes of this Agreement, the term “Company Intellectual Property” means the
Intellectual Property used in or held for use in the conduct of the business
of
the Company.
(w) Customers.
Section
5.01(w) of the Company Disclosure Schedule sets forth the names of the five
(5)
largest purchasers (based upon dollar values of purchases) of Mortgage Loans
from the Company in each of the Company’s fiscal year 2004 and
2005.
(x) Insurance. Section
5.01(x) of the Company Disclosure Schedule identifies all of the material
insurance policies, binders, or bonds currently maintained by the Company,
other
than credit-life policies (the “Insurance Policies”), including the insurer,
policy numbers, amount of coverage, effective and termination dates and any
pending claims thereunder involving more than $50,000. The Company is insured
with reputable insurers against such risks and in such amounts as the management
of the Company reasonably has determined to be prudent in accordance with
industry practices. All the Insurance Policies are in full force and effect,
the
Company is not in material default thereunder and all claims thereunder have
been filed in due and timely fashion.
34
(y) Anti-takeover
Provisions.
Assuming the accuracy of the representation and warranty of the Purchasers
contained in Section 5.02(g), no “control share acquisition,”“business
combination moratorium,”“fair price” or other form of anti-takeover statute or
regulation is applicable to this Agreement or the Merger, including without
limitation Section 11.75 of the Illinois Business Corporation Act, and the
provisions of the Company Articles relating to special voting requirements
for
certain business combinations do not apply to this Agreement or the
Merger.
(z) Fairness
Opinion.
The
Company Board has received the written opinion of the Company Financial Advisor
to the effect that as of the date hereof the Consideration is fair to the
holders of Company Common Stock from a financial point of view.
(aa) Proxy
Statement.
As of
the date of the Proxy Statement and the date of the meeting of the Shareholders
to which such Proxy Statement relates, the Proxy Statement will not contain
any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which
they
were made, not misleading, provided that information as of a later date shall
be
deemed to modify information as of an earlier date, and further provided
that no
representation and warranty is made with respect to information relating
to the
Purchasers or provided by the Purchasers included in the Proxy Statement
pursuant to Section 5.02(f) hereof.
(bb) SEC
Reports.
The
Company has previously made available to the Purchasers a true, correct and
complete copy of each (i) final registration statement, prospectus, report,
schedule and definitive proxy statement (after giving effect to any and all
amendments thereto) filed since April 30, 2002 by the Company with the SEC
pursuant to the Securities Act or the Exchange Act (collectively, the “Company
SEC Reports”) and (ii) communication mailed by the Company to its shareholders
since April 30, 2002, and no such registration statement, prospectus, report,
schedule, proxy statement or communication contained any untrue statement
of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the
circumstances in which they were made, not misleading. The Company has timely
filed all Company SEC Reports and other documents required to be filed by
it
under the Securities Act and the Exchange Act, and, as of their respective
dates, all Company SEC Reports complied with the published rules and regulations
of the SEC with respect thereto in all material respects. No executive officer
of the Company has failed in any respect to make the certifications required
of
him or her under Section 302, 404 or 906 of the Xxxxxxxx-Xxxxx Act of 2002
and
no enforcement action has been initiated against the Company by the SEC relating
to disclosures contained in any Company SEC Reports.
(cc) Disclosure.
The
representations and warranties contained in this Section 5.01, as qualified
by
the Company Disclosure Schedule, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the
statements and information contained in this Section 5.01 not
misleading.
35
(dd) Lending
Practices.
(i) the
Company has, and in the case of a Mortgage Loan originated with the assistance
of a mortgage broker, the mortgage broker also has, complied in all material
respects with all laws applicable to all outstanding Mortgage Loans, (ii)
to the
Company’s Knowledge, all mortgage brokers who originate Mortgage Loans have all
consents, authorizations or waivers from Governmental Authorities from all
jurisdictions requiring such consents, authorizations or waivers for such
origination activities, and (iii) each outstanding Mortgage Loan and commitment
to extend credit has been solicited, originated and administered in accordance
with the Company’s underwriting standards in all material respects. The Loan
Documents and Loan Files to which the Company is a party conform to all
applicable laws in all material respects, and each of the related Mortgage
Loans
arose out of bona fide transactions in the ordinary course of business, and
the
Loan Files relating to the Mortgage Loans accurately and completely reflect
in
all material respects the terms of the Mortgage Loans.
(ee) Lending
Policies; Loan Reserve Policies. (i)
the
Lending Policies and Loan Reserve Policies set forth a true and complete
description of the written policies and practices of the Company relating
to:
(A) documentation procedures; (B) collateralization practices
(including loan-to-value ratios and valuation and appraisal of collateral);
(C) procedures for (including frequency of) billing and on-going monitoring
and auditing of Mortgage Loans; (D) collections and review of past-due
accounts; (E) making of charge-offs, write downs, specific accruals
and
specific valuation reserves for Mortgage Loans and (F) the placing
of
Mortgage Loans on a non-accrual status, (ii) each Mortgage Loan originated
or
acquired by the Company has been originated, authorized, collateralized,
guaranteed and administered and serviced in accordance with the Lending Policies
and (iii) the Lending Policies comply with applicable Law in all material
respects.
(ff) Investment
Commitments. (i)
the
mandatory forward Investment Commitments are owned by the Company free and
clear
of any Liens, other than Liens for the benefit of the Company’s warehouse
lenders and (ii) the Company has not received written notice of any pending
cancellation of any mandatory forward Investment Commitment.
(gg) Custodial
Accounts. All
Custodial Accounts required to be maintained by the Company are maintained
in
accordance with applicable law and insurer requirements in all material
respects.
Section
5.02 Representations
and Warranties of the Purchasers.
The
Purchaser and the Purchaser Parent, jointly and severally, hereby represent
and
warrant to the Company as follows:
(a) Organization,
Standing and Authority.
The
Purchaser is duly organized, validly existing and in good standing under
the
laws of the State of Delaware. The Purchaser Parent is duly organized, validly
existing and in good standing under the laws of the Cayman Islands. Each
of the
Purchasers is duly licensed or qualified to do business in each jurisdiction
where its respective ownership or leasing of property or assets or the conduct
of its respective business requires it to be so licensed or qualified. Each
of
the Purchasers has in effect all federal, state, local, and foreign governmental
authorizations necessary for it to own or lease its respective properties
and
assets and to carry on its respective business as it is now
conducted.
36
(b) Power.
Each of
the Purchasers has the power, corporate or otherwise, and authority to carry
on
its respective business as it is now being conducted and to own all its
respective properties and assets; Each of the Purchasers has the power,
corporate or otherwise, and authority to execute, deliver and perform its
respective obligations under this Agreement and to consummate the
Merger.
(c) Authority.
This
Agreement and the Merger have been authorized by all necessary action, whether
corporate or otherwise, of each of the Purchasers and the Purchaser Board,
and
following its organization this Agreement and the Merger will be authorized
by
all necessary corporate action of the Merging Subsidiary. This Agreement
has
been duly executed and delivered by each of the Purchasers and, assuming
due
authorization, execution and delivery by the Company, this Agreement is a
valid
and legally binding agreement of each of the Purchasers enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors’ rights
or by general equity principles).
(d) Regulatory
Approvals; No Defaults.
(i) No
licenses, consents or approvals of, or waivers by, or filings or registrations
with, any Governmental Authority or with any third party are required to
be made
or obtained by the Purchasers in connection with the execution, delivery
or
performance by the Purchasers of this Agreement, or to consummate the
Merger.
(ii) Subject
to receipt, or the making, of the licenses, consents, approvals, waivers
and
filings referred to in the preceding paragraph, the execution, delivery and
performance of this Agreement by the Purchasers and the consummation of the
Merger do not and will not (A) constitute a breach or violation of, or a
default
under, the articles of incorporation or bylaws (or similar governing documents)
of the Purchaser or the Purchaser Parent, (B) violate any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to the Purchaser or the Purchaser Parent or any of their respective
properties or assets or (C) violate, conflict with, result in a breach of
any
provision of or the loss of any benefit under, constitute a default (or an
event
which, with notice or lapse of time, or both, would constitute a default)
under,
result in the termination of or a right of termination or cancellation under,
accelerate the performance required by, or result in the creation of any
Lien
upon any of the properties or assets of the Purchaser or the Purchaser Parent
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, lease, contract, agreement or other
instrument or obligation to which the Purchaser or the Purchaser Parent is
a
party or by which Purchaser or the Purchaser Parent or any of their respective
properties or assets may be bound or affected.
(e) Financial
Ability.
On the
Closing Date, the Purchasers, either individually or in combination, will
have
all funds necessary to consummate the Merger and pay the aggregate Consideration
to holders of Company Common Stock pursuant to Section 3.01(a) hereof.
37
(f) Proxy
Statement Information.
None of
the information relating to the Purchasers, which is expressly provided by
the
Purchasers to the Company for inclusion in the Proxy Statement, as of the
date
of the Proxy Statement and the date of the meeting of the Shareholders to
which
such Proxy Statement relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date.
(g) Ownership
of Company Common Stock.
As of
the date hereof, none of the Purchaser, the Purchaser Parent or, to the
Purchasers’ Knowledge, any of their other respective affiliates (as such term
are defined under the Exchange Act) owns, beneficially or of record, directly
or
indirectly, or is a party to any agreement (not including the Confidentiality
Agreement), arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, shares of Company Stock (other than shares held in
a
fiduciary capacity that are beneficially owned by third parties or as a result
of debts previously contracted).
(h) No
Brokers.
The
Purchasers have not incurred any liability for any broker’s fees, commissions or
finder’s fees in connection with the Merger for which the Company or any of its
directors or officers would be liable, other than liability for such fees
of The
Sapphire Group LLC, or any of its affiliates, in connection with the Merger,
for
which the Purchasers shall be solely responsible.
(i) Litigation.
As of
the date hereof, neither the Purchaser nor the Purchaser Parent (i) is a
party
to any and there are no pending or, to the Purchasers’ Knowledge, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Purchaser
or
the Purchaser Parent which challenge the validity or propriety of the Merger
such that there is a reasonable probability that the conditions set forth
in
Section 7.03(i) of this Agreement would not be satisfied, and (ii) is aware
of
any fact or circumstance that is reasonably likely to cause the conditions
set
forth in Section 7.03(i) of this Agreement to not be satisfied.
(j) Disclosure.
The
representations and warranties contained in this Section 5.02, when considered
as a whole, do not contain any untrue statement of a material fact or omit
to
state any material fact necessary in order to make the statements and
information contained in this Section 5.02 not misleading.
ARTICLE
VI
COVENANTS
Section
6.01 Commercially
Reasonable Efforts.
Subject to the terms and conditions of this Agreement, each of the parties
to
the Agreement agrees to use commercially reasonable efforts to take, or cause
to
be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws, so as to permit consummation of
the
Merger as promptly as practicable, and otherwise to enable consummation of
the
Merger, including the satisfaction of the conditions set forth in Article
VII
hereof, and shall cooperate fully with the other parties hereto to that
end.
38
Section
6.02 Shareholder
Approval.
The
Company agrees to take, in accordance with applicable law and the Company
Articles and Company Bylaws, all action necessary to convene a meeting of
the
Shareholders to consider and vote upon the approval of this Agreement, in
accordance with Section 5.01(e), and any other matters required to be approved
by the Company’s shareholders in order to permit consummation of the Merger
(including any adjournment or postponement, the “Company Meeting”) and, subject
to Section 6.06(a), shall use best efforts to take all lawful action to solicit
such approval by the Shareholders. The Company shall use best efforts to
convene
the Company Meeting within forty-five (45) days after the initial mailing
of the
Proxy Statement to Shareholders of the Company pursuant to Section 6.03(a).
Except with the prior approval of the Purchasers, no other matters shall
be
submitted for the approval of the Shareholders at the Company Meeting. The
Company Board shall at all times prior to and during the Company Meeting
recommend adoption of this Agreement by the Shareholders and shall not withhold,
withdraw, amend or modify such recommendation in any manner adverse to the
Purchasers or take any other action or make any other public statement
inconsistent with such recommendation, except as and to the extent expressly
permitted by Section 6.06(a) (a “Change in Recommendation”). Notwithstanding any
Change in Recommendation, this Agreement shall be submitted to the Shareholders
for their approval at the Company Meeting and nothing contained herein shall
be
deemed to relieve the Company of such obligation.
Section
6.03 Proxy
Statement; Regulatory Filings.
(a) The
Company shall prepare the Proxy Statement and shall submit the Proxy Statement
to the SEC within twenty (20) days after the date of this Agreement. The Company
shall provide the Purchasers a reasonable opportunity to review the Proxy
Statement and any amendments or supplements thereto prior to the Company’s
distribution of such documents to the Shareholders. The Company shall mail
the
Proxy Statement to the Shareholders within five (5) Business Days after the
date
(i) the SEC has completed its review of the Proxy Statement, or (ii) the Company
is notified by the SEC that the Proxy Statement will not be reviewed by the
SEC.
(b) Each
of
the Purchasers and the Company shall cooperate and use best efforts to prepare
all documentation (including the Proxy Statement), to effect all filings and
to
obtain all permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary to consummate the Merger and any other
transactions contemplated by this Agreement. Each of the Purchasers and the
Company shall have the right to review in advance, and to the extent practicable
each shall consult with the other, in each case subject to applicable laws
relating to the exchange of information, with respect to all written information
submitted to any third party or any Governmental Authority in connection with
the Merger. In exercising the foregoing right, each such party agrees to act
reasonably and as promptly as practicable. Each party hereto agrees that it
shall consult with the other parties hereto with respect to the obtaining of
all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the Merger
and
each party shall keep the other parties apprised of the status of material
matters relating to completion of the Merger.
39
(c) Each
party agrees, as promptly as practicable upon request, to furnish the requesting
party with all information concerning itself, its directors, officers and
shareholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement or any filing, notice or application
made
by or on behalf of such requesting party to any third party or Governmental
Authority.
Section
6.04 Press
Releases.
The
Company and the Purchasers shall consult with each other before issuing any
press release with respect to the Merger or this Agreement and shall not issue
any such press release or make any such public statements without the prior
consent of the other parties, which shall not be unreasonably withheld, delayed
or conditioned; provided, however, that a party may, without the prior consent
of the other parties (but after such consultation, to the extent practicable
in
the circumstances), issue such press release or make such public statements
as
may upon the advice of outside counsel be required by law or, in the case of
the
Company, the requirements of The Nasdaq SmallCap Market. The Company and the
Purchasers shall cooperate to develop all public announcement materials and
make
appropriate management available at presentations related to the Merger as
reasonably requested by the other party.
Section
6.05 Access;
Information.
(a) The
Company agrees that upon reasonable notice and subject to applicable laws
relating to the exchange of information, it shall afford the Purchasers and
each
of their respective officers, employees, counsel, accountants and other
authorized representatives such access during normal business hours throughout
the period prior to the Closing Date to the books, records (including, without
limitation, Tax Returns and work papers of independent auditors), properties
and
personnel of the Company and to such other information relating to the Company
as the Purchasers may reasonably request and, during such period, it shall
furnish promptly to the Purchasers all information concerning the business,
properties and personnel of the Company as the Purchasers may reasonably
request.
(b) No
investigation by the Purchasers of the business and affairs of the Company
shall
affect or be deemed to modify or waive any representation, warranty, covenant
or
agreement in this Agreement, or the conditions to the obligations of the
Purchasers to consummate the Merger.
(c) Notwithstanding
anything contained in this Agreement to the contrary, the Company and the
Purchasers (and each of their respective employees, representatives or other
agents) may disclose to any and all Persons, without limitation of any kind,
the
Tax treatment and any facts that may be relevant to the Tax structure of the
Merger beginning on the earliest of (i) the date of the public announcement
of
discussions relating to the Merger, (ii) the date of public announcement of
the
Merger or (iii) the date of the execution of an agreement (with or without
conditions) to enter into the Merger, provided, however, that neither the
Company nor the Purchasers (nor any of their respective employees,
representatives or other agents thereof) may disclose any other information
that
is not relevant to understanding the Tax treatment and Tax structure of the
Merger or any other information to the extent that such disclosure could result
in a violation of any federal or state securities law.
40
Section
6.06 No
Solicitation by the Company.
(a) From
the
date of this Agreement through the Closing Date, the Company shall not, nor
shall it authorize or permit any of its directors, officers or employees or
its
investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly through another Person,
(i) solicit, initiate or encourage (including by way of furnishing information
or assistance that it is not legally obligated to furnish), or take any other
action that is intended or that is likely to result in, any inquiries or the
making of any proposal that constitutes, or is reasonably likely to lead to,
any
Acquisition Proposal, (ii) enter into any agreement with respect to an
Acquisition Proposal, (iii) participate in any discussions or negotiations
regarding any Acquisition Proposal or (iv) make or authorize any statement
or
recommendation in support of any Acquisition Proposal. Notwithstanding the
foregoing, if, and only to the extent that, (i) the approval of this Agreement
by the Shareholders as set forth in Section 5.01(e) has not occurred, (ii)
the
Company Board reasonably determines in good faith, after consultation with
its
outside legal counsel, that such action would be required in order for directors
of the Company to comply with their respective fiduciary duties under applicable
law in response to a bona fide, written Acquisition Proposal not solicited
in
violation of this Section 6.06(a) that the Company Board believes in good faith
is a Superior Proposal and (iii) the Company provides notice to the Purchasers
of its decision to take such action in accordance with the requirements of
Section 6.06(b), the Company may (1) furnish information with respect to the
Company to any Person making such an Acquisition Proposal pursuant to a
customary confidentiality agreement (as determined by the Company after
consultation with its outside legal counsel) on terms substantially similar
to,
and no less favorable to such Person than, the terms contained in the
Confidentiality Agreement, (2) participate in discussions or negotiations
regarding such an Acquisition Proposal and (3) authorize any statement or
recommendation in support of such an Acquisition Proposal and withhold,
withdraw, amend or modify the recommendation referred in Section
6.02.
(b) The
Company shall notify the Purchasers promptly (but in no event later than 24
hours) after receipt of any Acquisition Proposal, or any material modification
of or material amendment to any Acquisition Proposal, or any request for
nonpublic information relating to the Company or for access to the properties,
books or records of the Company by any Person that informs the Company Board
or
a member of the senior management of the Company that it is considering making,
or has made, an Acquisition Proposal. Such notice to the Purchasers shall be
made orally and in writing, and shall indicate the identity of the Person making
the Acquisition Proposal or intending to make or considering making an
Acquisition Proposal or requesting non-public information or access to the
books
and records of the Company, and the material terms of any such Acquisition
Proposal and any modification or amendment to such Acquisition Proposal. The
Company shall promptly, and in any event within 24 hours, notify the Purchasers,
orally and in writing, with respect to any material changes in status and any
material changes or material modifications in the terms of any such Acquisition
Proposal, indication or request. The Company also shall promptly, and in any
event within 24 hours, notify the Purchasers, orally and in writing, if it
enters into discussions or negotiations concerning any Acquisition Proposal
in
accordance with Section 6.06(a).
