Exhibit 10.3
AGREEMENT FOR THE PURCHASE AND SALE
OF THE CAPITAL STOCK OF
MORTGAGE MARKET, INC.
PAGE
TABLE OF CONTENTS
PAGE
1 Definitions..................................................1
2 Purchase and Sale of Shares..................................5
2.1 Agreement to Sell and Purchase.......................5
2.2 Closing..............................................5
3 Consideration and Payment Terms..............................5
3.1 Purchase Price.......................................5
3.2 Additional Consideration and Additional
Compensation.........................................7
3.3 Additional Consideration or Additional Compensation
for Senior Managers.................................12
3.4 [*].................................................13
3.5 No Other Equity or Ownership Interest Implied.......13
4 Representations and Warranties of Sellers...................14
4.1 Organization and Standing...........................14
4.2 Qualification.......................................14
4.3 No Restrictions; Binding Effect; Approval
of Change of Control................................14
4.4 Noncontravention....................................14
4.5 Capital Structure...................................15
4.6 Title to the Shares or Other Interests in the
Company.............................................15
4.7 No Subsidiaries.....................................15
4.8 Corporate Records and Action........................16
4.9 Financial Statements................................16
4.10 Liabilities.........................................16
4.11 Events Since December 31, 1997 and March 31, 1998...16
4.12 Taxes...............................................18
4.13 Title to Assets.....................................19
4.14 Condition of Assets.................................19
4.15 Accounts Receivable; Notes Receivable...............19
4.16 Intellectual Property and Software..................19
4.17 Material Contracts..................................21
4.18 Litigation; Regulatory Examination..................22
4.19 Insurance...........................................22
4.20 Schedule of Loans...................................23
4.21 Compliance with Law Including Consumer Law..........23
4.22 Forms; Policies and Procedures......................23
4.23 Licenses and Permits................................24
4.24 Environmental Warranties............................24
4.25 Payroll List........................................25
4.26 Labor Relations.....................................25
4.27 Employee Benefit Plans..............................25
4.28 Employee Policies...................................26
4.29 Referral Sources; Investors.........................26
4.30 Bank Accounts.......................................26
4.31 Powers of Attorney..................................26
4.32 Personal Guarantees.................................26
4.33 Brokerage Fee.......................................26
4.34 Full Disclosure.....................................27
4.35 Business Records....................................27
5 Representations and Warranties of Purchaser.................27
5.1 Organization and Standing...........................27
5.2 No Restrictions; Authorization; Binding Effect;
Approval of Change of Control.......................27
5.3 Noncontravention....................................28
5.4 Litigation; Regulatory Examination..................28
5.5 Financial Statement.................................28
5.6 Full Disclosure.....................................28
6 Covenants of Sellers........................................29
6.1 Conduct of Businesses; Notification of
Breaches in Representations or Warranties...........29
6.2 Notification of Breach of Representation,
Warranty or Covenant................................29
6.3 Forebearances by MMI................................29
6.4 Good Faith Negotiations; Due Diligence..............30
6.5 Other Acquisition Proposals.........................31
6.6 Intentionally Deleted...............................31
6.7 Consents............................................31
6.8 Government Approval.................................31
6.9 Additional Financial Statements.....................31
6.10 Supplements to Schedules............................32
6.11 Consents of Third Parties...........................32
6.12 Transfer of Shares..................................32
6.13 Guarantees and Collateral Pledges...................32
7 Covenants of Purchaser......................................33
7.1 Notification of Breach of Warranty or Covenant......33
7.2 Good Faith Negotiations.............................33
7.3 Notification of Material Adverse Information........33
7.4 [Deliberately Omitted]..............................33
7.5 Consents............................................33
8 Joint Covenants.....................................33
8.1 Confidential Information............................33
8.2 Publicity...........................................34
8.3 Put Agreement.......................................35
8.4 Employment Agreements...............................35
8.5 Other Documentation.................................35
9 Conditions to Obligation to Close...........................35
9.1 Mutual Conditions...................................35
9.2 Conditions to Obligations of Purchaser to
Effect the Purchase.................................35
9.3 Conditions to Obligations of Sellers to
Effect the Closing..................................37
10 Post Closing Covenants......................................37
10.1 Post Closing Covenants of Purchaser Regarding
Financing of MMI....................................37
10.2 Covenant Not to Compete by Sellers..................38
10.3 Limited Indemnification by Sellers..................42
10.4 Tax Liability of Xxxxxxx, Sellers...................43
10.5 Covenant Regarding Record Keeping by Purchaser......44
10.6 Release of Personal Guarantees......................44
10.7 Recognition of MMI's Past Success; MMI Board........44
10.8 Intent to Investigate an IPO........................44
10.9 Name................................................45
10.10 Territorial Expansion...............................45
10.11 MMI Acquisition and Expansion.......................45
10.12 Rates...............................................46
10.13 Further Assurances..................................46
10.14 Contribution of Capital; Payments to Xxx Xxxxxxx....46
11 Termination.................................................46
11.1 Cure by Sellers Upon Material Adverse Change........46
11.2 Other Termination...................................46
11.3 Effect of Termination...............................47
12 Miscellaneous...............................................47
12.1 Survival of Representations and Warranties..........47
12.2 Expenses............................................47
12.3 Press Releases; Employee Communications.............47
12.4 Right of Offset.....................................48
12.5 Written Agreement to Govern.........................48
12.6 Severability........................................48
12.7 Injunctive Remedy for Breach........................48
12.8 Notices and Other Communications....................48
12.9 Counterparts........................................50
12.10 Successors and Assigns..............................51
12.11 Further Assurances..................................51
12.12 Interpretation......................................51
12.13 Schedules and Exhibits..............................51
12.14 Modification........................................51
12.15 Waiver of Provisions................................51
12.16 ARBITRATION; LAW; JURISDICTION; WAIVER
OF JURY TRIAL.......................................51
12.17 Waiver of Conditions................................54
12.18 Construction........................................54
SCHEDULES AND EXHIBITS
Schedule 4.1 -- Organization and Good Standing of MMI
Schedule 4.2 -- Qualifications
Schedule 4.3 -- Governmental Notices, Authorizations,
Filings, Etc. Required to
effect Change of Control
Schedule 4.4 -- Conflicts
Schedule 4.5 -- Current Capitalization of MMI
Schedule 4.7 -- Subsidiaries, Joint Ventures
Schedule 4.10 -- Undisclosed Liabilities
Schedule 4.11 -- Events Since March 31, 1998 and December 31, 1997
Schedule 4.12 -- Taxes
Schedule 4.13 -- Liens
Schedule 4.16 -- Intellectual Property
Schedule 4.17 -- Material Contracts
Schedule 4.18 -- Litigation, Administration
Schedule 4.19 -- Insurance
Schedule 4.20 -- Description of Loan Portfolio, Loan
Locks and Branches
Schedule 4.23 -- Licenses and Permits
Schedule 4.25 -- Payroll List
Schedule 4.28 -- Employee Policies
Schedule 4.29 -- Referral Sources; Investors
Schedule 4.30 -- Bank Accounts
Schedule 4.31 -- Powers of Attorney
Schedule 6.7 -- Required Consents
Definition of Terms
Acquisition Proposal 6.5
Additional Compensation 3.2
Additional Compensation Agreement 8.4
Affiliate 1
Affiliate Guarantees 6.13
After Tax Profits 1
Base Cash Price 3.1(a)
Base Cash Price Adjustment 3.1(b)
Branch Managers Agreement 1
Business Day 1
Closing 2.2
Closing Date 2.2
Closing Date Purchase Price 3.1(a)
Confidential Information 8.1(c)
Consumer Credit Law 4.21
Consumer Forms 4.22
Contract Year 1
Disclosing Party 8.1(b)
Disclosure Schedules 4.34
Employee Plans 4.27
Employee Retirement Income Security Act of 1974 4.27
Employment Agreements 8.4
Environmental Law 4.24
Equity Value Plan 1
Equity Value Plan Agreement 1
Federal Home Loan Mortgage Corporation 4.21
Federal National Mortgage Association 4.21
Financial Statements 4.9
Government National Mortgage Association 4.21
Guaranteed Loans 6.13
Hazardous Substance 4.24
Indemnification Claim 10.3(b)
Indemnification Claim for Undisclosed 10.3(b)
Liabilities or Loss from Liabilities
Not Arising in the Ordinary Course of Business
Intellectual Property 4.16
IPO or Sale of Purchaser 1
Key Employees Sec. 1
Know-How 4.16(d)
Licensed Intellectual Property 4.16(a)
MMI Net Income 1
MMI Operations 1
MMI's Mortgage Banking Net Income 1
Ordinary Course of Business 1
Personal Guaranties 4.32
Purchaser Net Income 1
Purchaser Shareholders 1
Put Agreement 1
Real Property 4.24
Recipient 8.1(b)
Representatives 8.1(d)
Seller Guaranties 6.13
Senior Managers Introductory Paragraph
Software 4.16(f)
Tax Returns 4.12(b)
Taxes 4.12
Third Parties 0
Xxxxxxxxxx 0.00(x)
Xxxxxx Xxxxxx Department of Housing .21
and Urban Development
Veteran's Administration 4.21
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT FOR THE PURCHASE AND SALE OF THE CAPITAL STOCK OF
MORTGAGE MARKET, INC. (this "Agreement") is made and entered into as of
this 30th day of September, 1998, by and between PRISM MORTGAGE COMPANY, an
Illinois corporation ("Purchaser"), and XXXXXX X. XXXXXXX ("Xxxxxxx"),
XXXXXXX XXXXXXX ("Xxxxxxx"), XXXXXXX XXXXXXX ("Xxxxxxx"), and XXXX
XXXXXXXXXXXX ("XxxxxxXxxxxx") (Xxxxxxx, Xxxxxxx and XxxxxxXxxxxx sometimes
called collectively the "Senior Managers" and Senior Managers and Xxxxxxx
sometimes called collectively the "Sellers" and each individually a
"Seller").
W I T N E S S E T H:
WHEREAS, Xxxxxxx owns all of the issued and outstanding shares of
capital stock of Mortgage Market, Inc. ("MMI"); and
WHEREAS, Senior Managers have certain rights ("Senior Manager
Interests") to receive stock or proceeds upon the sale of MMI pursuant to
their existing employment agreements with MMI; and
WHEREAS, MMI, which has its principal place of business at 0 Xxxxxx
Xxxxxx Xxxxx (the "Premises") is in the business of originating, brokering,
funding and closing residential mortgage loans (collectively, the
"Business"); and
WHEREAS, Xxxxxxx desires to sell and transfer to Purchaser all of
the issued and outstanding shares of capital stock of MMI and the Senior
Managers desire to sell and transfer the Senior Manager Interests and
Purchaser desires to purchase from Sellers all of the issued and
outstanding shares of capital stock of MMI and Senior Manager Interests
(the capital stock and Senior Manager Interests called collectively, the
"Shares") subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to
be legally bound, the parties hereto
do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Capitalized Terms herein, not otherwise defined, shall have the
meanings set forth in this Article:
"ADDITIONAL COMPENSATION AGREEMENT" shall have the meaning set forth in
Section 8.4.
"AFFILIATE" shall mean any legal entity or person which directly or
indirectly through one or more intermediaries, owns and controls or is
owned and controlled by a company. The term "control" means the power to
direct or cause the direction of the management and policies of an entity;
"ownership" shall mean ownership of 25% or more of the voting power or
equity value of a company or 25% or more of a capital and profits interest
of an unincorporated entity.
"AFTER TAX PROFITS" shall be calculated by deducting from the
income of MMI which is passed through and taxed to its shareholders an
amount equal to the sum of the taxes payable thereon by each shareholder
which shall be determined for each shareholder by multiplying each
shareholder's share of the income so allocated by the effective combined
federal and state income tax rate applicable to that shareholder for the
same taxable period.
"ANNIVERSARY DATE" shall mean any of the first five anniversary
dates of the Closing.
"BRANCH MANAGERS AGREEMENT" shall mean those certain agreements
between MMI and branch managers substantially in the form as provided to
Purchaser by MMI as of the Closing.
"BUSINESS DAY" shall mean any day which is not a Saturday or Sunday
and which is not a day on which national banks in Chicago, Illinois are
required or permitted
to be closed.
"CONTRACT YEAR" shall mean a one year period ending on an
Anniversary Date.
"EQUITY VALUE PLAN" shall mean that certain Equity Value Plan
established among MMI, Purchaser, the Senior Managers and the Key
Employees, pursuant to an Equity Value Plan Agreement for the purpose of
providing "Additional Compensation" as defined in the Equity Value Plan
Agreement.
"EQUITY VALUE PLAN AGREEMENT" shall mean that certain Equity Value
Plan Agreement entered into by and between the Purchaser, the Senior
Managers and the Key Employees in form and substance acceptable to the
Purchaser, MMI and the Sellers.
"FOR CAUSE" shall have the meaning set forth in Section 10.2(a).
"GEM OFFERING" shall mean that certain private placement made by
Prism as described in that certain term sheet dated August 25, 1998 between
Prism, the Pritzker Family and GEM Investors, Inc., a copy of which has
been delivered by Prism to
Sellers.
"IPO OR SALE OF PURCHASER" shall mean the consummation of (a) any
initial public offering of shares of capital stock of Purchaser or of a
corporation controlling or controlled by Purchaser ("Purchaser Shares"),
(b) the sale of all or substantially all of the assets of Purchaser or (c)
the sale of 80% or more of the capital stock of Purchaser, effected
directly or indirectly in a transaction or series of transactions of any
kind or nature, including without limitation, a merger, consolidation or
reorganization.
"KEY EMPLOYEES" shall mean Key Employees as such term is defined in
the Equity Value Plan Agreement.
"ORDINARY COURSE OF BUSINESS" shall mean in the ordinary course of
business in accordance with appropriate and legal past practices and
procedures by the Purchaser
or MMI, as applicable, in ordinary business circumstances.
"MMI'S MORTGAGE BANKING NET INCOME" shall include all service
release premiums, incentive income, gain on sale income, interest income,
income generated as a result of bulk sales, assignment of trade or
co-issuer transactions and all similar income and fees generated from the
sale of loans in the secondary market and shall be computed on a product by
product basis by calculating the total gross revenues generated by each
product for MMI and Purchaser and its Affiliates. Such gross revenue shall
be allocated as MMI Mortgage Banking Net Income based on (i) [*] MMI,
Purchaser or its Affiliates (including MMI) [*] Purchaser and its
Affiliates (including the MMI loans) multiplied by (ii) [*] from which
total (i.e., the aggregate sum of the foregoing calculations [*]) is
subtracted the following: (A) all mortgage banking expenses incurred in
connection with such revenues [*] MMI and funded by Purchaser or its
Affiliates (including MMI) relative to [*] Purchaser and its Affiliates
[*], (B) all hedging costs (e.g. all costs, including transaction costs, of
purchasing and selling marketable securities obtained to hedge pipeline
loans against interest rate risk together with the pair-off losses and
gains associated with such xxxxxx) allocated to MMI [*] MMI and funded by
Purchaser or its Affiliates (including MMI) [*] Purchaser or its Affiliates
[*]; (C) any costs and expenses associated with any repurchase obligations
of MMI to the extent they are not solely caused by Purchaser and its
Affiliates other than MMI, and (D) any special fees paid to, or reduced
premiums received from, purchasers of loan product of MMI, Purchaser or its
Affiliates due to [*] such loan products closed by MMI (e.g. surcharges by
purchasers of loans based on [*] the loans) and (E) adjusted further by
adding or subtracting any [*] reflected on the rate sheets of MMI
distributed to its loan officers vis-a-vis the rate sheets of Purchaser and
its Affiliates (other than MMI) distributed to their loan officers.