41
(c) The
Company shall immediately cease and cause to be terminated any existing
discussions or negotiations with any Persons (other than Purchasers) conducted
heretofore with respect to any of the foregoing, and shall use commercially
reasonable efforts to cause all Persons other than the Purchasers who have
been
furnished confidential information regarding the Company in connection with
the
solicitation of or discussions regarding an Acquisition Proposal within the
12
months prior to the date hereof promptly to return or destroy such information.
The Company agrees not to release any third party from the confidentiality
and
standstill provisions of any agreement to which the Company is or may become
a
party, and shall immediately take all steps necessary to terminate any approval
that may have been heretofore given under any such provisions authorizing any
Person to make an Acquisition Proposal.
(d) The
Company shall use commercially reasonable efforts to make the directors,
officers, employees, agents and representatives (including any investment
bankers, financial advisors, attorneys, accountants or other retained
representatives) of the Company are aware of the restrictions and agreements
described in this Section 6.06 as reasonably necessary to avoid violations
thereof. It is understood that any violation of the restrictions and agreements
set forth in this Section 6.06 by any director, officer, employee, agent or
representative (including any investment banker, financial advisor, attorney,
accountant or other retained representative) of the Company, at the direction
or
with the consent of the Company, shall be deemed to be a breach of this Section
6.06 by the Company.
Section
6.07 [Reserved].
Section
6.08 Indemnification.
(a) From
and
after the Closing Date, the Purchasers (the “Indemnifying Parties”), shall
indemnify and hold harmless each present and former director and officer of
the
Company determined as of the Closing Date (the “Indemnified Parties”) against
any costs or expenses (including reasonable attorneys’ fees), judgments, fines,
losses, claims, damages or liabilities incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at
or prior to the Closing Date, whether asserted or claimed prior to, at or after
the Closing Date, arising in whole or in part out of or pertaining to the fact
that he or she was a director or officer of the Company or is or was serving
at
the request of the Company as a director, officer, employee or other agent
of
any other organization or in any capacity with respect to any employee benefit
plan of the Company, including without limitation matters related to the
negotiation, execution and performance of this Agreement or any of the
transactions contemplated hereby, to the fullest extent provided by the Delaware
General Corporation Law as in effect on the date hereof. The Indemnifying
Parties’ obligations under this Section 6.08(a) shall continue in full force and
effect for a period of six (6) years from the Closing Date, provided, however,
that all rights to indemnification in respect of any claim asserted or made
within such period shall continue until the final disposition of such
claim.
(b) Any
Indemnified Party wishing to claim indemnification under this Section 6.08,
upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify the Indemnifying Parties, but the failure to so notify shall
not
relieve the Indemnifying Parties of any liability they may have to such
Indemnified Party if such failure does not actually prejudice the Indemnifying
Parties. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Closing Date), (i) the
Indemnifying Parties shall have the right to assume the defense thereof and
the
Indemnifying Parties shall not be liable to such Indemnified Parties for any
legal expenses of other counsel or any other expenses subsequently incurred
by
such Indemnified Parties in connection with the defense thereof, except that
if
the Indemnifying Parties elect not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Parties and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to
the
Indemnifying Parties, and the Indemnifying Party shall pay, promptly as
statements therefor are received, the reasonable fees and expenses of such
counsel for the Indemnified Parties (which may not exceed one firm in any
jurisdiction), (ii) the Indemnified Parties will cooperate in the defense of
any
such matter, (iii) the Indemnifying Parties shall not be liable for any
settlement effected without their prior written consent and (iv) the
Indemnifying Parties shall have no obligation hereunder in the event that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable laws and regulations or a court of competent
jurisdiction.
42
(c) The
Purchasers agree that for a period of six (6) years beginning as of the Closing
Date, the Purchasers shall cause to be maintained in effect the Company’s
current policy of officers’ and directors’ liability insurance with respect to
actions and omissions occurring on or prior to the Closing Date; provided,
however, that the Purchasers may substitute therefore policies of at least
the
same coverage amounts containing terms and conditions which are no less
advantageous to the covered persons, provided that such substitution shall
not
result in any lapses in coverage with respect to matters occurring on or prior
to the Closing Date.
(d) If
the
Purchasers or any of their respective successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of their respective assets to any other entity, then and in each case,
proper provision shall be made so that the successors and assigns of the
Purchasers shall assume the obligations set forth in this Section
6.08.
Section
6.09 Employees;
Benefit Plans.
(a) Following
the Closing Date, the Purchasers may choose to maintain any or all of Company
Benefit Plans in their sole discretion. However, for any Company Benefit Plan
terminated for which there is a comparable benefit plan of general applicability
at the Purchaser or the Purchaser Parent or any affiliate thereof (each, a
“Purchaser Benefit Plan”), the Purchasers and any such affiliate shall take all
reasonable action so that employees of the Company shall be entitled to
participate in such Purchaser Benefit Plan to the same extent as
similarly-situated employees of the Purchasers or the applicable affiliate
(it
being understood that inclusion of the employees of the Company in the Purchaser
Benefit Plans may occur at different times with respect to different plans),
provided, however, that nothing contained herein shall require the Purchasers
or
any affiliate thereof to make any grants to any former employee of the Company
under any discretionary equity compensation plan of the Purchaser, the Purchaser
Parent or any affiliate thereof. The Purchasers shall cause each Purchaser
Benefit Plan in which employees of the Company are eligible to participate
due
to the termination of an existing Company Benefit Plan to take into account
for
purposes of eligibility and vesting under the Purchaser Benefit Plans (but
not
for purposes of benefit accrual) the service of such employees with the Company
to the same extent as such service was credited for such purpose by the Company,
provided, however, that such service shall not be recognized to the extent
that
such recognition would result in a duplication of benefits. Nothing herein
shall
limit the ability of the Purchasers to amend or terminate any of the Company
Benefit Plans in accordance with their terms at any time, provided, however,
that the Purchasers shall continue to maintain the Company Benefit Plans (other
than stock-based or incentive plans) for which there is a comparable Purchaser
Benefit Plan until the Company employees are permitted to participate in the
Purchaser Benefit Plans.
43
(b) If
employees of the Company become eligible to participate in a medical, dental
or
health plan of the Purchaser, the Purchaser Parent or any affiliate thereof
upon
the termination of such plan of the Company, the Purchasers or the applicable
affiliate shall take commercially reasonable efforts to cause each such plan
to
(i) waive any preexisting condition limitations to the extent such conditions
are covered under the applicable medical, health or dental plans of the
Purchaser, the Purchaser Parent or the applicable affiliate, (ii) honor under
such plans any deductible, co-payment and out-of-pocket expenses incurred by
the
employees and their beneficiaries during the portion of the calendar year prior
to such participation and (iii) waive any waiting period limitation or evidence
of insurability requirement which would otherwise be applicable to such employee
on or after the Closing Date, in each case to the extent such employee had
satisfied any similar limitation or requirement under an analogous Company
Benefit Plan prior to the Closing Date.
(c) [Reserved].
(d) All
employees of the Company as of the Closing Date shall become employees of the
Surviving Corporation as of the Closing Date. Subject to Section 6.09(e) below,
the Purchasers shall have no obligation to continue the employment of any such
person and nothing contained herein shall give any employee of the Company
the
right to continue employment with the Purchaser, the Purchaser Parent or the
Surviving Corporation after the Closing Date.
(e) On
the
Closing Date (i) the Purchaser, the Company and Xxxxxx Xxxxxxxx shall enter
into
a Consulting Agreement substantially in the form of Annex
C
hereto,
and (ii) the Purchaser, the Company and Xxxxx X. Xxxxxxxx shall enter into
an
Employment Agreement substantially in the form of Annex
D
hereto,
in each case, to be effective as of the Closing Date.
Section
6.10 Merging
Subsidiary. Subject
to the receipt of any required approval of a Governmental Authority, the
Purchasers shall cause the Merging Subsidiary to be organized promptly after
the
execution of this Agreement by the Company.
Section
6.11 Advice
of Changes.
(a) The
Purchasers and the Company shall promptly notify the other parties of any change
or event having, or which could be reasonably expected to have, either
individually or in the aggregate with other changes and events, a Material
Adverse Effect on it or on the other parties, or which it believes would, or
which could reasonably be expected to, cause or constitute, either individually
or in the aggregate with other changes or events, a material breach of any
of
the representations, warranties or covenants contained herein. If notice is
provided as set forth in this Section 6.11(a), the parties agree that the
parties will consult with one another regarding such actions that may or should
be taken, if any, to remedy the change(s) or event(s) for which notice has
been
provided; provided,
however,
that
failure of any party to provide any notice contemplated hereby or to recommend
specific action in connection with any notice provided hereunder shall not
constitute a waiver of such party’s rights or remedies hereunder. Notice
pursuant to this Section 6.11(a) shall not constitute or be deemed to constitute
a notice of termination of this Agreement by any party hereto, nor shall any
such notice affect any other provision of this Agreement.
44
(b) Three
(3)
Business Days prior to each of the date of the Company Meeting and the Closing
Date, the Company will supplement or amend the Company Disclosure Schedule
with
respect to any matter hereafter arising which, if existing or occurring at
or
prior to the date of this Agreement, would have been required to be set forth
or
described in the Company Disclosure Schedule or which is necessary to correct
any information in the Company Disclosure Schedule or in Section 5.01 of this
Agreement which has been rendered inaccurate thereby. For purposes of
determining the accuracy of the representations and warranties of the Company
contained in Section 5.01 hereof and in order to determine the fulfillment
of
the conditions set forth in Section 7.03(a) hereof as of the Closing Date,
the
Company Disclosure Schedule shall be deemed to include only the information
contained therein on the date hereof.
Section
6.12 Current
Information.
During
the period from the date of this Agreement to the Closing Date, the Company
will
cause one or more of its designated representatives to confer on a regular
and
frequent basis with representatives of the Purchasers and to report the general
status of the ongoing operations of the Company. Without limiting the foregoing,
the Company agrees to provide the Purchasers (i) within twenty (20) days
following the close of each calendar month between the date hereof and the
Closing Date, a preliminary balance sheet (subject to normal recurring
adjustments) at the end of such month and comparative statements of operations
for such month and the same month in the prior year, and (ii) a copy of each
report filed by the Company with a Governmental Authority within one (1)
Business Day following the filing thereof.
Section
6.13 Transition.
Commencing following the date hereof, the Purchasers and the Company shall
use
commercially reasonable efforts to facilitate the integration of the Company
with the businesses of the Purchaser following consummation of the
Merger.
Section
6.14 Stock
Option Plan. As
of the
Closing Date, the Purchasers shall cause the Surviving Corporation to establish
a stock option plan under which options to acquire shares of the common stock
of
the Surviving Corporation may be issued and to which shall be reserved at least
ten (10%) percent of the common stock of the Surviving Corporation.
The
Purchasers shall provide a reasonable opportunity for the Chief Executive
Officer of the Company to review and comment upon the proposed stock option
plan
prior to its adoption.
Section
6.15 Company
Preferred Stock Repurchase Agreement. The
Company shall enter into the Company Preferred Stock Repurchase Agreement prior
to the Closing Date.
45
ARTICLE
VII
CONDITIONS
TO CONSUMMATION OF THE MERGER
Section
7.01 Conditions
to Obligations of the Parties to Effect the Merger.
The
respective obligations of the Company and the Purchasers to consummate the
Merger are subject to the fulfillment or, to the extent permitted by applicable
law, written waiver by the parties hereto prior to the Closing Date of each
of
the following conditions:
(a) Shareholder
Approval.
This
Agreement shall have been duly approved by the requisite vote of the holders
of
outstanding shares of Company Common Stock.
(b) No
Injunctions or Restraints; Illegality.
No
judgment, order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any Governmental Authority that prohibits or makes illegal the consummation
of the Merger.
Section
7.02 Conditions
to Obligations of the Company.
The
obligations of the Company to consummate the Merger also are subject to the
fulfillment or written waiver by the Company prior to the Closing Date of each
of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Purchasers set forth in this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and (except to the extent such representations and warranties speak
as
of an earlier date) as of the Closing Date as though made on and as of the
Closing Date; provided, however, that for purposes of this paragraph, such
representations and warranties shall be deemed to be true and correct in all
material respects unless the failure or failures of such representations and
warranties to be so true and correct, either individually or in the aggregate,
will have or are reasonably likely to have a Material Adverse Effect on the
Purchasers. The Company shall have received a certificate, dated the Closing
Date, signed on behalf of the Purchaser by the President and the Treasurer
of
the Purchaser and on behalf of the Purchaser Parent by the Chief Executive
Officer of the Purchaser Parent to such effect.
(b) Performance
of Obligations of the Purchasers.
The
Purchasers shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date (including, but not limited to, the payment to, and receipt by, the
Exchange Agent of an amount in cash equal to the aggregate Consideration in
accordance with Section 3.03(b) of this Agreement), and the Company shall have
received a certificate, dated the Closing Date, signed on behalf of the
Purchaser by the President and Treasurer of the Purchaser and on behalf of
the
Purchaser Parent by the Chief Executive Officer of the Purchaser Parent to
such
effect.
(c) Opinion
of Counsel.
The
Company shall have received an opinion of Xxxxxxx Xxxxxxxx & Xxxx
LLP,
counsel
to the Purchasers, dated the Closing Date, in the form and substance set forth
in Annex
E
attached
hereto.
46
(d) Other
Actions.
The
Purchasers shall have furnished the Company with such certificates of its
respective officers or others and such other documents to evidence fulfillment
of the conditions set forth in Sections 7.01 and 7.02 as the Company may
reasonably request.
Section
7.03 Conditions
to Obligations of the Purchasers.
The
obligations of the Purchasers to consummate the Merger also are subject to
the
fulfillment or written waiver by the Purchasers prior to the Closing Date of
each of the following conditions:
(a) Representations
and Warranties.
The
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects as of the date of this Agreement
and (except to the extent such representations and warranties speak as of an
earlier date) as of the Closing Date as though made on and as of the Closing
Date; provided, however, that for purposes of this paragraph, such
representations and warranties shall be deemed to be true and correct in all
material respects unless the failure or failures of such representations and
warranties to be so true and correct, either individually or in the aggregate,
will have or are reasonably likely to have a Material Adverse Effect on the
Company or the Surviving Corporation. The Purchasers shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by the
Chief Executive Officer and the Chief Financial Officer of the Company to such
effect.
(b) Performance
of Obligations of the Company.
The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date,
and
the Purchasers shall have received a certificate, dated the Closing Date, signed
on behalf of the Company by the Chief Executive Officer and the Chief Financial
Officer of the Company to such effect.
(c) Opinion
of Counsel.
The
Purchasers shall have received an opinion of Barack, Ferrazzano, Kirschbaum,
Xxxxxxx & Xxxxxxxxx, counsel to the Company, dated the Closing Date, in the
form and substance set forth in Annex
F
attached
hereto.
(d) Voting
Agreements.
Voting
Agreements, substantially in the form attached as Annex
A
hereto,
shall have been executed and delivered by each Director Shareholder concurrently
with the Company’s execution and delivery of this Agreement.
(e) Other
Actions.
The
Company shall have furnished the Purchasers with such certificates of its
officers or others and such other documents to evidence fulfillment of the
conditions set forth in Sections 7.01 and 7.03 as the Purchasers may reasonably
request.
(f) FIRPTA
Xxxxxxxxxxx.Xx
the
deemed request of the Shareholders, the Company shall have delivered to the
Purchasers a properly executed statement satisfying the requirements of Treasury
Regulation Sections 1.897-2(h) and 1.1445-2(c)(3) in a form reasonably
acceptable to the Purchasers (the “FIRPTA Affidavit”), and shall have filed any
and all relevant notices to the IRS in connection with issuing such FIRPTA
Affidavit.
(g) Dissenting
Shares.
Dissenting Shares shall not represent 10% or more of the outstanding Company
Common Stock.
47
(h) Licensing
Approvals.
In
connection with the Merger, the Company shall have filed an application with
the
appropriate State Agency in each jurisdiction in which the Company is as of
the
date hereof licensed to transact a mortgage banking, mortgage lending or similar
business as set forth in Schedule II attached hereto, and licensing approvals
from such State Agencies shall have been obtained by the Company in no fewer
than thirty-six (36) of such jurisdictions, which jurisdictions must include
the
jurisdictions set forth in Schedule I attached hereto. All licensing approvals
obtained shall remain in full force and effect, and no licensing approval
referred to in this Section 7.01(h) shall contain any condition, restriction
or
requirement which, either the Purchaser Board or the Parent Purchaser reasonably
determines in good faith, would individually or in the aggregate, materially
reduce the benefits of the Merger to such a degree that the Purchaser or the
Purchaser Parent would not have entered into this Agreement had such condition,
restriction or requirement been known at the date hereof.
(i) Company
Preferred Stock.
The
Company Preferred Stock shall have been repurchased and retired, and appropriate
evidence that the Company Preferred Stock shall have been repurchased and
retired, in accordance with Section 3.05 shall have been furnished to the
Purchasers.
(j) Employment
and Consulting Agreements.
The
Purchaser, the Company and Xxxxxx Xxxxxxxx shall have entered into a Consulting
Agreement substantially in the form of Annex
C
hereto,
and the Purchaser, the Company and Xxxxx X. Xxxxxxxx shall have entered into
an
Employment Agreement substantially in the form of Annex
D
hereto.
Section
7.04 Frustration
of Closing Conditions.
Neither
the Purchasers nor the Company may rely on the failure of any condition set
forth in Section 7.01, 7.02 or 7.03, as the case may be, to be satisfied if
such
failure was caused by such party’s failure to use commercially reasonable
efforts to consummate the Merger, as required by and subject to Section
6.01.
ARTICLE VIII
TERMINATION
Section
8.01 Termination.
This
Agreement may be terminated, and the Merger may be abandoned:
(a) Mutual
Consent.
At any
time prior to the Closing Date, by the mutual consent of the Purchaser, the
Purchaser Parent and the Company, if (i) in the case of the Purchaser and the
Company, the board of directors by vote of a majority of the members of the
entire board, and (ii) in the case of the Purchaser Parent, an authorized
representative of the Purchaser Parent, so determines.
(b) [Reserved].
(c) No
Shareholder Approval.
By any
of the Purchaser, the Purchaser Parent or the Company (provided in the case
of
the Company that it shall not be in material breach of any of its obligations
under Section 6.02), if the approval of the Shareholders required for the
consummation of the Merger shall not have been obtained by reason of the failure
to obtain the required vote as set forth in Section 5.01(e) at a duly held
meeting of the Shareholders or at any adjournment or postponement
thereof.
48
(d) Breach
of Representations and Warranties.
By any
of the Purchaser, the Purchaser Parent or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been
a material breach of any of the representations or warranties set forth in
this
Agreement by the other parties, which breach is not cured within thirty (30)
days following written notice to the party committing such breach, or which
breach, by its nature, cannot be cured prior to the Closing; provided, however,
that no party shall have the right to terminate this Agreement pursuant to
this
Section 8.01(d) unless the breach of representation or warranty, together with
all other such breaches, would entitle any party receiving the benefit of such
representation or warranty not to consummate the Merger under Section 7.02(a)
(in the case of a breach of a representation or warranty by the Purchasers)
or
Section 7.03(a) (in the case of a breach of a representation or warranty by
the
Company).
(e) Breach
of Covenants.
By any
of the Purchaser, the Purchaser Parent or the Company (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if there shall have
been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of the Company (in the case of the Purchasers) or on
the
part of either of the Purchasers (in the case of the Company), which breach
shall not have been cured within thirty (30) days following receipt by the
breaching party of written notice of such breach from the relevant party hereto,
or which breach, by its nature, cannot be cured prior to the Closing Date,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.01(e) unless the breach of covenant or
agreement, together with all other such breaches, would entitle any party
receiving the benefit of such covenant or agreement not to consummate the Merger
under Section 7.02(b) (in the case of a breach of a covenant or agreement by
the
Purchasers) or Section 7.03(b) (in the case of a breach of a covenant or
agreement by the Company).
(f) Delay.
By any
of the Purchaser, the Purchaser Parent or the Company if the Merger shall not
have been consummated on or before December 31, 2005, unless the failure of
the
Closing to occur by such date shall be due to a material breach of this
Agreement by the party seeking to terminate this Agreement. In the event that
the Purchaser or the Purchaser Parent notifies the Company of its intent to
terminate this Agreement pursuant to this Section 8.01(f), and at the time
such
notice is provided to the Company in accordance with Section 9.06:
(i) all
applications described in Section 7.03(h) shall have been filed by the Company,
but
(ii) approvals
from, (A) all of the jurisdictions set forth in Schedule I shall not have been
obtained, or (B) at least thirty-six (36) of the forty-nine (49) jurisdictions
set forth in Schedule II shall not have been obtained,
then
the
Company may, in its sole discretion upon written notice to the Purchasers,
extend the date specified in the previous sentence until February 28, 2006
such
that this Agreement may only be terminated by the Purchaser or the Purchaser
Parent pursuant to this Section 8.01(f) if the Merger shall not have been
consummated on or prior to February 28, 2006, unless the failure of the Closing
to occur by such date shall be due to a material breach of this Agreement by
the
party seeking to terminate this Agreement.
49
(g) Failure
to Recommend.
At any
time prior to the Company Meeting, by either of the Purchasers if (i) the
Company shall have breached its obligations under Section 6.06, (ii) the Company
Board shall have failed to make its recommendation referred to in Section 6.02,
withdrawn such recommendation or modified or changed such recommendation in
a
manner adverse in any respect to the interests of the Purchasers, (iii) the
Company Board shall have recommended, proposed, or publicly announced its
intention to recommend or propose, to engage in an Acquisition Transaction
with
any Person other than the Purchasers or (iv) the Company shall have materially
breached its obligations under Section 6.02 by failing to call, give notice
of,
convene and hold the Company Meeting in accordance with Section
6.02.
(h) Licensing
Approvals.
By
either of the Purchasers if:
(i) licensing
approval(s) shall have been denied by final, nonappealable action of the
applicable Governmental Authority (A) in any one or more of the jurisdictions
set forth in Schedule I attached hereto, or (B) in any fourteen (14) or more
of
the forty-nine (49) jurisdictions set forth in Schedule II attached hereto;
or
(ii) licensing
application(s) shall have been permanently withdrawn at the request of the
applicable Governmental Authority (A) in any one or more of the jurisdictions
set forth in Schedule I attached hereto, or (B) in any fourteen (14) or more
of
the forty-nine (49) jurisdictions set forth in Schedule II attached
hereto.
(i) Superior
Proposal.
By the
Company, if (i) the Company has complied with the provisions of Section 6.06,
and (ii) the Company Board shall have determined, in its good faith judgment
and
in accordance with Section 6.06, that it has received a Superior Proposal and
that it would be in the best interests of the Company’s shareholders to pursue
such Superior Proposal.
Section
8.02 Effect
of Termination and Abandonment.
(a) In
the
event of termination of this Agreement and the abandonment of the Merger
pursuant to this Article VIII, no party to this Agreement shall have any
liability or further obligation to any other party hereunder except (i) as
set
forth in this Section 8.02 and Section 9.01 and (ii) that termination will
not
relieve a breaching party from liability for any willful breach of any covenant,
agreement, representation or warranty of this Agreement giving rise to such
termination.
(b) In
recognition of the efforts, expenses and other opportunities foregone by the
Purchasers while structuring and pursuing the Merger, the parties hereto agree
that the Company shall pay to the Purchasers, without duplication, a termination
fee of $1,750,000 (the “Termination Fee”), as set forth below, if:
50
(i) this
Agreement is terminated by either of the Purchasers pursuant to Section 8.01(g)
and the Company enters into a definitive agreement with respect to an
Acquisition Transaction within twelve months after the termination of this
Agreement. The termination fee payable under this Section 8.02(b)(i) shall
be
paid, without duplication, by wire transfer of immediately available funds
to an
account designated by the Purchasers within two (2) Business Days of the date
the Company enters into a definitive agreement with respect to an Acquisition
Transaction; or
(ii) this
Agreement is terminated by the Company pursuant to Section 8.01(i). Amounts
that
become payable pursuant to this Section 8.02(b)(ii) shall be paid, without
duplication, by wire transfer of immediately available funds to an account
designated by the Purchasers within five (5) Business Days of the date this
Agreement is terminated.
(c) In
further recognition of the efforts, expenses and other opportunities foregone
by
the parties while structuring and pursuing the Merger, the parties hereto agree
that:
(i) if
this
Agreement is terminated by either of the Purchasers pursuant to Section 8.01(e)
or by either of the Purchasers or the Company pursuant to Section 8.01(c),
then
the Company shall pay to the Purchasers, without duplication, a termination
reimbursement amount equal to the aggregate amount of all reasonable,
documented, out-of-pocket costs and expenses incurred by the Purchaser and
the
Purchaser Parent solely and directly in connection with the execution, delivery
and performance of this Agreement by the Purchaser and the Purchaser Parent
(the
“Purchaser Termination Reimbursement Amount”);
(ii) if
this
Agreement is terminated (A) by either of the Purchasers pursuant to Section
8.01(h), (with the parties expressly acknowledging that the Company is presently
licensed in all jurisdictions identified in Schedule II) unless the Purchasers
can establish that such approvals were denied or applications were withdrawn,
as
the case may be, solely because of information pertaining to, or a fact or
circumstance relating to, the Company or any of its respective officers as
of
the date hereof, shareholders as of the date hereof, directors as of the date
hereof or any of their affiliated Persons or affiliated individuals, or (B)
by
the Company pursuant to Section 8.01(e), then the Purchasers shall pay to the
Company, without duplication, the aggregate amount of all reasonable,
documented, out-of-pocket costs and expenses incurred by the Company solely
and
directly in connection with the execution, delivery and performance of this
Agreement by the Company (the “Company Termination Reimbursement Amount”);
and
(iii) if
this
Agreement is terminated by either of the Purchasers or the Company pursuant
to
Section 8.01(f) and, as of the dates set forth in Section 8.01(f), unless
Purchasers can establish that the licensing approvals shall not have been
obtained as provided in Section 8.01(h) for reasons solely attributable to
information pertaining to, or a fact or circumstance relating to, the Company,
or any of its respective officers as of the date hereof, shareholders as of
the
date hereof, directors as of the date hereof or any of their affiliated Persons
or affiliated individuals, then the Purchasers shall pay to the Company, without
duplication, the Company Termination Reimbursement Amount.
51
Any
amount that becomes payable pursuant to this Section 8.02(c) shall be paid,
without duplication, by wire transfer of immediately available funds, to an
account designated by the party(ies) to whom such amount is due, within two
(2)
Business Days of the date that the documentation of costs and expenses
contemplated hereby is delivered to the party required to make payment
hereby.
(d) The
Company and the Purchasers agree that the agreement contained in paragraph
(b)
of this Section 8.02 is an integral part of the transactions contemplated by
this Agreement, and that without such agreement the Purchasers would not have
entered into this Agreement. Notwithstanding anything contained in this
Agreement to the contrary, in the event that this Agreement is terminated
pursuant to Section 8.02(b), the payment of the amounts contemplated in Section
8.02(b) is intended by the parties to be, and shall constitute, liquidated
damages and shall be the sole and exclusive remedy and shall be in lieu of
any
and all claims that the Purchasers and their respective officers, directors,
partners and stockholders have, or might have, against the Company and its
officers, directors and shareholders for any claims arising from, or relating
in
any way to, this Agreement or the Merger, and the Purchasers and their
respective officers, directors, partners and shareholders shall not have any
other rights or claims against the Company and its officers, directors and
shareholders. If the Company fails to pay the Purchasers the amounts due under
paragraph (b) above within the time periods specified therein, the Company
shall
pay the costs and expenses (including reasonable legal fees and expenses)
incurred by the Purchasers in connection with any action in which the Purchasers
prevail, including the filing of any lawsuit, taken to collect payment of such
amounts, together with interest on the amount of any such unpaid amounts at
the
prime lending rate prevailing during such period as published in The Wall Street
Journal, calculated on a daily basis from the date such amounts were required
to
be paid until the date of actual payment.
(e) The
Company and the Purchasers agree that the agreements contained in paragraph
(c)
of this Section 8.02 are an integral part of the transactions contemplated
by
this Agreement, that without such agreement the parties would not have entered
into this Agreement and that such amounts do not constitute a penalty or
liquidated damages in the event that this Agreement is terminated pursuant
to
Section 8.02(c). If the party(ies) owing the Purchaser Termination Reimbursement
Amount or the Company Termination Reimbursement Amount, as applicable, fail(s)
to pay the other party(ies) the amounts due under paragraph (c) above within
the
time periods specified therein, the party(ies) owing the applicable Purchaser
Termination Reimbursement Amount or Company Termination Reimbursement Amount
shall pay the costs and expenses (including reasonable legal fees and expenses)
incurred by the other party(ies) in connection with any action in which the
other party(ies) prevail(s), including the filing of any lawsuit, taken to
collect payment of such amounts, together with interest on the amount of any
such unpaid amounts at the prime lending rate prevailing during such period
as
published in The Wall Street Journal, calculated on a daily basis from the
date
such amounts were required to be paid until the date of actual
payment.
52
ARTICLE
IX
MISCELLANEOUS
Section
9.01 Survival.
No
representations, warranties, agreements and covenants contained in this
Agreement shall survive the Closing Date (other than agreements or covenants
contained herein that by their express terms are to be performed after the
Closing Date) or the termination of this Agreement if this Agreement is
terminated prior to the Closing Date (other than Section 8.02 and, excepting
Section 9.12 hereof, this Article IX, which shall survive any such termination).
Notwithstanding anything in the foregoing to the contrary, no representations,
warranties, agreements and covenants contained in this Agreement shall be deemed
to be terminated or extinguished so as to deprive a party hereto or any of
its
affiliates of any defense at law or in equity which otherwise would be available
against the claims of any Person, including without limitation any shareholder
or former shareholder.
Section
9.02 Waiver;
Amendment.
Prior to
the Closing Date, any provision of this Agreement may be (i) waived by the
party
benefited by the provision or (ii) amended or modified at any time, by an
agreement in writing among the parties hereto executed in the same manner as
this Agreement, except that after the Company Meeting no amendment shall be
made
which by law requires further approval by the Shareholders without obtaining
such approval.
Section
9.03 Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed to constitute an original.
Section
9.04 Governing
Law.
This
Agreement shall be governed in accordance with the laws of the State of New
York
without regard to conflicts of laws principals thereof (other than Section
5-1401 of the New York General Obligations Law).
Section
9.05 Expenses.
Each
party hereto will bear all expenses incurred by it in connection with this
Agreement and the Merger, including fees and expenses of its own financial
consultants, accountants and counsel, provided that nothing contained herein
shall limit either party’s rights to recover any liabilities or damages arising
out of the other party’s willful breach of any provision of this
Agreement.
Section
9.06 Notices.
All
notices, requests and other communications hereunder to a party shall be in
writing and shall be deemed given if personally delivered, mailed by registered
or certified mail (return receipt requested) or sent by reputable courier
service to such party at its address set forth below or such other address
as
such party may specify by notice to the parties hereto.
If
to the
Company to:
000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxxxx
Attention:
Xxxxx Xxxxxxxx
President
and Chief Executive Officer
53
With
a copy to:
Barack
Xxxxxxxxxx Et.
Al.
llp
000
Xxxx
Xxxxxx Xxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxx X. del Hierro
If
to
Purchaser to:
ARH
Mortgage
Inc.
c/o
Airlie Opportunity Master Fund, Ltd.
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxx 00000
Attention:
Xxxxxx
Xxxxx
Managing
Director
and
If
to the
Purchaser Parent to:
Airlie
Opportunity Master Fund, Ltd.
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxx 00000
Attention:
Xxxxxx
Xxxxx
Managing
Director
In
each
case with respect to the Purchasers, with a copy to:
Xxxxxxx
Xxxxxxxx & Xxxx LLP
Two
World
Financial Center
Attention:
Xxxxxx X. Xxxxxx, Esq.
Section
9.07 Entire
Understanding; No Third Party Beneficiaries.
This
Agreement and the Voting Agreements represent the entire understanding of the
parties hereto with reference to the Merger and this Agreement and the Voting
Agreements supersede any and all other oral or written agreements heretofore
made, including the Confidentiality Agreement. Except for the Indemnified
Parties’ right to enforce the Purchasers’ obligation under Section 6.08, which
are expressly intended to be for the irrevocable benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs and representatives,
nothing in this Agreement, expressed or implied, is intended to confer upon
any
Person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
54
Section
9.08 Severability.
Except
to the extent that application of this Section 9.08 would have a Material
Adverse Effect on the Company or the Purchasers, any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability
of
any of the terms or provisions of this Agreement in any other jurisdiction.
If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable. In all
such cases, the parties shall use commercially reasonable efforts to substitute
a valid, legal and enforceable provision which, insofar as practicable,
implements the original purposes and intents of this Agreement.
Section
9.09 Enforcement
of the Agreement.
The
parties hereto agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of
this Agreement and to enforce specifically the terms and provisions hereof
in
any court of the United States or any state having jurisdiction, this being
in
addition to any other remedy to which they are entitled at law or in
equity.
Section
9.10 Interpretation.
When a
reference is made in this Agreement to Sections, Annexes or Schedules, such
reference shall be to a Section of, or Annex or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in
this
Agreement are for reference purposes only and are not part of this Agreement.
Whenever the words “include,”“includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.” The phrases “the date of this Agreement,”“the date hereof” and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September 5, 2005.
Section
9.11 Assignment.
No party
may assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other party. Subject to
the
preceding sentence, this Agreement shall be binding upon and shall inure to
the
benefit of the parties hereto and their respective successors and permitted
assigns.
Section
9.12 Alternative
Structure.
Notwithstanding any provision of this Agreement to the contrary, the Purchasers
may at any time modify the structure of the acquisition of the Company set
forth
herein, subject to the prior written consent of the Company, which consent
shall
not be unreasonably withheld or delayed, provided that (i) the Consideration
to
be paid to the holders of Company Common Stock is not thereby changed in kind
or
reduced in amount (whether by payment of Taxes on such Consideration or
otherwise) as a result of such modification and (ii) such modification will
not
materially delay or jeopardize receipt of any required approvals of Governmental
Authorities or otherwise materially delay consummation of the
Merger.
[Signature
page follows]
55
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
ARH MORTGAGE INC. | ||
|
|
|
By: | /s/ Dort X. Xxxxxxx III | |
Dort X. Xxxxxxx III |
||
President |
AIRLIE OPPORTUNITY MASTER FUND, LTD. | ||
|
|
|
By: | /s/ Dort X. Xxxxxxx III | |
Dort X. Xxxxxxx III |
||
Chief Executive Officer |
UNITED FINANCIAL MORTGAGE CORP. | ||
|
|
|
By: | /s/ Xxxxx X. Xxxxxxxx | |
Xxxxx X. Xxxxxxxx |
||
President and Chief Executive Officer |
By: | /s/ Xxxxxxx X. Xxxxx | |
Xxxxxxx X. Xxxxx |
||
Executive Vice President and Corporate Counsel |
56
ANNEX
A
FORM
OF VOTING AGREEMENT
This
Voting Agreement (this “Agreement”) is made and entered into as of
September 5, 2005, by and between ARH Mortgage Inc. (“Buyer”), and the
undersigned shareholder (“Shareholder”) of United Financial Mortgage Corp.
(“Seller”).
RECITALS
WHEREAS,
Buyer and Seller have entered into an Agreement and Plan of Merger, dated
September 5, 2005 (as may be amended, the “Merger Agreement”), which provides
for the merger (the “Merger”) of Seller with and into a wholly-owned subsidiary
of Buyer, with Seller being the surviving corporation.
WHEREAS,
Shareholder is the record holder and beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of
such number of shares of the outstanding common stock, no par value per share,
of the Seller as indicated on the final page of this Agreement (the
“Shares”).
WHEREAS,
Buyer desires Shareholder to agree, and Shareholder is willing to agree, not
to
transfer or otherwise dispose of any of the Shares, or any other shares of
capital stock of Seller acquired hereunder and prior to the Termination Date
(as
defined in Section 1.1 below, except as otherwise permitted hereby), and to
vote
the Shares and any other such shares of capital stock of Seller in a manner
so
as to facilitate consummation of the transactions contemplated by the Merger
Agreement (the “Proposed Transaction”), as provided herein.
NOW,
THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement
to Retain Shares.
1.1 Transfer
and Encumbrance.