By way of example, assume [*].
MMI Mortgage Banking Net Income would equal [*].
"MMI NET INCOME" shall equal MMI's Mortgage Banking Net Income plus
all other income generated by the MMI Operations calculated in accordance
with GAAP, including, without limitation, revenues from loan origination
minus (i) all operational, administrative and out-of-pocket expenses
including, without limitation, all underwriting and closing costs, directly
associated with MMI Operations and (ii) all indirect or other expenses of
Purchaser and its Affiliates to the extent they are associated with
services provided to MMI and apply to MMI Operations (including, without
limitation, accounting, financial, legal and other services relating to the
provision of technology, human resources, accounting, insurance, national
marketing, national senior management and otherwise provided by national
senior management) allocated to or on behalf of MMI based on the ratio of
the number of loans closed by MMI in any period compared to the number of
loans closed by Purchaser and its Affiliates including those closed by MMI
in such period, provided that no such indirect expenses of Purchaser
incurred in the sixty (60) days immediately following the Closing shall be
allocated to MMI, provided further that any costs or a portion of any costs
related to [*] that MMI has incurred, or incurred on behalf of MMI, which
are necessitated solely by the [*] of MMI Operations with Purchaser and
incurred within [*] days immediately following the Closing, rather than [*]
of MMI Operations, such as [*].
"PURCHASER NET INCOME" shall mean all net income of Purchaser and
its Affiliates (including all of MMI Net Income) calculated in accordance
with GAAP.
"MMI OPERATIONS" shall mean (i) all current operations of MMI
existing as of the Closing plus (ii)any new operations (including
acquisitions) which are expressly approved as a MMI Operation by Purchaser
in writing, in its reasonable discretion and consistent with Section 10
hereof.
"PURCHASER SHAREHOLDERS" shall mean the shareholders of Purchaser.
"PUT AGREEMENT" shall mean that certain Put and Call and
Restrictions on Transfer Agreement dated of even date herewith between
Purchaser and the Sellers and
the Key Employees.
"REQUISITE COMPENSATION LEVEL" shall mean 50% of full-time employment.
"SELLERS' RESTRICTIVE COVENANT" shall mean those covenants of
Sellers set forth in Section 10.2.
"THIRD PARTIES" shall mean any person or entity other than
Purchaser, MMI or any Affiliate of Purchaser or MMI.
ARTICLE 2
PURCHASE AND SALE OF SHARES
2.1 AGREEMENT TO SELL AND PURCHASE Upon the terms and subject to
the conditions set forth herein, and in reliance on the respective
representations and warranties of the parties, Sellers shall sell the
Shares to Purchaser, and Purchaser shall purchase the Shares from Sellers,
on the Closing Date and at the time and place of Closing referred to in
Section 2.2 below, for the price and in accordance with the provisions
specified in Article 3 hereof, free and clear of all claims, liens,
charges, security interests, equities and encumbrances of any nature
whatsoever and free and clear of any sale, transfer or transaction taxes of
any kind whatsoever relating to the transfer of the Shares to Purchaser
hereunder.
2.2 CLOSING. The consummation of the purchase and sale of the
Shares (the "Closing") shall take place at the offices of Purchaser, 000
Xxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxx at 10:30 a.m. local time as of the date
hereof (hereinafter the "Closing Date").
ARTICLE 3
CONSIDERATION AND PAYMENT TERMS
3.1 PURCHASE PRICE. Purchaser shall pay the following consideration
subject to the terms set forth below:
(a) AMOUNT OF THE CLOSING DATE PURCHASE PRICE. The aggregate
consideration and signing bonuses to be paid by Purchaser to
Sellers for the Shares, the Senior Manager Interests and the
Sellers' Restrictive Covenant on the Closing Date (the "Closing
Date Purchase Price") as follows:
The "BASE CASH PRICE" equal to One Million Six Hundred
Twenty-Five Thousand Dollars ($1,625,000) paid to the Sellers and
allocated to the Shares and to the Sellers' Restrictive Covenant as
follows:
NAME SHARES RESTRICTIVE COVENANT TOTAL
--------------------------------------------------------------------------------------
Xxxxxxx $1,405,000 $20,000 $1,425,000
--------------------------------------------------------------------------------------
NAME SHARES/SENIOR
MANAGER
INTERESTS
SIGNING BONUS RESTRICTIVE COVENANT TOTAL
--------------------------------------------------------------------------------------
Xxxxxxx 90,000 10,000 100,000
Stashin 52,500 7,500 60,000
XxxxxxXxxxxx 35,000 5,000 40,000
--------------------------------------------------------------------------------------
Any adjustment or modification in the Base Cash Price pursuant to
Section 3.1(b) or (c) hereof shall be made in the amount payable to
Xxxxxxx for that portion of the Base Cash Price allocated to the
Shares.
(b) BASE CASH PRICE ADJUSTMENTS. In addition to the
foregoing consideration, Purchaser shall pay to Xxxxxxx in cash:
(i) within sixty (60) days after the Closing, an
amount equal to fifty percent (50%) of the amount, if any,
by which the stockholders equity of MMI as shown on its
consolidated balance sheet as of June 30, 1998, prepared in
accordance with GAAP by Stefani & Xxxxxxx, LLP, subject to
the reasonable review by Purchaser, but without deduction
for any distributions made pursuant to Section 10.4 of this
Agreement, exceeds Two Million Dollars ($2,000,000); and
(ii) no later than April 1, 1999, an amount equal to
[*] percent ([*]%) of the after-tax net income of MMI for
the period beginning August 1 and ending on the Closing
Date; provided that such net income shall be calculated
without a deduction for attorneys' fees incurred in
connection with this transaction.
The calculations in the preceding sentence will be made after taking
into account reasonable accruals for income and liabilities.
(c) OTHER MODIFICATIONS OF BASE CASH PRICE. It is
acknowledged by the parties hereto that MMI has certain assets and
related liabilities which may not be appropriate to include as part
of this transaction. Such assets and related liabilities will be
excluded after they have been clearly identified by the parties in
the course of such parties' due diligence and only pursuant to an
agreement by the parties with respect to excluding such items and
the procedure and effects of excluding such items. The Base Cash
Price will be reduced to the extent the value of the excluded
assets reasonably determined by the parties exceeds the value of
the excluded liabilities. Notwithstanding anything in the
foregoing, prior to Closing, Xxxxxxx shall be entitled to cause MMI
to distribute to Xxxxxxx the life insurance for Xxxxxxx which MMI
has been paying and Xxxxxxx' country club membership with [*]
reduction in the Base Cash Price. The parties also acknowledge that
certain uncollected debts identified on Schedule 3.1(c) attached
hereto are not included as assets on the Financial Statements of
MMI and that in the event amounts are collected with respect
thereto such amounts shall be paid to Xxxxxxx.
3.2 ADDITIONAL CONSIDERATION AND ADDITIONAL COMPENSATION
(a) COMPUTATION OF ADDITIONAL CONSIDERATION AND ADDITIONAL
COMPENSATION TO XXXXXXX. In addition to the consideration set forth
in Section 3.1 above, Purchaser shall pay to Xxxxxxx "Additional
Consideration" and "Additional Compensation" all on the terms and
conditions set forth in this Section 3.2.
o ADDITIONAL CONSIDERATION.
(A) Except as otherwise provided below, at the time
of an IPO or Sale of Purchaser, Xxxxxxx will be entitled to
receive Purchaser Shares, or, at the option of Purchaser the
equivalent in cash, in an amount computed by multiplying 3%
(or, if the IPO or Sale of Purchaser does not occur before
24 months after the date of Closing, 6%) by the product of
(i) [*] as computed below and (ii) [*]. If the Sale of
Purchaser is a Sale of the Stock of Purchaser and Purchaser
has not opted to pay Xxxxxxx such Additional Consideration
in cash as provided hereinabove at Xxxxxxx' option such
Additional Consideration shall be received in cash or a
mixture of cash and Purchaser Shares, in the same
proportions as that received by the other current
stockholders of Purchaser. For purposes of this Paragraph A,
the [*] shall be computed by [*].
If, and only if, an IPO occurs within 15 months of
the Closing and Xxxxxxx has so elected in writing prior to
the Closing (a "Special Election"), Xxxxxxx shall receive
the Additional Consideration in the foregoing Paragraph A on
the date occurring 15 months after the Closing (and not at
the IPO), and the above calculations shall be made as if the
IPO had occurred on the final day of the quarter immediately
preceding such date, i.e., the [*] shall be calculated [*].
By way of example:
Example 1: If Purchaser completes an IPO for
$100,000,000 for 100% of Purchaser in the fifteen months
after the Closing and Xxxxxxx has not made a Special
Election and at the time of the offering [*], the value of
the Purchaser Shares to be received by Xxxxxxx at the time
of the IPO would equal the following: [*].
Example 2: If Purchaser completed an IPO for $75
Million for 50% of Purchaser and at the time of the offering
[*], the value of the Purchaser Shares to be received by
Xxxxxxx would equal the
following:
[*].
(B) If the IPO or Sale of Purchaser occurs prior to
the end of the 24th month after the date of the Closing, at
the end of the twenty-fourth month Xxxxxxx will be entitled
to receive (1) additional Purchaser Shares or (2) the
equivalent amount of cash, at Purchaser's option, in an
amount equal to the product of 3% times the product of (i)
the [*] (as computed below) and (ii) [*]. If the Sale of
Purchaser is a Sale of the Stock of Purchaser and Purchaser
has not opted to pay Xxxxxxx such Additional Consideration
in cash as hereinabove provided, at Xxxxxxx' option, such
Additional Consideration shall be received in cash or a
mixture of cash and Purchaser Shares, in the same
proportions as that received by the other current
shareholders of Purchaser. For the purposes of this
Paragraph B, the [*] shall be computed by [*].
By way of example:
Example 1: If Purchaser completed an IPO prior to 24
months following the Closing and [*], the value of the stock
to be received by Xxxxxxx would equal the following: [*].
[*]
If the Purchaser Shareholders enter into any
restriction on the sale of their stock for a period of time
following any public offering, Xxxxxxx shall be subject to
the same restriction with respect to stock received as
Additional Consideration for a period not to exceed two (2)
years following the IPO.
o ADDITIONAL COMPENSATION.
(C) If Xxxxxxx is employed by MMI, Purchaser or their
Affiliates at the Requisite Compensation Level on the third
Anniversary Date following the Closing, at the time of an
IPO or Sale of Purchaser Xxxxxxx will be entitled to receive
the following Additional Compensation at the time of an IPO
or Sale of Purchaser or, if such IPO or Sale of Purchaser
has occurred prior to the third Anniversary Date, at the
time of such third Anniversary Date: Purchaser Shares, or,
at the option of Purchaser, the equivalent in cash, in an
amount computed by multiplying one percent (1%) times the
product of (i) [*] (as computed below) and (ii) [*]. If the
Sale of Purchaser is a Sale of Stock and Purchaser has not
opted to pay Xxxxxxx such Additional Compensation in cash as
provided hereinabove, at Xxxxxxx' option such Additional
Compensation shall be received in cash or a mixture of cash
and Purchaser Shares in the same proportions as that
received by the other current stockholders of Purchaser. For
the purposes of this paragraph (C), the [*] shall be
computed by [*].
If Xxxxxxx is employed by MMI, Purchaser or the
Affiliates at the Requisite Compensation Level on the fourth
Anniversary Date following the Closing, then on the fourth
Anniversary Date, Xxxxxxx shall be entitled to receive an
additional one percent Additional Compensation on such
fourth Anniversary Date, or if the IPO has not yet occurred
on the date of the IPO or Sale of Purchaser, computed in the
same manner as set forth in the immediately preceding
paragraph but replacing the "third Anniversary Date" with
the "fourth Anniversary Date."
For the purposes of this subsection (C), the
Additional Compensation shall vest on the third or fourth
Anniversary Date, as applicable, only if Xxxxxxx is employed
by MMI, Purchaser or any of its Affiliates or its successor
on such third or fourth Anniversary Date as provided in the
immediately preceding paragraph or prior to such date has
terminated his employment "for cause" as defined in the
final sentence of Section 10.2(a) of this Agreement or has
his employment terminated by Purchaser "without cause" as
defined in the penultimate sentence of Section 10.2(a) of
this Agreement. If Xxxxxxx shall die or become permanently
disabled, Xxxxxxx' rights with respect to Additional
Compensation for such 12-month period ending on the next
Anniversary Date shall vest on [*] but shall be prorated to
the date of death or such disability. All other Additional
Compensation not vested on or paid on any Anniversary Date
shall not vest to Xxxxxxx and shall, at the option of the
Board, be reallocated to other Key Employees of MMI as
provided in Section 3.3 of this Agreement.
(D) If the Purchaser completes an IPO and the
Purchaser has elected to pay Xxxxxxx Additional Compensation
in the form of cash rather than Shares and Xxxxxxx elects to
purchase Purchaser Shares with such cash concurrently with
the payment, Purchaser agrees to pay Xxxxxxx for all
brokerage commissions incurred by Xxxxxxx for such purchases
and, if the Additional Compensation is paid concurrently
with the IPO, any additional price in excess of the IPO
price which Xxxxxxx pays for the Purchaser Shares.
(b) TAX TREATMENT; PAYMENT OF ADDITIONAL CONSIDERATION AND
ADDITIONAL COMPENSATION. For purposes of computing the Additional
Consideration and Additional Compensation: MMI Net Income and [*]
shall be computed on a pretax basis for such periods as MMI [*] S
Corporations, but shall be computed on an after-tax basis for such
periods as MMI [*] C Corporations if and when MMI [*] C
Corporations. A report setting forth in reasonable detail the
computation of the Additional Consideration or Additional
Compensation shall be delivered to Xxxxxxx concurrently with the
payment of the Additional Consideration or Additional Compensation.
Xxxxxxx will receive such Additional Consideration or Additional
Compensation as soon as possible after the event giving rise to the
computation (e.g. the Anniversary Date or the IPO or Sale) of the
Additional Consideration or Additional Compensation above and shall
be paid by check if the Additional Consideration or Additional
Compensation is "cash" and shall otherwise be paid in the manner
hereinabove provided.