Other
than as provided herein, until the Termination Date, Shareholder shall not
hereafter (a) sell,
tender, transfer, pledge, encumber, assign or otherwise dispose of any of the
Shares or New Shares (as defined in Section 1.2 below), (b) deposit
any Shares or New Shares into a voting trust or enter into a voting agreement
or
arrangement with respect to such Shares or New Shares or grant any proxy or
power of attorney with respect thereto, (c) enter
into any contract, option or other arrangement or undertaking with respect
to
the direct or indirect sale, transfer, pledge, encumbrance, assignment or other
disposition of any Shares or New Shares, or (d)
take any action that would make any representation or warranty of Shareholder
contained herein untrue or incorrect or have the effect of preventing or
disabling Shareholder from performing Shareholder’s obligations under this
Agreement. Notwithstanding the restrictions set forth in this Section 1.1,
nothing shall prohibit Shareholder from transferring the Shares or New Shares
provided the person or entity to whom such Shares or New Shares are transferred
agrees to be bound by the terms of this Agreement. As used herein, the term
“Termination Date” shall mean the earlier to occur of (i) the Closing Date
(as defined in the Merger Agreement); and (ii) such date and time as
the
Merger Agreement shall be terminated pursuant to Article VIII
thereof.
A-1
1.2 Additional
Purchases.
Shareholder agrees not to acquire, directly or indirectly, beneficial ownership
of any shares of capital stock of Seller after the execution of this Agreement
and prior to the Termination Date (“New Shares”).
2. Agreement
to Vote Shares.
At
every meeting of the shareholders of Seller called with respect to any of the
following matters, and at every adjournment thereof, and on every action or
approval by written consent of the shareholders of Seller with respect to any
of
the following matters, Shareholder shall vote the Shares and any New Shares:
(i) in favor of approval of the Merger Agreement and the Proposed
Transaction and any matter necessary for consummation of the Proposed
Transaction; (ii) against (x) approval of any Acquisition Proposal
(as
defined in the Merger Agreement), (y) any proposal for any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Seller under the Merger
Agreement or which could result in any of the conditions of Seller’s obligations
under the Merger Agreement not being fulfilled, and (z) any action which
could reasonably be expected to impede, interfere with, delay, postpone or
materially adversely affect consummation of the Proposed Transaction; and
(iii) in favor of any other matter necessary for consummation of the
Proposed Transaction which is considered at any such meeting of shareholders
or
in such consent, and in connection therewith to execute any documents which
are
necessary or appropriate in order to effectuate the foregoing or, at the request
of Buyer, to permit Buyer to vote such Shares and New Shares directly.
3. Representations,
Warranties and Covenants of Shareholder.
Shareholder hereby represents, warrants and covenants to Buyer as
follows:
3.1 Due
Authority.
Shareholder has full power, corporate or otherwise, and authority to execute
and
deliver this Agreement and to perform its obligations hereunder. This Agreement
has been duly executed and delivered by or on behalf of Shareholder and
constitutes a legal, valid and binding obligation of Shareholder, enforceable
against Shareholder in accordance with its terms.
3.2 No
Conflict; Consents.
(a)
The
execution and delivery of this Agreement by Shareholder do not, and the
performance by Shareholder of the obligations under this Agreement and the
compliance by Shareholder with any provisions hereof do not and will not,
(i) conflict with or violate any law, statute, rule, regulation, order,
writ, judgment or decree applicable to Shareholder or the Shares, or
(ii) result in any breach of or constitute a default (or an event that
with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of a lien or encumbrance on any of the Shares pursuant to,
any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Shareholder is a party
or
by which Shareholder or the Shares are bound.
(b) The
execution and delivery of this Agreement by Shareholder do not, and the
performance of this Agreement by Shareholder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority by Shareholder except for applicable
requirements, if any, of the Exchange Act, and except where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, could not prevent or delay the performance by
Shareholder of its obligations under this Agreement in any material
respect.
A-2
3.3 Ownership
of Shares.
Shareholder (i) is the beneficial owner of the Shares, which at the
date
hereof are, and at all times up until the Termination Date will be, free and
clear of any liens, claims, options, charges, proxies or voting restrictions
or
other encumbrances, and (ii) does not beneficially own any shares of
capital stock of Seller other than the Shares.
4. No
Limitation on Discretion as Director.
Notwithstanding anything herein to the contrary, the covenants and agreements
set forth herein shall not prevent Shareholder from exercising his or her duties
and obligations as a Director of Seller or otherwise taking any action, subject
to the applicable provisions of the Merger Agreement, while acting in such
capacity as a director of Seller.
5. Additional
Documents.
Shareholder hereby covenants and agrees to execute and deliver any additional
documents necessary or desirable, in the reasonable opinion of Buyer to carry
out the intent of this Agreement.
6. Consent
and Waiver.
Shareholder hereby gives any consents or waivers that are reasonably required
for the consummation of the Proposed Transaction under the terms of any
agreements to which Shareholder is a party or pursuant to any rights Shareholder
may have.
7. Termination.
This
Agreement shall terminate and shall have no further force or effect as of the
Termination Date.
8. Appraisal
and Dissenters Rights.
Shareholder hereby waives and agrees not to assert, demand or exercise any
rights of appraisal or dissenters in connection with the Merger.
9. Miscellaneous.
9.1 Severability.
If any
term or other provision of this Agreement is determined to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate
in
good faith to modify this Agreement so as to effect the original intent of
the
parties as closely as possible to the fullest extent permitted by applicable
law
in an acceptable manner to the end that the transactions contemplated hereby
are
fulfilled to the extent possible.
9.2 Binding
Effect and Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns, but, except as otherwise specifically provided herein, neither this
Agreement nor any of the rights, interests or obligations of the parties hereto
may be assigned by either party without the prior written consent of the other
party.
A-3
9.3 Amendments
and Modifications.
This
Agreement may not be modified, amended, altered or supplemented except upon
the
execution and delivery of a written agreement executed by the parties
hereto.
9.4 Specific
Performance; Injunctive Relief.
The
parties hereto agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with the terms
hereof or was otherwise breached. It is accordingly agreed that the parties
shall be entitled to specific relief hereunder, including, without limitation,
an injunction or injunctions to prevent and enjoin breaches of the provisions
of
this Agreement and to enforce specifically the terms and provisions hereof,
in
any state or federal court in the State of New York, in addition to any other
remedy to which they may be entitled at law or in equity. Any requirements
for
the securing or posting of any bond with respect to any such remedy are hereby
waived.
9.5 Notices.
All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and sufficient if delivered in person, by cable, telegram or
facsimile (with confirmation of receipt), or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight courier
(prepaid) to the respective parties as follows:
If
to Buyer:
|
ARH
Mortgage Inc.
|
|
c/o
The Airlie Group
|
||
000
Xxxx Xxxxxx Xxxxxx
|
||
Xxxxxxxxx,
Xxxxxxxxxxx 00000
|
||
Attention:
Xxxxxx Xxxxx
|
If to Shareholder: To
the
address for notice set forth on the last page hereof
with
a copy to:
|
Barack
Xxxxxxxxxx ET. AL.
|
|
000
Xxxx Xxxxxx Xxxxx
|
||
Xxxxx
0000
|
||
Xxxxxxx,
Xxxxxxxx 00000
|
||
Attention: Xxxxx X. del Hierro, Esq. |
or
to
such other address as any party may have furnished to the other in writing
in
accordance herewith, except that notices of change of address shall be effective
upon receipt.
9.6 Governing
Law; Jurisdiction and Venue.
This
Agreement shall be governed in accordance with the laws of the State of New
York
without regard to conflicts of laws principals thereof (other than Section
5-1401 of the New York General Obligations Law). The parties hereto agree that
all actions and proceedings arising in connection with this Agreement or any
agreement, document or instrument executed in connection herewith shall be
tried
and litigated in the state and Federal courts located in New York, New York
(other than appeals from those courts that may have to be heard outside of
New
York, New York).
A-4
9.7 Entire
Agreement.
This
Agreement contains the entire understanding of the parties in respect of the
subject matter hereof, and supersedes all prior negotiations and understandings
between the parties with respect to such subject matter.
9.8 Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be an
original, but all of which together shall constitute one and the same
agreement.
9.9 Effect
of Headings.
The
section headings herein are for convenience only and shall not affect the
construction or interpretation of this Agreement.
9.10 No
Agreement Until Executed.
Irrespective of negotiations among the parties or the exchanging of drafts
of
this Agreement, this Agreement shall not constitute or be deemed to evidence
a
contract, agreement, arrangement or understanding between the parties hereto
unless and until (i) the Board of Directors of Seller has approved the Merger
Agreement and the Proposed Transaction, (ii) the Merger Agreement is executed
by
all parties thereto, and (iii) this Agreement is executed by all parties
hereto.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on
the date and year first above written.
_______________________________________
|
||
Name:
|
||
Title:
|
||
Address
for Notice:
|
||
_______________________________________
|
||
_______________________________________
|
||
Shares
beneficially owned:
|
||
____________
shares of common stock of Lark
|
||
ARH
MORTGAGE INC.
|
||
By:_____________________________________
|
||
Dort
X. Xxxxxxx III
|
||
President
|
A-5
ANNEX
B
COMPANY
PREFERRED STOCK REPURCHASE AGREEMENT
THIS
PREFERRED STOCK REPURCHASE AGREEMENT (this “Agreement”) is made as of September
___, 2005 between XXXXXX XXXXXXXX (the “Shareholder”), and UNITED FINANCIAL
MORTGAGE CORP., an Illinois corporation (the “Company”).
R
ECITALS:
A. Shareholder
currently holds 63 shares of Series A Preferred Stock of the Company (the
“Preferred
Stock”).
B. The
Company is currently in negotiations with ARH Mortgage, Inc., a Delaware
corporation, and Airlie Opportunity Master Fund, Ltd., a Cayman Islands limited
partnership, to enter into an Agreement and Plan of Merger (the “Agreement”)
whereby, among other things, shareholders of the Company will receive cash
consideration in exchange for shares of their common stock in the
Company.
C.
Shareholder
will receive substantial economic benefit from the consummation of the
transactions contemplated under the
Agreement.
D. In
contemplation of, and in consideration for, the transactions contemplated
under the
Agreement, the Shareholder grants the Company the option to repurchase the
Preferred Stock in accordance with the terms of this Agreement.
A
G R E E M E N T S:
In
consideration of the foregoing premises, which are incorporated herein by this
reference, and the covenants and agreements of the parties herein contained,
the
parties hereto, intending to be legally bound, hereby agree as
follows:
Section 1.
Grant
of Option.
Effective as of the date of this Agreement, and in exchange for the payment
by
the Company to the Shareholder of the sum of Ten Dollars ($10.00), the receipt
of which by the Shareholder is hereby acknowledged, the Shareholder hereby
grants to the Company an exclusive and irrevocable right and option (the
“Option”)
to
purchase the Preferred Stock, upon the terms and conditions hereinafter set
forth, for the price of $5,000.00 per share, or total consideration of $315,000,
plus a pro-rated cash dividend per share of Preferred Stock (based on an annual
dividend of $611.11 per share) for the period beginning May 1, 2005 through,
but
not including, the Closing Date (as defined in the Agreement) (the “Option
Price”).
Section 2.
Exercise
of Option.
On the
exercise date, the Shareholder shall sell, and the Company shall purchase,
the
Preferred Stock at the Option Price. The Shareholder shall deliver to the
Company certificates representing the Preferred Stock, properly endorsed for
transfer to the Company or its designee, and the Company shall deliver to the
Shareholder cash or a check in the amount of the Option Price.
B-1
Section 3.
Restriction
on Transfer.
Except
as otherwise provided in this Agreement, from the date of this Agreement to
the
exercise date, the Shareholder agrees that he may not sell, assign, gift,
convey, pledge, hypothecate, grant a security interest in or otherwise transfer
or encumber, voluntarily or involuntarily, any of the Preferred Stock without
the express prior written consent of the Company. Except as otherwise provided
herein, the Shareholder is entitled to exercise and enjoy all other rights
of
ownership of the Preferred Stock.
Section 4.
Endorsement
and Encumbrance.
During
the term hereof, the Shareholder and the Company agree to cause the certificates
for the Preferred Stock to bear the following legend:
“The
shares represented by this certificate are subject to the terms and conditions
of a Preferred Stock Repurchase Agreement dated as of September __, 2005,
between United Financial Mortgage Corp. and Xxxxxx Xxxxxxxx, a copy of which
is
on file in the office of the cashier of the Company.”
Section 5.
Notice.
Any
notice, demand, election or other communication (hereinafter called
“notice”)
that
any party hereto shall desire or be required to give pursuant to the provisions
of this Agreement shall be either personally delivered or sent by registered
or
certified mail, return receipt requested, postage prepaid, and if sent by mail,
the giving of notice shall be deemed complete on the date shown on the receipt,
said notice being delivered to the following addresses:
If
to the Company, to:
000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
|
If
to the Shareholder, to:
Xxxxxx
Xxxxxxxx
Personal
and Confidential
000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
|
Section 6.
Authority.
Each
signatory to this Agreement hereby represents and warrants to the other that
he,
she or it has full power, authority and legal right, on his, her or its own
behalf and on behalf of his, her or its heirs, executors, administrators,
successors, affiliates and assigns heretofore and hereafter to execute, deliver
and perform all actions required under this Agreement.
Section 7.
Amendment;
Modification.
This
Agreement may be amended, modified or supplemented at any time only by the
written approval of such amendment, modification or supplement by both parties
hereto.
Section 8.
Entire
Agreement.
This
Agreement evidences the entire agreement among the parties hereto with respect
to the matters provided for herein and there are no agreements, representations
or warranties with respect to the matters provided for herein other than those
set forth herein.
Section 9.
Counterparts.
This
Agreement may be executed in two or more counterparts, all of which taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart. The delivery
of executed counterparts of this Agreement may be effected by telecopy, which
shall have the same force and effect as original executed and delivered
signature pages hereto.
B-2
Section 10.
Governing
Law.
All
questions concerning the construction, validity and interpretation of this
Agreement and the performance of the obligations imposed by this Agreement
shall
be governed by the internal laws of the State of Illinois, except to the extent
that the federal laws of the United States apply.
Section 11.
Successors;
Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Company and
its
successors and permitted assigns, and the Shareholder and his or her spouse,
executor, personal representative, administrator, heirs, legatees, guardian
and
other legal representatives. This Agreement shall survive the death or
incapacity of the Shareholder.
Section 12.
No
Third-Party Beneficiaries.
This
Agreement is for the sole and exclusive benefit of the Company and the
Shareholder and their respective successors and permitted assigns. Nothing
in
this Agreement shall be construed to grant to any other person or entity any
rights, remedy or claim under or in respect of this Agreement.
[Remainder
of This Page Intentionally Left Blank]
B-3
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement either
individually or through its duly authorized officer, on the day and year
first
written above.
By: __________________________________
|
__________________________________
|
XXXXXX
XXXXXXXX
|
B-4
ANNEX
C
FORM
OF CONSULTING AGREEMENT
This
CONSULTING AGREEMENT (the "Agreement") is executed on
___________, 2005 and is made and entered into effective as of the Closing
Date
(also referred to as the “Employment Date”) by and among ARH MORTGAGE
INC., a corporation organized and operating under the laws of the State
of Delaware (the "Corporation"), UNITED FINANCIAL MORTGAGE
CORP., a mortgage corporation organized and operating under the laws of
the State of Illinois ("Mortgage Corp."), and XXXXXX XXXXXXXX
(the "Executive"). For purposes of this Agreement, the Closing Date shall
have
the meaning assigned to it by the Agreement and Plan of Merger dated as of
September 1, 2005 among the Corporation, Airlie Opportunity Master Fund,
Ltd.
and the Mortgage Corp.
INTRODUCTORY
STATEMENT
The
Executive was Chairman and Founder of the Mortgage Corp. prior to its
acquisition by the Corporation on the Employment Date and supervised and
controlled all of the business affairs of Mortgage Corp. Following the
acquisition, the Board of Directors of the Corporation and the Board of
Directors of Mortgage Corp. (each, a “Board”) have concluded that it is in the
best interests of the Corporation and Mortgage Corp. to secure the Executive’s
services and expertise. For these reasons, the Boards have decided to offer
to
enter into a contract with the Executive for his services. The Executive has
accepted this offer.
The
terms
and conditions which the Corporation, Mortgage Corp. and the Executive have
agreed to are as follows.
AGREEMENT
1. Employment.
The
Corporation and Mortgage Corp. hereby offer to employ the Executive, and the
Executive hereby accepts such continued employment, during the period and upon
the terms and conditions set forth in this Agreement.
2. Employment
Period.
(a) The
Corporation and Mortgage Corp. shall employ the Executive during the period
beginning on the Employment Date and ending on the later of October 31, 2008
or
the third annual anniversary of the Employment Date (the "Employment Period").
(b) Except
as
otherwise expressly provided in this Agreement, any reference in this Agreement
to the term "Remaining Unexpired Employment Period" as of any date shall mean
the period beginning on such date and ending on the last day of the Employment
Period.
(c) Nothing
in this Agreement shall be deemed to prohibit the Corporation, Mortgage Corp.
or
the Executive from terminating the Executive's employment before the end of
the
Employment Period with or without notice for any reason. This Agreement shall
determine the relative rights and obligations of the Corporation, Mortgage
Corp.
and the Executive in the event of any such termination. In addition, nothing
in
this Agreement shall require a termination, or prohibit a continuation, of
the
Executive's employment at the expiration of the Employment Period. Any such
continuation shall be on an "at-will" basis unless the Corporation, Mortgage
Corp. and the Executive agree otherwise.
C-1
3. Duties.
The
Executive shall serve as consultant to the Mortgage Corp. providing the Boards
with such advice and consultation as requested by the Boards and senior
executive officers of the Mortgage Corp. and agreed to by
Executive.
4. Compensation.
In
consideration for the services to be rendered by the Executive hereunder, the
Mortgage Corp. shall pay to him a salary at an initial annual rate of One
Hundred Fifty Thousand Dollars ($150,000), payable in approximately equal
installments in accordance with its customary payroll practices for senior
officers. The Boards, or their respective Compensation Committees or Executive
Committees, shall review the Executive's annual rate of salary at such times
during the Employment Period as they deem appropriate, but not less frequently
than once every twelve (12) months, and may, in their discretion, approve a
salary increase. In addition to salary, the Executive may receive other cash
compensation from the Mortgage Corp. for services hereunder at such times,
in
such amounts and on such terms and conditions as the Boards, or their respective
Compensation Committees or Executive Committees, may determine.
5. Employee
Benefit Plans and Programs.
Except
as
expressly provided herein to the contrary, during the Employment Period, the
Executive shall be treated as an employee of the Corporation and Mortgage Corp.
and shall be entitled to participate in and receive benefits under any and
all
qualified or non-qualified retirement, pension, savings, or profit-sharing
plans, any and all group life, health (including hospitalization, medical and
major medical), dental, accident and long-term disability insurance plans,
and
any other employee benefit and compensation plans as may from time to time
be
maintained by, or cover employees of, the Corporation or Mortgage Corp., in
accordance with the terms and conditions of such employee benefit plans and
programs and compensation plans and programs and consistent with the
Corporation’s or Mortgage Corp.’s customary practices. Such benefits shall in
any event be at least as favorable as those provided to the Executive by
Mortgage Corp. immediately prior to its acquisition by the Corporation. Until
such time as the Executive and Executive’s spouse attain age sixty-six (66), the
Corporation and Mortgage Corp. shall pay one hundred percent (100%) of the
premium for the Executive and Executive’s spouse’s coverages under the group
life, health (including hospitalization, medical, major medical and long term
care), dental, disability and other insurance plans and this obligation shall
survive the expiration or termination of this Agreement.
6. Indemnification
and Insurance.
(a) During
the Employment Period and for six (6) years thereafter, the Corporation and
Mortgage Corp. shall cause the Executive to be covered by and named as an
insured under any policy or contract of insurance obtained by either of them
to
insure their respective directors and officers against personal liability for
acts or omissions in connection with service as an officer or director of the
Corporation or Mortgage Corp. or service in other capacities at their request.
The insurance coverage provided to the Executive pursuant to this section 6(a)
shall be at least as favorable as the scope and the terms and conditions as
the
coverage provided to other officers or directors of the Corporation or Mortgage
Corp.
C-2
(b) To
the
maximum extent permitted under applicable law, during the Employment Period
and
for six (6) years thereafter, the Corporation and Mortgage Corp. shall indemnify
the Executive against and hold him harmless from any costs, liabilities, losses
and exposures arising from claims for acts or omissions taken in or by virtue
of
positions as an employee, officer or director of the Corporation or Mortgage
Corp. or as an employee, officer or director of other entities at the request
of
the Corporation or Mortgage Corp. In this regard, unless expressly prohibited
by
law, Corporation and Mortgage Corp. shall advance all costs and expenses for
the
defense of any claim or allegation until it shall be determined by outside
legal
counsel with recognized expertise in such matters that the Corporation and
the
Mortgage Corp. are prohibited from indemnifying and holding the Executive
harmless. The indemnification provided to the Executive pursuant to this section
6(b) shall be at least as favorable as the scope and the terms and conditions
as
the indemnification provided to other officers or directors of the Corporation
or Mortgage Corp.
7. Outside
Activities.
The
Executive may serve as a member of the boards of directors of such business,
community and charitable organizations as he may disclose to and as may be
approved by any Board (which approval shall not be unreasonably withheld);
provided, however, that such service shall not materially interfere with the
performance of his duties under this Agreement. The Executive may also engage
in
personal business and investment activities which do not materially interfere
with the performance of his duties hereunder; provided, however, that such
activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Corporation or Mortgage Corp.,
as
amended from time to time, and generally applicable to all similarly situated
executives.
8. Working
Facilities and Expenses.
The
Executive's principal place of employment shall be at Mortgage Corp.'s executive
offices on the date of this Agreement, or at such other location as the
Corporation, Mortgage Corp. and the Executive may mutually agree upon. The
Corporation and Mortgage Corp. shall provide the Executive at his principal
place of employment with a private office, secretarial services and other
support services and facilities suitable to his position with the Mortgage
Corp.
and necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Mortgage Corp. shall pay the Executive an
annual automobile allowance of SEVEN THOUSAND FIVE HUNDRED DOLLARS ($7,500).
The
Corporation and Mortgage Corp. shall reimburse the Executive for such ordinary
and necessary travel, entertainment and business expenses including, without
limitation, all expenses associated with his business use of the aforementioned
automobile (including, without limitation, gas, maintenance and insurance)
as
the Executive, Mortgage Corp. and the Corporation shall mutually agree are
necessary and appropriate for business purposes, upon presentation of an
itemized account of such expenses in such form as the Corporation and Mortgage
Corp. may reasonably require. The Executive shall be entitled to no less than
twenty (20) days of paid vacation during each year in the Employment Period.
C-3
9. Termination
of Employment Due to Death.
The
Executive's employment with the Corporation and Mortgage Corp. shall terminate,
automatically and without any further action on the part of any party to this
Agreement, on the date of the Executive's death. In such event, the Corporation
or Mortgage Corp. shall pay or provide to the Executive’s estate, surviving
dependents or designated beneficiaries, as applicable:
(a) the
Executive's earned but unpaid compensation (including, without limitation,
salary and all other items which constitute wages under applicable law) as
of
the date of his termination of employment. This payment shall be made at the
time and in the manner prescribed by law applicable to the payment of wages
but
in no event later than 30 (thirty) days after the date of the Executive's
termination of employment.
(b) the
benefits, if any, due under any employee benefit plans and programs and
compensation plans and programs maintained for the benefit of officers and
employees of the Corporation or Mortgage Corp. subject to and in accordance
with
this Agreement. The time and manner of payment or other delivery of these
benefits and the recipients of such benefits shall be determined according
to
the terms and conditions of the applicable plans and programs subject to and
in
accordance with this Agreement.
The
payments and benefits described in sections 9(a) and (b) shall be referred
to in
this Agreement as the "Standard Termination Entitlements."
10. Termination
Due to Disability.
The
Corporation and Mortgage Corp. may terminate the Executive's employment upon
a
determination, by vote of a majority of the members of the Corporation’s Board,
or a majority of the members of the Compensation Committee or Executive
Committee thereof, acting in reliance on the written advice of a medical
professional acceptable to it, that the Executive is suffering from a physical
or mental impairment which, at the date of the determination, has prevented
the
Executive from performing his assigned duties for a period of at least sixty
(60) days during the period of six (6) months ending with the date of the
determination or is likely to result in death or prevent the Executive from
performing his assigned duties on a substantially full-time basis for a period
of at least one hundred and eighty (180) days during the period of six (6)
months beginning with the date of the determination. In such event:
(a) The
Corporation or Mortgage Corp. shall pay and deliver to the Executive (or in
the
event of his death before payment, to his estate, surviving dependents or
beneficiaries, as applicable) the Standard Termination
Entitlements.
(b) In
addition to the Standard Termination Entitlements, the Corporation or Mortgage
Corp. shall continue to pay the Executive his base salary, at the annual rate
in
effect for him immediately prior to the termination of his employment, during
a
period ending on the earliest of: (i) the expiration of one hundred and eighty
(180) days after the date of termination of his employment; (ii) the date on
which long-term disability insurance benefits are first payable to him under
any
long-term disability insurance plan covering employees of the Corporation or
Mortgage Corp. (the "LTD Eligibility Date"); (iii) the date of his death; and
(iv) the expiration of the Remaining Unexpired Employment Period (the "Initial
Continuation Period"). If the end of the Initial Continuation Period is neither
the LTD Eligibility Date nor the date of his death, the Corporation or Mortgage
Corp. shall continue to pay the Executive his base salary, at an annual rate
equal to sixty percent (60%) of the annual rate in effect for him immediately
prior to the termination of his employment, during an additional period ending
on the earliest of the LTD Eligibility Date, the date of his death and the
expiration of the Remaining
Unexpired Employment Period.
C-4
A
termination of employment due to disability under this section 10 shall be
effected by notice of termination given to the Executive by the Corporation
and
Mortgage Corp. and shall take effect on the later of the effective date of
termination specified in such notice or sixty (60) days after the date on which
the notice of termination is deemed given to the Executive.
11. Discharge.
(a) The
Corporation and Mortgage Corp. may terminate the Executive's employment at
any
time during the Employment Period for any reason or for no reason, but only
by
majority vote of the entire membership of the Corporation’s and Mortgage Corp.’s
Boards.
(b) The
termination of the Executive's employment shall be deemed to be for "Cause"
only
if the Corporation’s and Mortgage Corp.’s Boards, by majority vote of their
respective entire memberships, determines that the Executive
(i) has
willfully failed or refused to perform his assigned duties under this Agreement
in any material respect (including, for these purposes, the Executive's
inability to perform such duties as a result of drug or alcohol dependency);
(ii) has
committed gross negligence in the performance of, or is guilty of continual
neglect of, his assigned material duties;
(iii) has
been
convicted or entered a plea of guilty or nolo contendere to, the commission
of a
felony or any other crime involving dishonesty, personal profit or other similar
circumstance likely, in the commercially reasonable judgment of the Boards,
to
have a material adverse effect on the Corporation, Mortgage Corp. or their
respective businesses or reputations;
(iv) has
knowingly violated, in any material respect, any material law, rule, regulation
or order applicable to the Corporation or Mortgage Corp. in his performance
of
services for the Corporation or Mortgage Corp.; or
(v) has
willfully and intentionally breached the material terms of this Agreement in
any
material respect.
C-5
For
purposes of this section 11, no act or failure to act on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Corporation
and
Mortgage Corp. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Boards or based upon the written advice
of
counsel for the Corporation or Mortgage Corp. shall be conclusively presumed
to
be done, or omitted to be done, by the Executive in good faith and in the best
interests of the Corporation and Mortgage Corp. Termination with Cause shall
be
effected by written notice to the Executive setting forth with particularity
the
grounds for termination. No such Termination with Cause shall be effected,
however, until (1) the Boards have provided the Executive written notice that
both Boards have made a preliminary determination, by a majority vote of their
entire memberships, of Cause, (2) the Executive is unable to correct his conduct
or correct the consequences of his conduct within 30 days, (3) the Executive
then is provided a hearing before each Board, and (4) after such hearings,
the
Boards make the determination described in the first sentence of this section
11(b).
(c) If
the
Executive is discharged during the Employment Period with Cause, the Corporation
or Mortgage Corp. shall pay and provide to him (or, in the event of his death,
to his estate, his surviving beneficiaries or dependents, as applicable) the
Standard Termination Entitlements only.
(d) If
the
Executive is discharged during the Employment Period without Cause, the
Corporation or Mortgage Corp. shall pay and provide to him (or, in the event
of
his death, to his estate, his surviving beneficiaries or dependents, as
applicable) the Standard Termination Entitlements and, in addition to the
Standard Termination Entitlements:
(i)
Until
such time as the Executive and Executive’s spouse attain age sixty-six (66), the
Corporation or Mortgage Corp. shall provide for the Executive and his dependents
continued group life, health (including hospitalization, medical and major
medical), dental, accident and long-term disability insurance coverage on
substantially the same terms and conditions (including any co-payments and
deductibles) in effect for them immediately prior to the Executive's
termination. The coverage provided under this section 11(d)(i) may, at the
election of the Corporation or Mortgage Corp., be secondary to the coverage
provided as part of the Standard Termination Entitlements and to any
employer-paid coverage provided by a subsequent employer or through Medicare,
with the result that benefits under other coverage will offset the coverage
required by this section 11(d)(i).
(ii)
During
the Remaining Unexpired Employment Period, the Corporation or Mortgage Corp.
shall continue to pay to the Executive (or, in the event of his death before
payment, his estate) his base salary at the annual rate in effect for him
immediately prior to the termination of his employment. Such payments shall
be
made in accordance with the Corporation’s or Mortgage Corp.’s then standard
payroll schedule.
The
payments and benefits enumerated in section 11(d) shall be referred to
collectively in this Agreement as the “Additional Termination Entitlements”.
C-6
12. Resignation.
(a) The
Executive may resign from his employment with the Corporation and Mortgage
Corp.
at any time for any reason or for no reason. A resignation under this section
12
shall be effected by notice of resignation given by the Executive to the
Corporation and Mortgage Corp. and shall take effect on the effective date
of
termination specified in such notice (which shall in no event be sooner than
sixty (60) days after the notice is deemed given) or such earlier or later
date
as the Executive, the Corporation and Mortgage Corp. may mutually agree upon.
The Executive's resignation of any of the positions within the Corporation
and
Mortgage Corp. to which he has been assigned shall be deemed a resignation
from
all such positions unless the Corporation, Mortgage Corp. and the Executive
agree in writing otherwise.
(b) The
Executive's resignation shall be deemed to be for "Good Reason" if the effective
date of resignation occurs within three (3) months after any of the
following:
(i) any
reduction of the Executive's rate of base salary in effect from time to time,
whether or not material, or any failure (other than due to reasonable
administrative error that is cured promptly upon notice) to pay any portion
of
the Executive's compensation as and when due;
(ii) any
change in the terms and conditions of any compensation, subject to Sections
5
and 8 hereof, or benefit program in which the Executive participates (other
than
across-the-board changes in benefit programs having substantially the same
effect on all similarly situated employees) which, either individually or
together with other changes, has a material adverse effect on the aggregate
value of his total compensation package; provided that the Executive shall
have
given written notice of such material adverse effect to the Corporation and
Mortgage Corp., and the Corporation or Mortgage Corp. shall not have
substantially cured such failure within thirty (30) days after such notice
is
deemed given;
(iii) any
material breach by the Corporation or Mortgage Corp. of any material term,
condition or covenant contained in this Agreement; provided that the Executive
shall have given notice of such material breach to the Corporation and Mortgage
Corp., and the Corporation or Mortgage Corp. shall not have substantially cured
such breach within thirty (30) days after such notice is deemed given;
(iv) a
change
in the Executive's principal place of employment to a place that is not the
principal executive office of Mortgage Corp. as of the effective date of this
Agreement or other mutually agreeable location, or a relocation of Mortgage
Corp.'s principal executive office to a location that is both more than thirty
(30) miles away from the Executive's principal residence and more than thirty
(30) miles away from the location of the Mortgage Corp.'s principal executive
office on the effective date of this Agreement; or
(v) there
is
a Change in Control of the Corporation or the Mortgage Corp. which for purposes
of this Agreement shall occur if the individuals who are members of he Boards
immediately following the Closing Date (the “Continuing Directors”) cease for
any reason to constitute a majority of their respective Boards, unless the
election, or nomination for election by the stockholders, of any new director
was approved by a vote of a majority of the applicable Continuing Directors,
and
such new director shall, for purposes of this Agreement, be considered as a
Continuing Director.
C-7
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur as a result
of a
transaction in which the Mortgage Corp. or any parent corporation thereof
becomes publicly-traded. In all other cases, a resignation by the Executive
shall be deemed to be without Good Reason.
(c) If
the
Executive resigns during the Employment Period without Good Reason, the
Corporation and Mortgage Corp. shall pay and provide to him (or, in the event
of
his death, to his estate, his surviving beneficiaries or dependents, as
applicable) the Standard Termination Entitlements only.
(d) If
the
Executive resigns during the Employment Period with Good Reason, the Corporation
and Mortgage Corp. shall pay and provide to him (or, in the event of his death,
to his estate, his surviving beneficiaries or dependents, as applicable) the
Standard Termination Entitlements and, in addition, shall also pay and deliver
the Additional Termination Entitlements.
13. Terms
and Conditions of the Additional Termination
Entitlements.
The
Corporation, Mortgage Corp. and the Executive hereby stipulate that the damages
which may be incurred by the Executive following any termination of employment
are not capable of accurate measurement as of the date first above written
and
that the Additional Termination Entitlements constitute reasonable damages
under
the circumstances and shall be payable without any requirement of proof of
actual damage and without regard to the Executive's efforts, if any, to mitigate
damages. The Corporation, Mortgage Corp. and the Executive further agree that
the Corporation and Mortgage Corp. may condition the payment and delivery of
the
Additional Termination Entitlements on the receipt of (a) the Executive's
resignation from any and all positions which he holds as an officer, director
or
committee member with respect to the Corporation, Mortgage Corp. or any
subsidiary or affiliate and (b) the Executive’s release (in such form and of
such substance as is mutually agreeable to the Corporation, the Mortgage Corp.
and the Executive) of the Corporation, Mortgage Corp. and their respective
affiliates, subsidiaries and parent corporations, and their respective
directors, officers, employees and agents, and the heirs, successors and assigns
of all of them, from any liability of any nature in connection with the
Executive’s employment by the Corporation and Mortgage Corp. or the termination
thereof, except for those contractual liabilities expressly created by this
Agreement.
14. Limitation
of Benefits under Certain Circumstances.
If
the
Additional Termination Entitlements, either alone or together with other
payments and benefits which the Executive has the right to receive from the
Corporation or Mortgage Corp., would constitute a “parachute payment” under
Section 280G of the Internal Revenue Code of 1986, the regulations promulgated
thereunder or related Internal Revenue Service guidance (collectively, the
“Code”), the Additional Termination Entitlements shall be reduced, in the manner
determined by the Executive, by the amount, if any, which is the minimum
necessary to result in no portion of the Additional Termination Entitlements
payable by the Corporation or Mortgage Corp. being non-deductible to the
Corporation or Mortgage Corp. pursuant to Section 280G of the Code and subject
to the excise tax imposed under Section 4999 of the Code. Similarly, any payment
of the Additional Termination Entitlements shall be structured to comply with
all requirements of Section 409A of the Code. The determination of any reduction
or restructuring of the Additional Termination Entitlements shall be based
upon
the opinion of independent counsel selected by the Corporation’s or Mortgage
Corp. and paid by the Corporation and Mortgage Corp. Such counsel shall be
reasonably acceptable to the Corporation, Mortgage Corp. and the Executive;
shall promptly prepare the foregoing opinion, but in no event later than thirty
(30) days from the date of termination; and may use such actuaries or
accountants as such counsel deems necessary or advisable for the purpose.
Nothing contained herein shall result in a reduction of any payments or benefits
to which the Executive may be entitled upon termination of employment under
any
circumstances other than as specified in this Section 14, or a reduction
in
the Additional Termination Entitlements below zero.
C-8
15. Protective
Covenants.
(a) Covenants.
The
Corporation and Mortgage Corp. conduct a business consisting of residential
mortgage lending, residential mortgage banking, residential mortgage brokerage
and residential mortgage servicing (the “Corporation’s Business”) at various
locations in cities and counties across the United States (such cities and
counties, together with any other city or county in which the Corporation or
Mortgage Corp. subsequently maintains or establishes a plan to open an office,
the “Corporation’s Geographic Market”). The Executive acknowledges that the
Corporation and Mortgage are entering into this Agreement with him for the
purpose of preserving and cultivating the Corporation’s Business. Therefore, the
Executive agrees to the following covenants:
(i) Covenant
Not To Compete. Prior to the later of October 31, 2008 or the third annual
anniversary of the Employment Date, he shall not, without the prior written
consent of the Corporation or Mortgage Corp., become an officer, employee,
consultant, director or trustee of, or otherwise provide services with or
without compensation to, any person or entity that is engaged in a business
or
line of business or provides a product or service in direct or indirect
competition with the Corporation’s Business in the Corporation’s Geographic
Market (the Corporation’s Geographic Market for this purpose to be determined as
of the date of his termination of employment).