(c) RECORDS AND INSPECTION OF RECORDS AND FINANCIAL
STATEMENTS FOR CALCULATION OF ADDITIONAL CONSIDERATION AND
ADDITIONAL COMPENSATION. During the five (5) years following the
Closing, Purchaser shall permit Xxxxxxx and his representatives,
agents, accountants and advisors reasonable access to examine MMI's
and Purchaser's consolidated and unconsolidated income statements
and balance sheets and review the computations relevant to the
calculation of MMI Net Income, including the allocation of income
and costs. The costs of any such inspection shall be borne by
Xxxxxxx, provided that if the inspection and any consequent
verification of such records or computations reveals a mistake of
any kind, including, but not limited to, an improper allocation,
that results in a discrepancy of more than 10% of such payment, and
which discrepancy is acknowledged by Purchaser or confirmed by the
dispute resolution mechanism set forth in this Subsection 3.2(c)
hereinbelow, then the cost of such inspection shall be borne by
Purchaser. If Xxxxxxx' inspection discloses a mistake or
discrepancy resulting in an underpayment of the Additional
Consideration or Additional Compensation, Xxxxxxx shall notify
Purchaser thereof in writing, which notice shall specify the basis
for such mistake or discrepancy in reasonable detail. Within twenty
(20) Business Days after Purchaser's receipt of such notice,
Purchaser shall either (i) pay to Xxxxxxx the aggregate amount of
such underpayment, or (ii) notify Xxxxxxx in writing that it
disputes the amount of such underpayment, stating its grounds
therefor in reasonable detail. If Purchaser and Xxxxxxx are unable
to resolve Purchaser's objections within twenty (20) Business Days
after Purchaser has notified Xxxxxxx of its objections, and the
matter in dispute concerns only the calculation of the amount of
the Additional Consideration or Additional Compensation the matter
in dispute shall be referred to an investment banker or accountant
mutually acceptable to the parties hereto, which shall be
instructed to resolve the matter in dispute promptly (and the fees
of such investment banker or accountant shall be borne equally by
Purchaser and Xxxxxxx).
If the investment banker or accountant cannot resolve the
dispute or if Xxxxxxx and the Purchaser cannot agree on an
investment banker or accountant, Xxxxxxx shall select one
investment banker or accountant, Purchaser another and each of such
investment bankers or accountants shall together select a third
investment banker or accountant who shall make such determination.
The determination of such investment banker or accountant shall be
final, binding and conclusive on Purchaser and Xxxxxxx. The fees of
their first two investment bankers or accountants shall be borne by
the party -- Purchaser or Xxxxxxx --retaining such investment
banker or accountant and the fees of the third shall be borne
equally by Purchaser and Xxxxxxx.
(d) RESTRICTIONS ON ASSIGNMENT. The right to receive the
Additional Consideration or Additional Compensation may not be
transferred by Xxxxxxx, except as follows:
(i) such right may be transferred upon the death of
Xxxxxxx to his heirs or to a beneficiary so designated in a
testamentary document;
(ii) such right may be transferred by Xxxxxxx to the
spouse and children of Xxxxxxx or to a trust created for the
primary benefit of Xxxxxxx or his spouse and children; and
(iii) in accordance with the Put Agreement,
(each a "Permitted Assignee"); provided, that Purchaser shall not
be obligated to make any payment to a Permitted Assignee unless (i)
Purchaser has received notice of such transfer from the assignor,
setting forth the name, address and employer identification number
or social security number of such Permitted Assignee and (ii) such
notice has been received by Purchaser at least ten (10) Business
Days before the next payment of the Additional Consideration or
Additional Compensation is made.
(e) DEATH OR DISABILITY OF XXXXXXX. All Additional
Compensation owed to Xxxxxxx set forth herein shall continue to be
payable to Xxxxxxx or his heirs notwithstanding his disability or
death.
3.3 ADDITIONAL CONSIDERATION OR ADDITIONAL COMPENSATION FOR SENIOR
MANAGERS. Additional Compensation shall be paid to the Senior Managers as
provided in the several Additional Compensation Agreements and Equity Value
Agreement between Purchaser and Senior Managers and other Key Employees of
MMI unless such Senior Manager or other Key Employee of MMI dies, becomes
disabled or otherwise ceases to be employed and thereby is no longer
vested, in which case the portion of the Additional Compensation that by
the terms of such Additional Compensation Agreement or Equity Value
Agreement no longer payable to such Key Employee or Senior Manager shall be
reallocated to the remaining Senior Managers and Key Employees as
determined by Purchaser subject to the reasonable approval of Xxxxxxx.
3.4 [*]. [*].
Immediately prior to such sale, the Purchaser shall issue [*] and
the percentage used to calculate the amount of Additional Consideration or
Additional Compensation to be received by such Seller on any future
occasion shall be reduced by the percentage used to calculate the
Additional Consideration or Additional Compensation received to effect the
[*] computed at the time of such initial sale.
3.5 NO OTHER EQUITY OR OWNERSHIP INTEREST IMPLIED. Neither a
Seller's rights with respect to Additional Consideration or Additional
Compensation hereunder nor the [*] under Section 3.4 or in the Additional
Compensation Agreements shall confer on any Seller any equity or ownership
interest in the Purchaser or any concomitant rights other than the rights
set forth hereunder and the right to receive stock or cash when and as
described hereunder, and no equity or ownership interest in Purchaser shall
be conferred on any Seller by virtue of the "vesting" of any Additional
Consideration or Additional Compensation prior to the issuance of Purchaser
Shares pursuant to this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, as to themselves and for and on behalf of MMI, represent
and warrant to Purchaser on the date hereof and as of the Closing Date as
follows:
4.1 ORGANIZATION AND STANDING. MMI is a corporation which is duly
organized, validly existing and in good standing under the laws of Oregon.
Sellers have delivered to Purchaser complete and correct copies of the
Articles of Incorporation and By-Laws, as amended, of MMI. MMI has all
necessary corporate powers and authority to engage in the business in which
it is presently engaged (as such business is presently being conducted), to
own all property now owned by it, and to lease all of the property used by
it under lease. Complete copies of the corporate minutes and stock transfer
records of MMI have been delivered to Purchaser for Purchaser's review, and
contain minutes and consents for all actions taken by the shareholders and
directors of MMI for which such consents were required, and complete and
accurate records of all issuances and transfer of shares of its capital
stock. Schedule 4.1 hereto contains a complete and accurate list of the
officers and directors of MMI.
4.2 QUALIFICATION. MMI has not failed to qualify in any
jurisdiction where a failure to so qualify would have an adverse effect on
the financial condition or results of operations of MMI. Schedule 4.2
hereto identifies each jurisdiction where MMI is duly qualified to do
business as a foreign corporation, and MMI is in good standing in each such
jurisdiction.
4.3 NO RESTRICTIONS; BINDING EFFECT; APPROVAL OF CHANGE OF CONTROL.
Except as contemplated by this Agreement or as set forth in Schedule 4.3,
neither Sellers nor MMI is subject to any material restriction, agreement,
law, rule, regulation, ordinance, code, writ, injunction, award, judgment
or decree which would prohibit or be violated by the execution and delivery
hereof or the consummation of the transactions contemplated hereby. Sellers
have all power to execute and deliver this Agreement and the instruments,
documents and agreements to be executed and delivered pursuant hereto and
to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the instruments, documents and agreements to be
executed and delivered pursuant hereto have been or will be duly executed
and delivered by Sellers, and each constitutes a legal, valid and binding
obligation of Sellers, enforceable against Sellers in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally and subject to the availability of
equitable remedies. Except as contemplated by this Agreement or as set
forth in Schedule 4.3, neither Sellers nor MMI are required to give any
notice to, make any filing with, or obtain any authorization, consent or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement.
4.4 NONCONTRAVENTION. Except as set forth in Schedule 4.4, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby and thereby nor any direct or indirect
change of control of MMI will (a) violate any statute, regulation, rule,
judgment, order, decree, stipulation, injunction, memorandum of
understanding regulatory order or understanding to which MMI is a party or
is otherwise subject, (b) conflict with or result in a breach of the
provisions of the Articles of Incorporation or By-laws of MMI, as amended
to date, or (c) conflict with, result in the breach of, constitute a
default under, result in the acceleration of, create in any person or
entity the right to accelerate, terminate, modify or cancel, or require any
notice under, any material contract, lease, license, indenture, agreement,
mortgage, instrument of indebtedness or other instrument to which MMI is a
party or by which MMI or any property of MMI is bound or result in the
creation or imposition of any lien or encumbrance on any of such property,
and MMI and the Sellers shall obtain all consents, waivers and amendments
necessary to resolve any such violation or conflict identified on Schedule
4.4 on or before the Closing.