(ii) Confidential
Information. Unless he obtains the prior written consent of the Corporation
or
Mortgage Corp., the Executive shall keep confidential and shall refrain from
using for the benefit of himself, or any person or entity other than the
Corporation and its parents and subsidiaries and any subsidiary of any of the
Corporation’s parents (the Corporation and such parents and subsidiaries
collectively, the “Corporation’s Affiliated Group”), any material document or
information obtained from a member of the Corporation’s Affiliated Group, or in
the course of his employment with any of them concerning their current or
planned future properties, operations or business, including but not limited
to
information concerning the Corporation’s or Mortgage Corp.’s customers (the
“Confidential Information”) unless and until such document or information is
readily ascertainable from public or published information or trade sources
or
has otherwise been made available to the public through no fault of his own;
provided,
however,
that
nothing in this section 15(a)(ii) shall prevent the Executive, with or without
the Corporation’s or Mortgage Corp.’s consent, from participating in or
disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is compelled under applicable law; in such event,
the Executive shall, to the extent practicable under the circumstances, notify
the Corporation and Mortgage Corp. in advance of and afford the Corporation
and
Mortgage Corp. an opportunity, at their own expense, to take action to prevent
or limit the scope of such participation or disclosure.
C-9
(iii) Proprietary
Information. The Executive acknowledges that, during the course of his
employment, he will, alone or jointly with others, develop or have access to
information (whether in written, oral, electronic or other form) concerning
the
Corporation’s Affiliated Group’s business plans, marketing plans, methods and
surveys, product and service design, development and pricing plans and methods,
customer lists, prospect lists, customer relationship information and need
assessments, profitability assessments, technology, service marks, trademarks
and other intellectual property, trade secrets, know-how and other proprietary
information concerning the Corporation’s Affiliated Group (the “Proprietary
Information”). The Executive acknowledges that all such Proprietary Information
is, as between the Executive and the Corporation’s Affiliated Group, the sole
property of the Corporation’s Affiliated Group and that the Executive has no
right, title or interest therein. During his employment with the Corporation
and
Mortgage Corp. and at all times thereafter, the Executive shall refrain from
using any Proprietary Information for the benefit of any person or entity other
than the Corporation’s Affiliated Group. At any time upon the Corporation’s or
Mortgage Corp.’s request, and in any event upon his termination of employment
with the Corporation and Mortgage Corp., the Executive shall promptly return
to
the Corporation and Mortgage Corp. all Proprietary Information in his possession
in any form or media and all laptop computers, cell phones and other property
of
the Corporation’s Affiliated Group in his possession and shall, if requested to
do so by the Corporation or Bancorp, certify in writing that any Proprietary
Information not so returned has been destroyed.
(iv) Solicitation.
The Executive, prior to the later of October 31, 2008 and the third annual
anniversary of the Employment Date, shall not, without the written consent
of
the Corporation and Mortgage Corp., either directly or indirectly:
(A)
solicit,
offer employment to, or take any other action intended, or that a reasonable
person acting in like circumstances would expect, to have the effect of causing
any officer or employee of the Corporation’s Affiliated Group to terminate his
or her employment and accept employment or become affiliated with, or provide
services with or without compensation in any capacity whatsoever to, any person
or entity engaged in a business or line of business or providing a product
or
service in direct or indirect competition with the Corporation’s Business in the
Corporation’s Geographic Market (the Corporation’s Geographic Market for this
purpose to be determined as of the date of his termination of
employment);
(B)
provide
any information, advice or recommendation with respect to any such officer
or
employee to any person or entity that is intended, or that a reasonable person
acting in like circumstances would expect, to have the effect of causing,
encouraging or enabling any officer or employee of the Corporation’s Affiliated
Group to terminate his employment and accept employment or become affiliated
with, or provide services with or without compensation in any capacity
whatsoever to, to any person or entity engaged in a business or line of business
or providing a product or service in direct or indirect competition with the
Corporation’s Business in the Corporation’s Geographic Market (the Corporation’s
Geographic Market for this purpose to be determined as of the date of his
termination of employment); or
C-10
(C)
directly
or indirectly solicit, or facilitate in any manner any other person’s or
entity’s solicitation of, business in competition with the Corporation’s
Business in the Corporation’s Geographic Market (the Corporation’s Geographic
Market for this purpose to be determined as
of the
date of his termination of employment) from (I) any of the Corporation’s or
Mortgage Corp.’s customers with whom the Executive served as a relationship
manager, or whom the Executive was assigned to solicit on behalf of the
Corporation or Mortgage Corp., at any time during the period of one (1) year
ending on the date of his termination of employment; (II) any other person
or
entity which the Executive knows to be one of the Corporation’s or Mortgage
Corp.’s customers, or (III) any other person or entity which the Executive knows
is being actively solicited by the Corporation or Mortgage Corp. on, or had
been
identified for active solicitation by the Corporation or Mortgage Corp. at
any
time during the period of one (1) year ending on, the date of his termination
of
employment with the Corporation and Mortgage Corp.
(b) Reasonableness
of Covenants.
The
Executive acknowledges that: (i) the Corporation and Mortgage Corp. have a
legitimate business interest in preserving their investment in their
Confidential Information and Proprietary Information, and the Corporation and
Mortgage Corp.’s customers; (ii) the restrictions set forth in this section 15
constitute reasonable restrictions to protect the Corporation’s and Mortgage
Corp.’s legitimate business interests; (iii) such restrictions are reasonable in
duration, geographic scope and scope of business protected; (iv) observing
such
restrictions will not unreasonably impair the Executive’s ability to seek or
secure employment following his termination of employment with the Corporation
and Mortgage Corp.; and (v) his employment by the Corporation and Mortgage
Corp.
and the Additional Termination Entitlements (if any) constitute adequate
consideration for his adherence to such restrictions.
(c) Specific
Performance.
The
Executive acknowledges that money damages will not be an adequate remedy for
his
failure to observe or perform any of the covenants set forth in section 15(a).
Therefore, the Corporation and Mortgage Corp. each shall have the right to
apply
to any court of competent jurisdiction for equitable relief, including but
not
limited to a temporary restraining order or injunction ordering specific
performance.
(d) Notification
to Subsequent Employers and Potential Employers.
Prior
to
accepting employment with any person or entity other than a member of the
Corporation’s Affiliated Group, the Executive shall disclose to such person or
entity the existence of this Agreement and furnish such person or entity with
a
copy hereof.
(e) Reformation
or Modification.
In the
event that this section 15 or any portion hereof shall be found by an arbitrator
or court of competent jurisdiction to be unenforceable as written, such court
or
arbitrator shall, and is hereby authorized to, modify this section 15 or any
portion hereof in such manner as he or it determines to be necessary to render
this section 15 enforceable to the maximum possible extent and to enforce this
section 15 as so modified.
C-11
16. No
Effect on Employee Benefit Plans or Programs.
The
termination of the Executive's employment during the term of this Agreement
or
thereafter, whether by the Corporation and Mortgage Corp. or by the Executive,
shall have no effect on the rights and obligations of the parties hereto under
the Corporation's or Mortgage Corp.’s qualified or non-qualified retirement,
pension, savings, thrift or profit-sharing plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs,
or
compensation plans or programs, as may be maintained by, or cover employees
of,
the Corporation or Mortgage Corp. from time to time; provided, however, that
nothing in this Agreement shall be deemed to duplicate any compensation or
benefits provided under any agreement, plan or program covering the Executive
to
which the Corporation or Mortgage Corp. is a party and any duplicative amount
payable under any such agreement, plan or program shall be applied as an offset
to reduce the amounts otherwise payable hereunder.
17. Successors
and Assigns.
This
Agreement will inure to the benefit of and be binding upon the Executive, his
legal representatives and testate or intestate distributees, and the
Corporation, Mortgage Corp. and their respective successors and assigns,
including any successor by merger or consolidation or a statutory receiver
or
any other person or firm or corporation to which all or substantially all of
the
assets and business of the Corporation or Mortgage Corp. may be sold or
otherwise transferred. Failure of the Corporation or Mortgage Corp. to obtain
from its successor its express written assumption of the Corporation's or
Mortgage Corp.’s obligations hereunder at least 30 days in advance of the
scheduled effective date of any such succession shall be deemed a material
breach of this Agreement.
18. Notices.
Any
communication required or permitted to be given under this Agreement, including
any notice, direction, designation, consent, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as
it is
delivered personally, or five (5) days after mailing if mailed, postage prepaid,
by registered or certified mail, return receipt requested, addressed to such
party at the address listed below or at such other address as one such party
may
by written notice specify to the other party:
If
to the
Executive:
Xxxxxx
Xxxxxxxx
Personal
and Confidential
c/o
United Financial Mortgage Corp.
000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxxxx 00000
C-12
with
a copy to:
Barack
Xxxxxxxxxx Et.
Al.
000
Xxxx
Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxx X. del Hierro, Esq.
If
to the
Corporation or the Mortgage Corp.:
ARH
Mortgage
Inc.
c/o
Airlie Opportunity Master Fund, Ltd.
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxx 00000
Attention:
Xxxxxx Xxxxx
with
a copy to:
Xxxxxxx
Xxxxxxxx & Xxxx LLP
Two
World
Financial Center
New
York,
New York 10281
Attention:
Xxxxxx X. Xxxxxx, Esq.
19. Severability.
A
determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision
hereof.
20. Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed a waiver of such term, covenant, or condition. A
waiver of any provision of this Agreement must be made in writing, designated
as
a waiver, and signed by the party against whom its enforcement is sought. Any
waiver or relinquishment of any right or power hereunder at any one or more
times shall not be deemed a waiver or relinquishment of such right or power
at
any other time or times.
21. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
Agreement.
22. Governing
Law.
Except
to
the extent preempted by federal law, this Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Illinois
applicable to contracts entered into and to be performed entirely within the
State of Illinois.
C-13
23. Headings
and Construction.
The
headings of sections in this Agreement are for convenience of reference only
and
are not intended to qualify the meaning of any section. Any reference to a
section number shall refer to a section of this Agreement, unless otherwise
stated.
24. Entire
Agreement; Modifications.
This
instrument contains the entire agreement of the parties relating to the subject
matter hereof, and supersedes in its entirety any and all prior agreements,
understandings or representations relating to the subject matter hereof
including the employment agreement between the Executive and Mortgage Corp.
dated August 1, 2003, including, without limitation, any provisions of such
employment agreement that by their terms survive the termination, expiration,
or
supersedure of such employment agreement. No modifications of this Agreement
shall be valid unless made in writing and signed by the parties
hereto.
25. Non-Duplication.
In
the
event that the Executive shall perform services for any direct or indirect
subsidiary or affiliate of the Corporation or Mortgage Corp., any compensation
or benefits provided to the Executive by such other employer shall be applied
to
offset the obligations of the Corporation and Mortgage Corp. hereunder, it
being
intended that this Agreement set forth the aggregate compensation and benefits
payable to the Executive for all services to the Corporation, Mortgage Corp.
and
all of their respective direct or indirect subsidiaries and affiliates.
26. Dispute
Resolution.
Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Chicago, Illinois in accordance with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association then in effect. The expenses of the parties, including
reasonable out-of-pocket costs and expenses of the prevailing party’s legal
counsel and the costs and expenses of the arbitrator, shall be borne by the
non-prevailing party if the arbitrator determines that any of the claims brought
or any of the defenses asserted by such non-prevailing party were not brought,
or were not asserted, in good faith. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. Notwithstanding the foregoing, the
Corporation and Mortgage Corp. each shall have the right apply to any court
of
competent jurisdiction for a temporary restraining order, preliminary injunction
or other interim equitable relief to which they may be entitled in connection
with any alleged violations of section 15 of this Agreement.
C-14
In
Witness Whereof,
the
Corporation and Mortgage Corp. have caused this Agreement to be executed and
the
Executive has hereunto set his hand, all as of the day and year first above
written.
XXXXXX XXXXXXXX |
||
ARH
MORTGAGE INC.
|
||
|
|
|
By: | ||
Name: Dort X. Xxxxxxx III |
||
Title: President |
UNITED
FINANCIAL MORTGAGE CORP.
|
||
|
|
|
: | By: | |
Name: Xxxxx X. Xxxxxxxx |
||
Title: President and Chief Executive Officer |
C-15
ANNEX
D
FORM
OF EMPLOYMENT AGREEMENT
This
EMPLOYMENT AGREEMENT (the "Agreement") is executed on
_____________, 2005 and is made and entered into effective as of the Closing
Date (also referred to as the “Employment Date”) by and among ARH
MORTGAGE INC., a corporation organized and operating under the laws of
the State of Delaware (the "Corporation"), UNITED FINANCIAL MORTGAGE
CORP., a mortgage corporation organized and operating under the laws of
the State of Illinois ("Mortgage Corp."), and XXXXX X. XXXXXXXX
(the "Executive"). For purposes of this Agreement, the Closing Date shall
have
the meaning assigned to it by the Agreement and Plan of Merger dated as of
September 1, 2005 among the Corporation, Airlie Opportunity Master Fund,
Ltd.
and the Mortgage Corp. (the “Merger Agreement”).
INTRODUCTORY
STATEMENT
The
Executive was President and Chief Executive Officer of the Mortgage Corp. prior
to its acquisition by the Corporation on the Employment Date and supervised
and
controlled all of the business affairs of Mortgage Corp. Following the
acquisition, the Board of Directors of the Corporation and the Board of
Directors of Mortgage Corp. (each, a “Board”) have concluded that it is in the
best interests of the Corporation and Mortgage Corp. to secure the Executive’s
services and expertise. For these reasons, the Boards have decided to offer
to
enter into a contract with the Executive for his services. The Executive has
accepted this offer.
The
terms
and conditions which the Corporation, Mortgage Corp. and the Executive have
agreed to are as follows.
AGREEMENT
1. Employment.
The
Corporation and Mortgage Corp. hereby offer to employ the Executive, and the
Executive hereby accepts such continued employment, during the period and upon
the terms and conditions set forth in this Agreement. Executive shall be elected
to and shall serve as a director of each of the Corporation and the Mortgage
Corp.
2. Employment
Period.
(a)
The
Corporation and Mortgage Corp. shall employ the Executive during the period
beginning on the Employment Date and ending on the later of October 31, 2008
or
the third annual anniversary of the Employment Date (the "Employment Period").
(b)
Except
as
otherwise expressly provided in this Agreement, any reference in this Agreement
to the term "Remaining Unexpired Employment Period" as of any date shall mean
the period beginning on such date and ending on the last day of the Employment
Period.
(c)
Nothing
in this Agreement shall be deemed to prohibit the Corporation, Mortgage Corp.
or
the Executive from terminating the Executive's employment before the end of
the
Employment Period with or without notice for any reason. This Agreement shall
determine the relative rights and obligations of the Corporation, Mortgage
Corp.
and the Executive in the event of any such termination. In addition, nothing
in
this Agreement shall require a termination, or prohibit a continuation, of
the
Executive's employment at the expiration of the Employment Period. Any such
continuation shall be on an "at-will" basis unless the Corporation, Mortgage
Corp. and the Executive agree otherwise.
D-1
3. Duties.
The
Executive shall serve as the most senior executive officer of Mortgage Corp.
with the title President and Chief Executive Officer. The Executive shall,
subject to the control of the Boards, in general supervise and control all
of
the business and affairs of the Mortgage Corp., and shall participate in all
policy making decisions of the Mortgage Corp. Board and be responsible for
carrying out the decisions of the Boards. Subject to the authority of the
Boards, the Executive shall be responsible for planning the growth of the
Mortgage Corp., capital-raising, shareholder relations, relations with
investment bankers other financial institutions and financial advisors, and
strategic planning, including exploring opportunities for mergers, acquisitions
and new business. The Executive shall have the general supervision and direction
of all of the Mortgage Corp.’s officers, subject to and consistent with policies
enunciated by the Boards. The Executive shall, under authority given to the
Executive, sign instruments in the name of the Mortgage Corp. The Executive
shall have such other duties and powers customarily performed and held by
Presidents and Chief Executive Officers of publicly traded mortgage companies
comparable to the Mortgage Corp. and such additional duties and powers as may
be
assigned to him from time to time by each Board. During the Employment Period,
the Executive shall devote to his duties hereunder his full working time,
attention and energies.
4. Compensation.
In
consideration for the services to be rendered by the Executive hereunder, the
Mortgage Corp. shall pay to him (a) a salary at an initial annual rate of Three
Hundred Twenty-Five Thousand Dollars ($325,000), payable in approximately equal
installments in accordance with its customary payroll practices for senior
officers; and (b) an annual bonus based on performance in accordance with the
terms set forth in Schedule A to this Agreement. The Boards, or their respective
Compensation Committees or Executive Committees, shall review the Executive's
annual rate of salary at such times during the Employment Period as they deem
appropriate, but not less frequently than once every twelve (12) months, and
may, in their discretion, approve a salary increase. In addition to salary
and
bonus set forth in (a) and (b) above, the Executive (i) shall receive on the
Employment Date a grant of stock options with such terms and conditions as
shall
be described in Schedule A and, (ii) in addition, may receive such other cash
compensation from the Corporation and the Mortgage Corp. for services hereunder
at such times, in such amounts and on such terms and conditions as the Boards,
or their respective Compensation Committees or Executive Committees, may
determine.
5. Employee
Benefit Plans and Programs.
Except
as
expressly provided herein to the contrary, during the Employment Period, the
Executive shall be treated as an employee of the Corporation and Mortgage Corp.
and shall be entitled to participate in and receive benefits under any and
all
qualified or non-qualified retirement, pension, savings, or profit-sharing
plans, any and all group life, health (including hospitalization, medical and
major medical), dental, accident and long-term disability insurance plans,
and
any other employee benefit and compensation plans as may from time to time
be
maintained by, or cover employees of, the Corporation or Mortgage Corp., in
accordance with the terms and conditions of such employee benefit plans and
programs and compensation plans and programs and consistent with the
Corporation’s or Mortgage Corp.’s customary practices. Such benefits shall in
any event be at least as favorable as those provided to the Executive by
Mortgage Corp. immediately prior to its acquisition by the Corporation. At
all
times during the Executive’s employment with the Corporation and the Mortgage
Corp., the Corporation or the Mortgage Corp. shall pay one hundred percent
(100%) of the premium for each of (a) the Executive’s and his dependents’
coverage under the group life, group health (including hospitalization, medical,
major medical and long-term care), dental disability and other insurance plans
maintained by the Corporation or Mortgage Corp. and (b) a life insurance policy
issued by an insurance company reasonably acceptable to the Executive that
would
pay any beneficiary designated by the Executive at least $1,000,000 upon the
death of the Executive.
D-2
6. Indemnification
and Insurance.
(a)
During
the Employment Period and for six (6) years thereafter, the Corporation and
Mortgage Corp. shall cause the Executive to be covered by and named as an
insured under any policy or contract of insurance obtained by either of them
to
insure their respective directors and officers against personal liability for
acts or omissions in connection with service as an officer or director of the
Corporation or Mortgage Corp. or service in other capacities at their request.
The insurance coverage provided to the Executive pursuant to this section 6(a)
shall be at least as favorable as the scope and the terms and conditions as
the
coverage provided to other officers or directors of the Corporation or Mortgage
Corp.
(b)
To
the
maximum extent permitted under applicable law, during the Employment Period
and
for six (6) years thereafter, the Corporation and Mortgage Corp. shall indemnify
the Executive against and hold him harmless from any costs, liabilities, losses
and exposures arising from claims for acts or omissions taken in or by virtue
of
positions as an employee, officer or director of the Corporation or Mortgage
Corp. or as an employee, officer or director of other entities at the request
of
the Corporation or Mortgage Corp. In this regard, unless expressly prohibited
by
law, Corporation and Mortgage Corp. shall advance all costs and expenses for
the
defense of any claim or allegation until it shall be determined by outside
legal
counsel with recognized expertise in such matters that the Corporation and
the
Mortgage Corp. are prohibited from indemnifying and holding the Executive
harmless. The indemnification provided to the Executive pursuant to this section
6(b) shall be at least as favorable as the scope and the terms and conditions
as
the indemnification provided to other officers or directors of the Corporation
or Mortgage Corp.
7. Outside
Activities.
The
Executive may serve as a member of the boards of directors of such business,
community and charitable organizations as he may disclose to and as may be
approved by any Board (which approval shall not be unreasonably withheld);
provided, however, that such service shall not materially interfere with the
performance of his duties under this Agreement. The Executive may also engage
in
personal business and investment activities which do not materially interfere
with the performance of his duties hereunder; provided, however, that such
activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Corporation or Mortgage Corp.,
as
amended from time to time, and generally applicable to all similarly situated
executives.
D-3
8. Working
Facilities and Expenses.
The
Executive's principal place of employment shall be at Mortgage Corp.'s executive
offices on the date of this Agreement, or at such other location as the
Corporation, Mortgage Corp. and the Executive may mutually agree upon. The
Corporation and Mortgage Corp. shall provide the Executive at his principal
place of employment with a private office, secretarial services and other
support services and facilities suitable to his position with the Mortgage
Corp.
and necessary or appropriate in connection with the performance of his assigned
duties under this Agreement. The Mortgage Corp. shall pay the Executive an
annual automobile allowance of TWELVE THOUSAND FIVE HUNDRED DOLLARS ($12,500).
The Corporation and Mortgage Corp. shall reimburse the Executive for such
ordinary and necessary travel, entertainment and business expenses, including,
without limitation, all expenses associated with his business use of the
aforementioned automobile (including, without limitation, gas, maintenance
and
insurance), use of a cellular telephone, fees for memberships in such clubs
and
organizations as the Executive, Mortgage Corp. and the Corporation shall
mutually agree are necessary and appropriate for business purposes, upon
presentation of an itemized account of such expenses in such form as the
Corporation and Mortgage Corp. may reasonably require. The Executive shall
be
entitled to no less than twenty (20) days of paid vacation during each year
in
the Employment Period.
9. Termination
of Employment Due to Death.
The
Executive's employment with the Corporation and Mortgage Corp. shall terminate,
automatically and without any further action on the part of any party to this
Agreement, on the date of the Executive's death. In such event, the Corporation
or Mortgage Corp. shall pay or provide to the Executive’s estate, surviving
dependents or designated beneficiaries, as applicable:
(a)
the
Executive's earned but unpaid compensation (including, without limitation,
salary and all other items which constitute wages under applicable law) as
of
the date of his termination of employment. This payment shall be made at the
time and in the manner prescribed by law applicable to the payment of wages
but
in no event later than 30 (thirty) days after the date of the Executive's
termination of employment.
(b)
the
benefits, if any, due under any employee benefit plans and programs and
compensation plans and programs maintained for the benefit of officers and
employees of the Corporation or Mortgage Corp. subject to and in accordance
with
the terms of this Agreement. The time and manner of payment or other delivery
of
these benefits and the recipients of such benefits shall be determined according
to the terms and conditions of the applicable plans and programs subject to
and
in accordance with the terms of this Agreement.
The
payments and benefits described in sections 9(a) and (b) shall be referred
to in
this Agreement as the "Standard Termination Entitlements."
D-4
10. Termination
Due to Disability.
The
Corporation and Mortgage Corp. may terminate the Executive's employment upon
a
determination, by vote of a majority of the members of the Corporation’s Board,
or a majority of the members of the Compensation Committee or Executive
Committee thereof, acting in reliance on the written advice of a medical
professional acceptable to it, that the Executive is suffering from a physical
or mental impairment which, at the date of the determination, has prevented
the
Executive from performing his assigned duties on a substantially full-time
basis
for a period of at least sixty (60) days during the period of six (6) months
ending with the date of the determination or is likely to result in death or
prevent the Executive from performing his assigned duties on a substantially
full-time basis for a period of at least one hundred and eighty (180) days
during the period of six (6) months beginning with the date of the
determination. In such event:
(a)
The
Corporation or Mortgage Corp. shall pay and deliver to the Executive (or in
the
event of his death before payment, to his estate, surviving dependents or
beneficiaries, as applicable) the Standard Termination
Entitlements.
(b)
In
addition to the Standard Termination Entitlements, the Corporation or Mortgage
Corp. shall continue to pay the Executive his base salary, at the annual rate
in
effect for him immediately prior to the termination of his employment, during
a
period ending on the earliest of: (i) the expiration of one hundred and eighty
(180) days after the date of termination of his employment; (ii) the date on
which long-term disability insurance benefits are first payable to him under
any
long-term disability insurance plan covering employees of the Corporation or
Mortgage Corp. (the "LTD Eligibility Date"); (iii) the date of his death; and
(iv) the expiration of the Remaining Unexpired Employment Period (the "Initial
Continuation Period"). If the end of the Initial Continuation Period is neither
the LTD Eligibility Date nor the date of his death, the Corporation or Mortgage
Corp. shall continue to pay the Executive his base salary, at an annual rate
equal to sixty percent (60%) of the annual rate in effect for him immediately
prior to the termination of his employment, during an additional period ending
on the earliest of the LTD Eligibility Date, the date of his death and the
expiration of the Remaining Unexpired Employment Period.
A
termination of employment due to disability under this section 10 shall be
effected by notice of termination given to the Executive by the Corporation
and
Mortgage Corp. and shall take effect on the later of the effective date of
termination specified in such notice or sixty (60) days after the date on which
the notice of termination is deemed given to the Executive.
11. Discharge.
(a)
The
Corporation and Mortgage Corp. may terminate the Executive's employment at
any
time during the Employment Period for any reason or for no reason, but only
by
majority vote of the entire membership of the Corporation’s and the Mortgage
Corp.’s Boards.
D-5
(b)
The
termination of the Executive's employment shall be deemed to be for "Cause"
only
if the Corporation’s and the Mortgage Corp.’s Boards, by majority vote of their
entire memberships, determine that the Executive
(i)
has
willfully failed or refused to perform his assigned duties under this Agreement
in any material respect (including, for these purposes, the Executive's
inability to perform such duties as a result of drug or alcohol dependency);
(ii)
has
committed gross negligence in the performance of, or is guilty of continual
neglect of, his assigned material duties;
(iii)
has
been
convicted or entered a plea of guilty or nolo contendere to, the commission
of a
felony or any other crime involving dishonesty, personal profit or other similar
circumstance likely, in the commercially reasonable judgment of the Boards,
to
have a material adverse effect on the Corporation, Mortgage Corp. or their
respective businesses or reputations;
(iv)
has
knowingly
violated,
in any material respect, any material law, rule, regulation or order applicable
to the Corporation or Mortgage Corp. in his performance of services for the
Corporation or Mortgage Corp.; or
(v)
has
willfully and intentionally breached the material terms of this Agreement in
any
material respect.
For
purposes of this section 11, no act or failure to act on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Corporation
and
Mortgage Corp. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Boards or based upon the written advice
of
counsel for the Corporation or Mortgage Corp. shall be conclusively presumed
to
be done, or omitted to be done, by the Executive in good faith and in the best
interests of the Corporation and Mortgage Corp. Termination with Cause shall
be
effected by written notice to the Executive setting forth with particularity
the
grounds for termination. No such Termination with Cause shall be effected,
however, until (1) the Corporation and Mortgage Corp. Boards have provided
the
Executive written notice that such Boards have made a preliminary determination,
by a majority vote of their respective entire memberships, of Cause, (2) the
Executive is unable to correct his conduct or cure the consequences of his
conduct within 30 days, (3) the Executive then is provided a hearing before
such
Board or Committee, and (4) after such hearings, the Corporation and Mortgage
Corp.’s Boards make the determination described in the first sentence of this
section 11(b).
(c)
If
the
Executive is discharged during the Employment Period with Cause, the Corporation
or Mortgage Corp. shall pay and provide to him (or, in the event of his death,
to his estate, his surviving beneficiaries or dependents, as applicable) the
Standard Termination Entitlements only.
(d)
If
the
Executive is discharged during the Employment Period without Cause, the
Corporation or Mortgage Corp. shall pay and provide to him (or, in the event
of
his death, to his estate, his surviving beneficiaries or dependents, as
applicable) the Standard Termination Entitlements and, in addition to the
Standard Termination Entitlements:
D-6
(i)
During
the Remaining Unexpired Employment Period, the Corporation or Mortgage Corp.
shall provide for the Executive and his dependents continued group life, health
(including hospitalization, medical and major medical), dental, accident and
long-term disability insurance coverage on substantially the same terms and
conditions (including any required co-payments and deductibles) in effect for
them immediately prior to the Executive's termination. The coverage provided
under this section 11(d)(i) may, at the election of the Corporation or Mortgage
Corp., be secondary to the coverage provided as part of the Standard Termination
Entitlements and to any employer-paid coverage provided by a subsequent employer
or through Medicare, with the result that benefits under other coverage will
offset the coverage required by this section 11(d)(i).
(ii)
The
Corporation or Mortgage Corp. shall pay to the Executive (or, in the event
of
his death before payment, his estate) a lump sum payment equal to the greater
of
the following: (A) $250,000 or (B) an amount equal to the Executive’s annual
base salary (at the annual rate in effect for him immediately prior to the
termination of his employment) that would have been paid during the Remaining
Unexpired Employment Period if the Executive’s employment had not been
terminated; provided, however, that the minimum payment of $250,000 shall also
be payable to the Executive at the expiration of the Employment Period unless
the Executive shall have been notified by the Corporation or Mortgage Corp.
of
its intention to extend or not extend the Employment Period at least six (6)
months prior to the expiration of the initial Employment Period. Such payment
shall be made within five (5) business days of the Executive’s termination
date.
(iii)
The
Corporation or Mortgage Corp. shall pay to the Executive (or, in the event
of
his death before payment, his estate) a lump sum payment equal to (A)
one-twelfth of the aggregate cash incentive compensation payment (whether
denominated as bonuses (including the bonus contemplated in Section 4 above),
incentive plan payments, performance units, performance-based compensation
or
otherwise) paid to the Executive by the Corporation and Mortgage Corp. in the
last fiscal year of the Mortgage Corp. to end concurrently with or prior to
his
termination of employment multiplied by (B) the number of months that constitute
the Remaining Unexpired Employment Period. Such payment shall be made within
five (5) business days of the Executive’s termination date.
The
payments and benefits enumerated in section 11(d) shall be referred to
collectively in this Agreement as the “Additional Termination Entitlements”.
12. Resignation.
(a)
The
Executive may resign from his employment with the Corporation and Mortgage
Corp.
at any time for any reason or for no reason. A resignation under this section
12
shall be effected by notice of resignation given by the Executive to the
Corporation and Mortgage Corp. and shall take effect on the effective date
of
termination specified in such notice (which shall in no event be sooner than
sixty (60) days after the notice is deemed given) or such earlier or later
date
as the Executive, the Corporation and Mortgage Corp. may mutually agree upon.
The Executive's resignation of any of the positions within the Corporation
and
Mortgage Corp. to which he has been assigned shall be deemed a resignation
from
all such positions unless the Corporation, Mortgage Corp. and the Executive
agree in writing otherwise.
D-7
(b)
The
Executive's resignation shall be deemed to be for "Good Reason" if the effective
date of resignation occurs within three (3) months after any of the
following:
(i)
a
material failure by the Corporation or Mortgage Corp., whether by amendment
of
their respective articles of incorporation or by-laws, action of their
respective Boards or otherwise, to vest in the Executive the titles, functions,
duties, or responsibilities prescribed in section 3 of this Agreement or any
material reduction thereof by the Corporation or Mortgage Corp., provided that
the Executive shall have given written notice of such failure or reduction
to
the Corporation and Mortgage Corp., and the Corporation or Mortgage Corp. shall
not have substantially cured such failure or reduction within thirty (30) days
after such notice is deemed given;
(ii)
failure
of the Executive to serve as a director of the Corporation and Mortgage Corp.’s
Boards, other than as a result of the Executive’s voluntary resignation from the
Boards; provided, however, that this section 12(b)(ii) shall not apply if the
Mortgage Corp. or any parent corporation thereof becomes
publicly-traded;
(iii)
any
reduction of the Executive's rate of base salary in effect from time to time,
whether or not material, or any failure (other than due to reasonable
administrative error that is cured promptly upon notice) to pay any portion
of
the Executive's compensation as and when due;
(iv)
any
change in the terms and conditions of any compensation, or subject to sections
5
and 8 hereof, or benefit program in which the Executive participates (other
than
across-the-board changes in benefit programs having substantially the same
effect on all similarly situated employees) which, either individually or
together with other changes, has a material adverse effect on the aggregate
value of his total compensation package; provided that the Executive shall
have
given written notice of such material adverse effect to the Corporation and
Mortgage Corp., and the Corporation or Mortgage Corp. shall not have
substantially cured such failure within thirty (30) days after such notice
is
deemed given;
(v)
any
material breach by the Corporation or Mortgage Corp. of any material term,
condition or covenant contained in this Agreement; provided that the Executive
shall have given notice of such material breach to the Corporation and Mortgage
Corp., and the Corporation or Mortgage Corp. shall not have substantially cured
such breach within thirty (30) days after such notice is deemed given;
(vi)
a
failure
by the Corporation or the Mortgage Corp. to cause the Mortgage Corp. to be
exclusive company (except as set forth in Schedule B) in which each of the
Corporation and the Mortgage Corp. conducts substantially all of the
Corporation’s Business (as defined in Section 15 below);
(vii)
a
change
in the Executive's principal place of employment to a place that is not the
principal executive office of Mortgage Corp. as of the effective date of this
Agreement or other mutually agreeable location, or a relocation of Mortgage
Corp.'s principal executive office to a location that is both more than
forty-five (45) miles away from the Executive's principal residence and more
than fifteen (15) miles away from the location of the Mortgage Corp.'s principal
executive office on the effective date of this Agreement; or
D-8
(viii)
there
is a Change in
Control of the Corporation or the Mortgage Corp. which for purposes of this
Agreement shall occur if the individuals who are members of he Boards
immediately following the Closing Date (the “Continuing Directors”) cease for
any reason to constitute a majority of their respective Boards, unless the
election, or nomination for election by the stockholders, of any new director
was approved by a vote of a majority of the applicable Continuing Directors,
and
such new director shall, for purposes of this Agreement, be considered as a
Continuing Director.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur as a result
of a
transaction in which the Mortgage Corp. or any parent corporation thereof
becomes publicly-traded. In all other cases, a resignation by the Executive
shall be deemed to be without Good Reason.
(c)
If
the
Executive resigns during the Employment Period without Good Reason, the
Corporation and Mortgage Corp. shall pay and provide to him (or, in the event
of
his death, to his estate, his surviving beneficiaries or dependents, as
applicable) the Standard Termination Entitlements only.
(d)
If
the
Executive resigns during the Employment Period with Good Reason, the Corporation
and Mortgage Corp. shall pay and provide to him (or, in the event of his death,
to his estate, his surviving beneficiaries or dependents, as applicable) the
Standard Termination Entitlements and, in addition, shall also pay and deliver
the Additional Termination Entitlements.
13. Terms
and Conditions of the Additional Termination
Entitlements.
The
Corporation, Mortgage Corp. and the Executive hereby stipulate that the damages
which may be incurred by the Executive following any termination of employment
are not capable of accurate measurement as of the date first above written
and
that the Additional Termination Entitlements constitute reasonable damages
under
the circumstances and shall be payable without any requirement of proof of
actual damage and without regard to the Executive's efforts, if any, to mitigate
damages. The Corporation, Mortgage Corp. and the Executive further agree that
the Corporation and Mortgage Corp. may condition the payment and delivery of
the
Additional Termination Entitlements on the receipt of (a) the Executive's
resignation from any and all positions which he holds as an officer, director
or
committee member with respect to the Corporation, Mortgage Corp. or any
subsidiary or affiliate and (b) the Executive’s release (in such form and of
such substance as is mutually agreeable to the Corporation, the Mortgage Corp.
and the Executive) of the Corporation, Mortgage Corp. and their respective
affiliates, subsidiaries and parent corporations, and their respective
directors, officers, employees and agents, and the heirs, successors and assigns
of all of them, from any liability of any nature in connection with the
Executive’s employment by the Corporation and Mortgage Corp. or the termination
thereof, except for those contractual liabilities expressly created by this
Agreement.
D-9
14. Limitation
of Benefits under Certain Circumstances.
If
the
Additional Termination Entitlements or any other benefits conferred under this
Agreement, either alone or together with other payments and benefits which
the
Executive has the right to receive from the Corporation or Mortgage Corp.,
would
constitute a “parachute payment” under Section 280G of the Internal Revenue Code
of 1986, the regulations promulgated thereunder or related Internal Revenue
Service guidance (collectively, the “Code”), the Additional Termination
Entitlements or any other benefits conferred under this Agreement shall be
reduced, in the manner determined by the Executive, by the amount, if any,
which
is the minimum necessary to result in no portion of the Additional Termination
Entitlements or any other benefits conferred under this Agreement payable by
the
Corporation or Mortgage Corp. being non-deductible to the Corporation or
Mortgage Corp. pursuant to Section 280G of the Code and subject to the excise
tax imposed under Section 4999 of the Code. Similarly, any payment of the
Additional Termination Entitlements or any other benefits conferred under this
Agreement shall be structured to comply with all requirements of Section 409A
of
the Code. The determination of any reduction or restructuring of the Additional
Termination Entitlements or any other benefits conferred under this Agreement
shall be based upon the opinion of independent counsel selected by the
Corporation’s or Mortgage Corp. and paid by the Corporation and Mortgage Corp.