4.5 CAPITAL STRUCTURE. Xxxxxxx is the only record and beneficial
owner of the capital stock of MMI as of the date hereof and Schedule 4.5
hereto accurately sets forth the number of authorized and issued and
outstanding shares of capital stock of MMI. All such issued and outstanding
shares of capital stock are duly authorized, validly issued and
outstanding, and are fully paid and non-assessable. Except as set forth in
said Schedule 4.5, no other class or series of capital stock of MMI is
presently authorized. Except as set forth in Schedule 4.5, (i) there is no
obligation, option or warrant which is binding upon MMI to issue, sell,
redeem, purchase or exchange any of its capital stock or any right relating
thereto, (ii) there is no obligation, debt, liability or security of MMI
that is convertible into capital stock of MMI, (iii) there are no
outstanding stock appreciation rights, phantom stock or similar rights, and
(iv) there are no agreements to pay a percentage of profits, revenue or
volume of loans originated, brokered or assigned.
4.6 TITLE TO THE SHARES OR OTHER INTERESTS IN THE COMPANY
(a) Xxxxxxx is the record and beneficial owner and holder of
the Shares consisting of capital stock and the Senior Managers are
the beneficial owners and holders of the Senior Manager Interests
and each respectively has good title to his or her respective
Shares or interest, free and clear of all liens, encumbrances,
pledges, security interests, options, claims, charges and
restrictions of any nature whatsoever, except those that will be
released at Closing; and
(b) Xxxxxxx has full voting power over his Shares, which
represent all capital stock of MMI, subject to no proxy,
shareholders agreement or voting trust, and have full right, power
and authority to sell and deliver the Shares to Purchaser in the
manner provided for in this Agreement.
4.7 NO SUBSIDIARIES. Except as set forth on Schedule 4.7, MMI does
not own any shares of or equity interest in any corporation, partnership,
limited liability company, joint venture, association (excluding
memberships in trade associations) or other entity and the execution and
delivery of this Agreement and the consummation of the transactions
contemplated thereby and hereby do not and will not violate or conflict
with or create a default under, or give the counterparty to such agreement
the right to terminate, the agreements governing any of the joint ventures
set forth on Schedule 4.7.
4.8 CORPORATE RECORDS AND ACTION. MMI has previously furnished to
Purchaser a copy of the Articles of Incorporation and all amendments
thereto of MMI, and prior to the Closing shall furnish to Purchaser a copy
of the foregoing, certified as being true, correct and complete by the
Secretary of State of Oregon. MMI has previously furnished to Purchaser a
complete copy of the By-laws and all amendments thereto of MMI and prior to
the Closing shall furnish to Purchaser certification by the Secretary of
MMI as to the accuracy of such documents. MMI has previously made available
to Purchaser the complete minute books of MMI. As of the Closing, all
corporate actions taken by the shareholders, Board of Directors or any
committee of the Board of Directors of MMI is fairly and accurately
summarized in all material respects in the minute books of MMI. MMI has
previously made available to Purchaser the stock ledger books of MMI. All
issuances, cancellations, transfers and exchanges of capital stock of MMI
as of the Closing are reflected in its stock ledger books.
4.9 FINANCIAL STATEMENTS. The financial statements of MMI for the
years ended December 31, 1996 and 1997, the quarter ending March 31, 1998,
and the period ending June 30, 1998, including the balance sheets as of
said dates and the statements of income, statements of stockholders' equity
and statements of cash flows, reviewed by Stefani & Xxxxxxx, LLP, certified
public accountants (collectively, the "Financial Statements"), copies of
which have been previously delivered to Purchaser, (a) have been prepared
from the books and records of MMI in accordance with generally accepted
accounting principles applied on a consistent basis, and (b) fairly present
the financial position of MMI as of the respective dates included therein
and the results of operations, changes in equity and cash flows of MMI for
the respective periods covered by the Financial Statements.
4.10 LIABILITIES. Except as set forth in Schedule 4.10, MMI has no
liabilities (whether absolute or contingent, liquidated or unliquidated and
whether due or to become due), including any liability for Taxes (as
defined in Section 4.12), except for (a) liabilities set forth on the
balance sheet of MMI as of June 30, 1998 included in Financial Statements,
(b) liabilities incurred since that date in the ordinary course of business
in accordance with past practices, and (c) costs and expenses incurred in
connection with the transactions contemplated by this Agreement subject to
the $[*] limitation set forth in Section 12.2 hereof. Sellers acknowledge
that, to the extent there are other liabilities not disclosed on Schedule
4.10 that are not known to Sellers, they shall constitute an
Indemnification Claim under Section 10.3 hereof. Except as set forth in
Schedule 4.10, MMI is not liable upon or with respect to or obligated in
any other way to provide funds in respect of or to guaranty or
indemnification or assume in any manner (including, without limitation,
under or pursuant to any agreement, arrangement, commitment or
understanding, whether written or oral), any debt, obligation or dividend
of any other person or entity.
4.11 EVENTS SINCE DECEMBER 31, 1997 AND MARCH 31, 1998. Since
December 31, 1997 and March 31, 1998 except as disclosed on Schedule 4.11,
there has
not been:
(a) Any material increase in the compensation or benefits
(including bonuses) payable or to become payable by MMI to any of
its respective directors, officers, employees or agents, other than
increases in the ordinary course of MMI's business to persons
receiving annual compensation, including increases in commission
compensation to employees compensated solely on a commission basis;
(b) Any contractual commitment by MMI to any third party,
other than as provided in this Agreement or arising in the ordinary
course of MMI's business, relating to (i) the property, assets or
business of MMI, or (ii) the acquisition or disposition of property
or assets (including, without limitation, any leasehold estate) of
MMI;
(c) Any transaction, other than at arm's length in the
ordinary course of business, between MMI and any shareholder,
director, officer or affiliate of MMI or any affiliate of any such
officer, director or shareholder;
(d) Any material change in the manner in which MMI operates
its Business which has had or may reasonably be expected to have an
adverse effect on the assets or properties, liabilities, condition
(financial or other) or results of operations of MMI;
(e) Any indebtedness for borrowed money incurred by MMI
other than in the ordinary course not exceeding $10,000 in the
aggregate;
(f) Any material change in any accounting policies,
procedures or practices employed with respect to MMI;
(g) Any sale of any of the assets of MMI, other than sales
of loans
in the ordinary course of business;
(h) Any acceleration, termination, cancellation or adverse
modification of any material agreement, contract, lease or license
to which MMI is a party or by which it is bound;
(i) Any other material transaction of MMI other than in the
ordinary course of business consistent with past practices;
(j) Any casualty damage, destruction, loss or forfeiture
(whether or not covered by insurance) or adverse change, actual or
threatened, to or affecting (i) any material property or asset of
MMI, or (ii) the material business or condition (financial or
other) of MMI, or (iii) the results of operations or prospects of
MMI;
(k) Any direct or indirect redemption, purchase or other
acquisition by MMI of any capital stock of MMI, or any declaration,
setting aside or payment of any dividend, distribution or payment
(other than any wages, salary or other compensation in the ordinary
course consistent with past practices) with respect to any capital
stock of MMI or any payment to or on behalf of any of the Sellers;
(l) Any waiver or surrender by MMI of any valuable right or
property other than for fair consideration; or
(m) Any capital expenditures paid or incurred by MMI other
than capital expenditures incurred in the ordinary course of
business which do not exceed $30,000 for any single item or group
of related items.