Such counsel shall be reasonably acceptable to the Corporation, Mortgage Corp.
and the Executive; shall promptly prepare the foregoing opinion, but in no
event
later than thirty (30) days from the date of termination; and may use such
actuaries or accountants as such counsel deems necessary or advisable for the
purpose. Nothing contained herein shall result in a reduction of any payments
or
benefits to which the Executive may be entitled upon termination of employment
under any circumstances other than as specified in this Section 14,
or a
reduction in the Additional Termination Entitlements or any other benefits
conferred under this Agreement below zero.
15. Protective
Covenants.
(a)
Covenants.
The
Corporation and Mortgage Corp. conduct a business consisting of mortgage
lending, mortgage banking, mortgage brokerage and mortgage servicing (the
“Corporation’s Business”) at various locations in cities and counties across the
United States (such cities and counties, together with any other city or county
in which the Corporation or Mortgage Corp. subsequently maintains or establishes
a plan to open an office, the “Corporation’s Geographic Market”). The Executive
acknowledges that the Corporation and Mortgage Corp. are entering into this
Agreement with him for the purpose of preserving and cultivating the
Corporation’s Business. Therefore, the Executive agrees to the following
covenants:
(i)
Covenant
Not To Compete. Prior to the later of October 31, 2008 or the third annual
anniversary of the Employment Date, he shall not, without the prior written
consent of the Corporation or Mortgage Corp., become an officer, employee,
consultant, director or trustee of, or otherwise provide services with or
without compensation to, any person or entity that is engaged in a business
or
line of business or provides a product or service in direct or indirect
competition with the Corporation’s Business in the Corporation’s Geographic
Market (the Corporation’s Geographic Market for this purpose to be determined as
of the date of his termination of employment).
D-10
(ii)
Confidential
Information. Unless he obtains the prior written consent of the Corporation
or
Mortgage Corp., the Executive shall keep confidential and shall refrain from
using for the benefit of himself, or any person or entity other than the
Corporation and its parents and subsidiaries and any subsidiary of any of the
Corporation’s parents (the Corporation and such parents and subsidiaries
collectively, the “Corporation’s Affiliated Group”), any material document or
information obtained from a member of the Corporation’s Affiliated Group, or in
the course of his employment with any of them concerning their current or
planned future properties, operations or business, including but not limited
to
information concerning the Corporation’s or Mortgage Corp.’s customers (the
“Confidential Information”) unless and until such document or information is
readily ascertainable from public or published information or trade sources
or
has otherwise been made available to the public through no fault of his own;
provided,
however,
that
nothing in this section 15(a)(ii) shall prevent the Executive, with or without
the Corporation’s or Mortgage Corp.’s consent, from participating in or
disclosing documents or information in connection with any judicial or
administrative investigation, inquiry or proceeding to the extent that such
participation or disclosure is compelled under applicable law; in such event,
the Executive shall, to the extent practicable under the circumstances, notify
the Corporation and Mortgage Corp. in advance of and afford the Corporation
and
Mortgage Corp. an opportunity, at their own expense, to take action to prevent
or limit the scope of such participation or disclosure.
(iii)
Proprietary
Information. The Executive acknowledges that, during the course of his
employment, he will, alone or jointly with others, develop or have access to
information (whether in written, oral, electronic or other form) concerning
the
Corporation’s Affiliated Group’s business plans, marketing plans, methods and
surveys, product and service design, development and pricing plans and methods,
customer lists, prospect lists, customer relationship information and need
assessments, profitability assessments, technology, service marks, trademarks
and other intellectual property, trade secrets, know-how and other proprietary
information concerning the Corporation’s Affiliated Group (the “Proprietary
Information”). The Executive acknowledges that all such Proprietary Information
is, as between the Executive and the Corporation’s Affiliated Group, the sole
property of the Corporation’s Affiliated Group and that the Executive has no
right, title or interest therein. During his employment with the Corporation
and
Mortgage Corp. and at all times thereafter, the Executive shall refrain from
using any Proprietary Information for the benefit of any person or entity other
than the Corporation’s Affiliated Group. At any time upon the Corporation’s or
Mortgage Corp.’s request, and in any event upon his termination of employment
with the Corporation and Mortgage Corp., the Executive shall promptly return
to
the Corporation and Mortgage Corp. all Proprietary Information in his possession
in any form or media and all laptop computers, cell phones and other property
of
the Corporation’s Affiliated Group in his possession and shall, if requested to
do so by the Corporation or Mortgage Corp., certify in writing that any
Proprietary Information not so returned has been destroyed.
(iv)
Solicitation.
The Executive, prior to the later of October 31, 2008 and the third annual
anniversary of the Employment Date, shall not, without the written consent
of
the Corporation and Mortgage Corp., either directly or indirectly:
D-11
(A)
solicit,
offer employment to, or take any other action intended, or that a reasonable
person acting in like circumstances would expect, to have the effect of causing
any officer or employee of the Corporation’s Affiliated Group to terminate his
or her employment and accept employment or become affiliated with, or provide
services with or without compensation in any capacity whatsoever to, any person
or entity engaged in a business or line of business or providing a product
or
service in direct or indirect competition with the Corporation’s Business in the
Corporation’s Geographic Market (the Corporation’s Geographic Market for this
purpose to be determined as of the date of his termination of
employment);
(B)
provide
any information, advice or recommendation with respect to any such officer
or
employee to any person or entity that is intended, or that a reasonable person
acting in like circumstances would expect, to have the effect of causing,
encouraging or enabling any officer or employee of the Corporation’s Affiliated
Group to terminate his employment and accept employment or become affiliated
with, or provide services with or without compensation in any capacity
whatsoever to, to any person or entity engaged in a business or line of business
or providing a product or service in direct or indirect competition with the
Corporation’s Business in the Corporation’s Geographic Market (the Corporation’s
Geographic Market for this purpose to be determined as of the date of his
termination of employment); or
(C)
directly
or indirectly solicit, or facilitate in any manner any other person’s or
entity’s solicitation of, business in competition with the Corporation’s
Business in the Corporation’s Geographic Market (the Corporation’s Geographic
Market for this purpose to be determined as
of the
date of his termination of employment) from (I) any of the Corporation’s or
Mortgage Corp.’s customers with whom the Executive served as a relationship
manager, or whom the Executive was assigned to solicit on behalf of the
Corporation or Mortgage Corp., at any time during the period of one (1) year
ending on the date of his termination of employment; (II) any other person
or
entity which the Executive knows to be one of the Corporation’s or Mortgage
Corp.’s customers, or (III) any other person or entity which the Executive knows
is being actively solicited by the Corporation or Mortgage Corp. on, or had
been
identified for active solicitation by the Corporation or Mortgage Corp. at
any
time during the period of one (1) year ending on, the date of his termination
of
employment with the Corporation and Mortgage Corp.
(b)
Reasonableness
of Covenants.
The
Executive acknowledges that: (i) the Corporation and Mortgage Corp. have a
legitimate business interest in preserving their investment in their
Confidential Information and Proprietary Information, and the Corporation and
Mortgage Corp.’s customers; (ii) the restrictions set forth in this section 15
constitute reasonable restrictions to protect the Corporation’s and Mortgage
Corp.’s legitimate business interests; (iii) such restrictions are reasonable in
duration, geographic scope and scope of business protected; (iv) observing
such
restrictions will not unreasonably impair the Executive’s ability to seek or
secure employment following his termination of employment with the Corporation
and Mortgage Corp.; and (v) his employment by the Corporation and Mortgage
Corp.
and the Additional Termination Entitlements (if any) constitute adequate
consideration for his adherence to such restrictions.
D-12
(c)
Specific
Performance.
The
Executive acknowledges that money damages will not be an adequate remedy for
his
failure to observe or perform any of the covenants set forth in section 15(a).
Therefore, the Corporation and Mortgage Corp. each shall have the right to
apply
to any court of competent jurisdiction for equitable relief, including but
not
limited to a temporary restraining order or injunction ordering specific
performance.
(d)
Notification
to Subsequent Employers and Potential Employers.
Prior
to
accepting employment with any person or entity other than a member of the
Corporation’s Affiliated Group, the Executive shall disclose to such person or
entity the existence of this Agreement and furnish such person or entity with
a
copy hereof.
(e)
Reformation
or Modification.
In the
event that this section 15 or any portion hereof shall be found by an arbitrator
or court of competent jurisdiction to be unenforceable as written, such court
or
arbitrator shall, and is hereby authorized to, modify this section 15 or any
portion hereof in such manner as he or it determines to be necessary to render
this section 15 enforceable to the maximum possible extent and to enforce this
section 15 as so modified.
16. No
Effect on Employee Benefit Plans or Programs.
The
termination of the Executive's employment during the term of this Agreement
or
thereafter, whether by the Corporation and Mortgage Corp. or by the Executive,
shall have no effect on the rights and obligations of the parties hereto under
the Corporation's or Mortgage Corp.’s qualified or non-qualified retirement,
pension, savings, thrift or profit-sharing plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs,
or
compensation plans or programs, as may be maintained by, or cover employees
of,
the Corporation or Mortgage Corp. from time to time; provided, however, that
nothing in this Agreement shall be deemed to duplicate any compensation or
benefits provided under any agreement, plan or program covering the Executive
to
which the Corporation or Mortgage Corp. is a party and any duplicative amount
payable under any such agreement, plan or program shall be applied as an offset
to reduce the amounts otherwise payable hereunder.
17. Successors
and Assigns.
This
Agreement will inure to the benefit of and be binding upon the Executive, his
legal representatives and testate or intestate distributees, and the
Corporation, Mortgage Corp. and their respective successors and assigns,
including any successor by merger or consolidation or a statutory receiver
or
any other person or firm or corporation to which all or substantially all of
the
assets and business of the Corporation or Mortgage Corp. may be sold or
otherwise transferred. Failure of the Corporation or Mortgage Corp. to obtain
from its successor its express written assumption of the Corporation's or
Mortgage Corp.’s obligations hereunder at least 30 days in advance of the
scheduled effective date of any such succession shall be deemed a material
breach of this Agreement.
D-13
18. Notices.
Any
communication required or permitted to be given under this Agreement, including
any notice, direction, designation, consent, instruction, objection or waiver,
shall be in writing and shall be deemed to have been given at such time as
it is
delivered personally, or five (5) days after mailing if mailed, postage prepaid,
by registered or certified mail, return receipt requested, addressed to such
party at the address listed below or at such other address as one such party
may
by written notice specify to the other party:
If
to the
Executive:
Xxxxx
X.
Xxxxxxxx
Personal
and Confidential
c/o
United Financial Mortgage Corp.
000
Xxxxxxxx Xxxxx, Xxxxx 000
Xxx
Xxxxx, Xxxxxxxx 00000
with
a copy to:
Barack
Xxxxxxxxxx Et.
Al.
000
Xxxx
Xxxxxx Xxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxx X. del Hierro, Esq.
If
to the
Corporation or the Mortgage Corp.:
ARH
Mortgage
Inc.
c/o
Airlie Opportunity Fund, LP
000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxxxx,
Xxxxxxxxxxx 00000
Attention:
Xxxxxx Xxxxx
with
a copy to:
Xxxxxxx
Xxxxxxxx & Xxxx LLP
Two
World
Financial Center
New
York,
New York 10281
Attention:
Xxxxxx X. Xxxxxx, Esq.
19. Severability.
A
determination that any provision of this Agreement is invalid or unenforceable
shall not affect the validity or enforceability of any other provision
hereof.
D-14
20. Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed a waiver of such term, covenant, or condition. A
waiver of any provision of this Agreement must be made in writing, designated
as
a waiver, and signed by the party against whom its enforcement is sought. Any
waiver or relinquishment of any right or power hereunder at any one or more
times shall not be deemed a waiver or relinquishment of such right or power
at
any other time or times.
21. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, and all of which shall constitute one and the same
Agreement.
22. Governing
Law.
Except
to
the extent preempted by federal law, this Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Illinois
applicable to contracts entered into and to be performed entirely within the
State of Illinois.
23. Headings
and Construction.
The
headings of sections in this Agreement are for convenience of reference only
and
are not intended to qualify the meaning of any section. Any reference to a
section number shall refer to a section of this Agreement, unless otherwise
stated.
24. Entire
Agreement; Modifications.
This
instrument contains the entire agreement of the parties relating to the subject
matter hereof, and supersedes in its entirety any and all prior agreements,
understandings or representations relating to the subject matter hereof
including the employment agreement between the Executive and Mortgage Corp.
dated August 1, 2003, including, without limitation, any provisions of such
employment agreement that by their terms survive the termination, expiration,
or
supersedure of such employment agreement. No modifications of this Agreement
shall be valid unless made in writing and signed by the parties
hereto.
25. Non-Duplication.
In
the
event that the Executive shall perform services for any direct or indirect
subsidiary or affiliate of the Corporation or Mortgage Corp., any compensation
or benefits provided to the Executive by such other employer shall be applied
to
offset the obligations of the Corporation and Mortgage Corp. hereunder, it
being
intended that this Agreement set forth the aggregate compensation and benefits
payable to the Executive for all services to the Corporation, Mortgage Corp.
and
all of their respective direct or indirect subsidiaries and affiliates.
D-15
26. Dispute
Resolution.
Any
dispute or controversy arising under or in connection with this Agreement
shall
be settled exclusively by arbitration in Chicago, Illinois in accordance
with
the National Rules for the Resolution of Employment Disputes of the American
Arbitration Association then in effect. The expenses of the parties, including
reasonable out-of-pocket costs and expenses of the prevailing party’s legal
counsel and the costs and expenses of the arbitrator, shall be borne by the
non-prevailing party if the arbitrator determines that any of the claims
brought
or any of the defenses asserted by such non-prevailing party were not brought,
or were not asserted, in good faith. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. Notwithstanding the foregoing, the
Corporation and Mortgage Corp. each shall have the right apply to any court
of
competent jurisdiction for a temporary restraining order, preliminary injunction
or other interim equitable relief to which they may be entitled in connection
with any alleged violations of section 15 of this Agreement.
D-16
In
WITHNESS WHEREOF, the
Corporation and Mortgage Corp. have caused this Agreement to be executed and
the
Executive has hereunto set his hand, all as of the day and year first above
written.
XXXXX X. XXXXXXXX |
||
ARH
MORTGAGE INC.
|
||
|
|
|
By: | ||
Name: Dort X. Xxxxxxx III |
||
Title: President |
UNITED
FINANCIAL MORTGAGE CORP.
|
||
|
|
|
: | By: | |
Name: Xxxxxxx X. Xxxxx |
||
Title: Executive Vice President and Corporate Counsel |
D-17
ANNEX
E
FORM
OF OPINION OF THE PURCHASER’S COUNSEL
Pursuant
to Section 7.02(c) of the Agreement, counsel for the Purchaser shall deliver
an
opinion in form and substance set forth below. Capitalized terms used and not
defined herein shall have the respective meanings set forth in the
Agreement.
(A) The
Purchaser is duly incorporated and is validly existing as a corporation in
good
standing under the laws of the State of Delaware. The Purchaser has the
requisite corporate power and authority to execute and deliver the Agreement
and
to perform its obligations thereunder.
(B) The
execution, delivery and performance of the Agreement by the Purchaser have
been
duly authorized by all necessary corporate action.
(C) With
respect to the Purchaser, the performance of its obligations under the Agreement
and the consummation of the transactions contemplated thereby do not require
any
consent, approval, authorization or order of, filing with or notice to any
court, agency or other governmental body, except such as have been obtained,
effected or given.
(D) With
respect to the Purchaser, the performance of its obligations under the Agreement
and the consummation of the transactions contemplated thereby will not result
in: (i) any breach or violation of its certificate of incorporation or bylaws,
(ii) to such counsel’s knowledge, any breach, violation or acceleration of or
default under any indenture or other material agreement or instrument to which
the Purchaser is a party or by which it is bound or (iii) any breach or
violation of any statute or regulation or, to such counsel’s knowledge, any
order of any court, agency or other governmental body.
(E) With
respect to the Purchaser, there is no legal action, suit, proceeding or
investigation before any court, agency or other governmental body pending or,
to
such counsel’s knowledge threatened, against the Purchaser which, either in one
instance or in the aggregate, draws into question the validity of any of the
Agreement or the Merger, seeks to prevent the consummation of any of the
transactions contemplated by the Agreement or would materially impair the
Purchaser’s ability to perform its obligations under the Agreement.
E-1
ANNEX
F
FORM
OF OPINION OF THE COMPANY’S COUNSEL
Pursuant
to Section 7.03(c) of the Agreement, counsel for the Company shall deliver
an
opinion in form and substance set forth below. Capitalized terms used and not
defined herein shall have the respective meanings set forth in the
Agreement.
(A) The
Company is duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Illinois. The Company has the requisite
corporate power and authority to execute and deliver the Agreement and to
perform its obligations thereunder.
(B) The
execution, delivery and performance of the Agreement by the Company have been
duly authorized by all necessary corporate action.
(C) With
respect to the Company, the performance of its obligations under the Agreement
and the consummation of the transactions contemplated thereby do not require
any
consent, approval, authorization or order of, filing with or notice to any
court, agency or other governmental body, except such as have been obtained,
effected or given.
(D) With
respect to the Company, the performance of its obligations under the Agreement
and the consummation of the transactions contemplated thereby will not result
in: (i) any breach or violation of its articles of incorporation or bylaws,
(ii)
to such counsel’s knowledge, any breach, violation or acceleration of or default
under any indenture or other material agreement or instrument to which the
Company is a party or by which it is bound or (iii) any breach or violation
of
any statute or regulation or, to such counsel’s knowledge, any order of any
court, agency or other governmental body.
(E) With
respect to the Company, there is no legal action, suit, proceeding or
investigation before any court, agency or other governmental body pending or,
to
such counsel’s knowledge threatened, against the Company which, either in one
instance or in the aggregate, draws into question the validity of any of the
Agreement or the Merger, seeks to prevent the consummation of any of the
transactions contemplated by the Agreement or would materially impair the
Company’s ability to perform its obligations under the Agreement.
F-1