Since March 31, 1998, except as disclosed on Schedule 4.11, there has not
been:
(n) Any redemption or purchase of any Shares or any option
to purchase MMI Common Shares or any dividend, payment or other
distribution;
(o) Any issuance of any Shares (other than the sale or
distribution to Sellers, which Shares are to be purchased pursuant
to the terms hereof) or of any options, warrants or other rights to
purchase such shares; or
(p) Any material adverse change in the Business or finances
of MMI.
4.12 TAXES.
(a) MMI is an S Corporation under Section 1360, et seq., of
the Code.
(b) Except as disclosed in Schedule 4.12, MMI has filed all
returns and/or reports relating to Taxes (as hereinafter defined)
which MMI was required to file prior to the date of this
representation (collectively the "Tax Returns"). All Taxes due and
owing by MMI have been paid. As used herein, "Taxes" mean any
federal, state, local or foreign income, gross receipts, franchise,
payroll, employment, excise, unemployment, personal property,
sales, use, value added, alternative, estimated or other tax or tax
obligation of any kind whatsoever, including any interest, penalty
or addition thereto.
(c) Proper and accurate amounts have been withheld by MMI
with respect to all compensation paid to employees of MMI for all
periods ending on or before the Closing Date. MMI has required each
employee who exercised an option to purchase MMI common shares to
pay to MMI cash in an amount sufficient to satisfy in full MMI's
obligation to withhold Federal, state or local income or other
taxes incurred by reason of such exercise. All deposits required
with respect to compensation paid to employees of MMI have been
made in compliance with applicable laws.
(d) MMI has not made any payment, and is not obligated to
make any payment, and is not a party to any agreement that could
obligate it to make any payment that will not be deductible (in
whole or in part) for Federal income tax purposes by reason of
Section 280G of the Code or under Proposed Treasury Regulation
Section 1.280G-1. No provision of this Agreement, or any agreement
executed and delivered pursuant hereto or thereto obligates MMI to
make any payment in the nature of compensation that will not be
deductible (in whole or in part) for federal income tax purposes by
reason of Section 280G of the Code or under Proposed Treasury
Regulation Section 1.280G-1.
(e) MMI has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or
deficiency.
(f) Except as set forth on Schedule 4.12, none of MMI's tax
returns has been audited or is currently the subject of an audit by
a governmental agency. Except as set forth on Schedule 4.12, MMI
has not received any notice of a deficiency or proposed deficiency
in any of the taxes paid by or on behalf of MMI and MMI has not
entered into any settlements or tax agreements, and has not been
the subject of audits or proceedings by any federal or state taxing
authority.
4.13 TITLE TO ASSETS. MMI owns all its assets free and clear of any
mortgage, pledge, lien, encumbrance or other security interest, other than
liens for real estate taxes not yet due or payable, liens for capitalized
leases entered into in the ordinary course of business and the liens
described in Schedule 4.13. Other than the real estate set forth in
Schedule 4.13, MMI does not currently own any real property and has not
owned any real estate during the last three years.
4.14 CONDITION OF ASSETS. The personal property owned and leased by
MMI is in good operating condition and repair, ordinary wear and tear
excepted. Any real estate owned or leased by MMI is in good condition and
MMI is not obligated to perform any material repairs or maintenance to such
real estate.
4.15 ACCOUNTS RECEIVABLE; NOTES RECEIVABLE. The accounts receivable
(other than that certain receivable from Xxxxxxx in the amount of $108,000)
and notes receivable set forth in the Financial Statements and the accounts
receivable of MMI arising after that date represent valid claims payable to
MMI for the provision of services or other charges arising in the ordinary
course of business of MMI on or before the date thereof and are enforceable
in accordance with their terms. Each of the account receivables (other than
that certain receivable from Xxxxxxx in the amount of $108,000) or note
receivables on such Financial Statements, constitute valid claims arising
from bona fide transactions in the ordinary course of MMI's business and
are not subject to any claim for set-off, reduction or rebate.
4.16 INTELLECTUAL PROPERTY AND SOFTWARE.
(a) Schedule 4.16 correctly identifies (where applicable, by
owner, place of registration, registration or application number
and registration or application dates) all issued domestic and
foreign patents, patent applications pending, patent applications
in process, trademarks, trademark registrations, trademark
registration applications, service marks, service xxxx
registrations, service xxxx registration applications, copyright
registrations, copyright registration applications, license
agreements, rights acquired through litigation, logos, trade names,
slogans owned by MMI and all books and training manuals published
or printed by or on behalf of MMI and which are presently used in
the business of MMI, and are material to the operation of MMI (the
foregoing, along with know-how and trade secrets owned by MMI which
are material to the operation of MMI are hereinafter collectively
referred to as the "Intellectual Property"). Schedule 4.16
correctly identifies all issued patents, patent applications
pending, patent applications in process, trademarks, trademark
registrations, trademark registration applications, service marks,
service xxxx registrations, service xxxx registration applications,
copyright registration applications, licenses, rights acquired
through litigation, logos, trade names, slogans, know-how and trade
secrets other than Software (as defined in Section 4.16(g) below)
that are currently expressly licensed to or by MMI and are material
to the operation of MMI ("Licensed Intellectual Property"). Except
for any implied licenses, neither Sellers nor MMI has granted any
license to any person with respect to any Intellectual Property or
Licensed Intellectual Property, except those set forth in Schedule
4.16. Except as set forth in Schedule 4.16, the agreements and/or
arrangements for the Licensed Intellectual Property are in full
force and effect, and are free and clear of all adverse claims,
options, liens, charges, security interests, covenants, conditions,
agreements, restrictions, encumbrances and defenses and no material
default by MMI exists thereunder.
(b) Intellectual Property consisting of issued trademarks
("Trademarks") are valid and subsisting and there are no challenges
pending or, to the knowledge of Sellers, threatened, to the
validity of any Trademarks.
(c) Except as disclosed on Schedule 4.16, MMI is not a party
to any license or agreement relating to any unpatented inventions,
discoveries, specifications, data, processes, formulae, trade
secrets, proprietary technical information or know-how used by MMI
with respect to its business (hereinafter collectively "Know-How").
Except as disclosed on Schedule 4.16, MMI owns and is legally
entitled to exploit the Know-How as used in the business as
currently conducted without restrictions and free of any adverse
claim or claim of infringement.
(d) There are no interference, opposition or cancellation
proceedings or infringement suits pending or, to the knowledge of
Sellers, threatened, with respect to any Intellectual Property or
Licensed Intellectual Property, except to the extent disclosed in
Schedule 4.16 hereto. To Sellers' knowledge, no other person is
infringing any Intellectual Property, Licensed Intellectual
Property, or Know-How currently owned by or licensed to MMI, except
as disclosed in Schedule 4.16 hereto, and MMI is not infringing,
nor within the last five (5) years has MMI infringed or been
charged with infringing, any patent or trademark right of any
person, or the rights of any person with respect to Know-How,
except to the extent disclosed in Schedule 4.16 hereto.
(e) The Intellectual Property, Licensed Intellectual
Property and Know-How comprise all of the intellectual property
rights owned or expressly licensed to MMI and pertaining to the
conduct of its business as now operated, or as presently planned to
be operated, and there are no limitations or restrictions and no
conflict or asserted conflict with intellectual property rights of
others.
(f) Except as set forth on Schedule 4.16 hereto, all of the
computer software used by or for MMI in the conduct of its business
(the "Software") is either (i) owned by MMI free and clear of any
and all liens, claims, equities, security interests and
encumbrances whatsoever, or (ii) used by MMI pursuant to a
fully-paid license granted to MMI by the third party pursuant to
the terms of such license. Except as set forth on Schedule 4.16, no
such computer software license shall terminate or become terminable
as a result of the transaction contemplated herein. There are no
infringement suits pending or, to the knowledge of Sellers or MMI,
threatened, against MMI with respect to any of the Software, and,
to the knowledge of Sellers, no fact or condition exists which
could give rise to any such infringement suit.
4.17 MATERIAL CONTRACTS. Schedule 4.17 lists the following material
contracts, leases and agreements in effect to which MMI is a party or is
bound:
(a) any agreement for the lease, as lessee, of vehicles;
(b) any agreement (or group of related agreements) for the
lease of personal property to or from any person or entity
providing for rent in excess of
$20,000 during any twelve month period;
(c) any agreement for the lease of real property;
(d) any agreement (or group of related agreements) or
indemnity under which MMI has created, incurred, assumed,
guaranteed any debt or obligation including without limitation any
indebtedness for borrowed money, warehouse lines of credit, or any
capitalized lease or purchase money obligation;
(e) any agreement under which MMI has granted a lien,
pledge, security interest or other encumbrance upon any of its
assets;
(f) licenses of any of the Software, other than licenses to
customers granted in the ordinary course of business pursuant to
agreements which restrict the use and right to copy such Software
in a manner which protects the proprietary rights of MMI in the
Software and do not restrict MMI's right to use and exploit such
Software;
(g) any agreement under which MMI has an obligation to
indemnify a director, officer or employee or an obligation to
indemnify any person or entity including, without limitation, with
respect to any representation, warranty or covenant made by MMI;
(h) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis other than oral
retainers of professionals terminable at will except for employment
agreements of employees with a salary of less than $40,000 who have
signed MMI's standard form employment agreement;
(i) any agreement concerning confidentiality or
noncompetition given by MMI other than those employment agreements
set forth on Schedule 4.17(i) and those agreements with employees
on MMI's standard form employment agreement;
(j) any other plan, contract or arrangement, whether formal
or informal, which involve direct or indirect compensation
(including bonus, stock option, severance, golden parachute,
deferred compensation, special retirement, consulting and similar
agreements) for the benefit of one or more of the current or former
directors, officers or employees of MMI (other than employee
policies described in Schedule 4.28);
(k) any guaranty or suretyship, performance bond or
contribution agreement;
(l) any distribution, marketing, sales representative or
dealership agreement;
(m) any Branch Manager Agreement; and
(n) any other contract or commitment.
With respect to each such agreement, except as otherwise disclosed in
Schedule 4.17: (i) such agreement is in full force and effect and
constitutes the legal, valid and binding obligation of MMI and, to the
knowledge of Sellers, the other parties thereto, enforceable in accordance
with its terms, (ii) such agreement will not be terminated as a result of
the Closing, (iii) MMI is not in default in any material respect under such
agreement and no event has occurred which, with the passage of time, would
constitute such a default, and (iv) to the knowledge of Sellers, no other
party is in default in any material respect under such agreement.
Notwithstanding the foregoing, in the event MMI is in default with respect
to any contract not disclosed as material as provided hereinabove, any loss
or damage arising from any such contract not disclosed herein because such
contract was deemed immaterial by Sellers, shall be covered by the
Indemnification contained in Section 10.3 hereof. In the case of the Branch
Managers Agreement, Schedule 4.17 accurately sets forth the salaries of all
branch managers and summarizes the other material terms thereof. Except as
disclosed in Schedule 4.17 or as provided in this Agreement in the
agreements executed in connection herewith, no bonus or severance will
become due and payable under any existing agreement between MMI and any of
its employees as a result of the Closing and the change of control effected
thereby.
4.18 LITIGATION; REGULATORY EXAMINATION. Except as set forth on
Schedule 4.18 or as disclosed in writing to Purchaser, neither MMI nor
Sellers (a) are or have been subject to any outstanding injunction,
judgment, order, decree, ruling, criminal charges, memorandum of
understanding, cease and desist order or administrative sanction; (b) are
or have been a party or, to the knowledge of MMI or Sellers, threatened to
be made a party to any action, suit, proceeding, hearing, audit or
investigation, of or before any court, quasi-judicial agency, grand jury,
administrative agency or arbitrator; or (c) have engaged in any activity
that would reasonably be expected to lead to litigation or criminal
proceedings. Neither MMI nor any Seller has been audited or investigated by
any instrumentality, commission, division, subdivision, department, agency
or procuring office or other entity of the federal or state government
other than routine examinations by federal and state regulators, and such
routine examinations have not revealed any material non-compliance with
law, regulation or applicable standards.
4.19 INSURANCE. MMI maintains and has maintained such insurance as
is required by law or agreements to which they are a party and such other
insurance, in amounts and insuring against hazards and other liabilities,
as is customarily maintained by companies similarly situated. Except as set
forth on Schedule 4.19, MMI does not maintain any insurance on the lives of
any of its shareholders, other than group insurance on those shareholders
who are also employees. Schedule 4.19 also describes all health insurance,
life insurance, disability, or other health policies and any "stop-loss"
policy entered into for or on behalf of MMI employees and the periodic
premiums due thereon.
4.20 SCHEDULE OF LOANS. Schedule 4.20, prepared as of the date of
this Agreement, contains a detailed description of the loan portfolio
currently held by MMI and all loans currently outstanding on MMI's
warehouse line, includes a detailed schedule of all delinquencies and
payment histories, the discount or actual prices at which loans were sold
to government agencies or other third parties, accurately describes all
loans subject to repurchase obligations of MMI, and a list of all uninsured
FHA and VA loans. Except as set forth in Schedule 4.20, all mortgage
insurance premiums and all VA funding fees are current with respect to each
loan for which such insurance is required. Schedule 4.20 also sets forth a
list of all loan locks taken by MMI and all losses caused by such loan
locks within one hundred eighty (180) days of the date of this Agreement
which are still outstanding (provided that despite such listing on Schedule
4.20, any such losses suffered by MMI that are not mitigated shall
constitute an Indemnification Claim as defined in Section 10.3(b)(ii)).
Schedule 4.20 also lists all branches, including all branches of MMI for
the eighteen (18) month period immediately preceding the Closing (including
any branches sold or closed) and setting forth the volume of loans made at
each such branch.
4.21 COMPLIANCE WITH LAW INCLUDING CONSUMER LAW. Except as
described on Schedule 4.21, MMI has complied with all applicable material
laws, rules, regulations, ordinances and codes, whether federal, state,
local or foreign and, including, without limitation, all laws and
regulations relating to occupational health and safety, equal employment
opportunities, fair employment practices, and sex, race, religious, age and
other prohibited discrimination, all other labor laws, including without
limitation the Family and Medical Leave Act, and all licensure, disclosure,
usury and other consumer credit laws and regulations governing residential
mortgage lending and brokering, including, but not limited to, all
applicable rules, regulations, standards and guidelines promulgated by the
United States Department of Housing and Urban Development ("HUD"), the
Federal Home Loan Mortgage Corporation ("FHLMC"), the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), the Veterans Administration ("VA") and the Board of Governors of
the Federal Reserve System, the state agencies and all applicable
provisions of the Real Estate Settlement Procedures Act of 1974, the Flood
Insurance Protection Act, the Consumer Credit Protection Act, the Truth in
Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting
Act, all as amended from time to time, and all regulations promulgated
thereunder (the foregoing statutes and laws called "Consumer Credit Law")
and except as set forth on Schedule 4.21, no notice or correspondence
(whether regarding litigation, regulatory action or otherwise) has been
received by MMI from or on behalf of consumers or from any regulatory
agency in which such consumer or regulatory agency has alleged
noncompliance with any Consumer Credit Law or other applicable law. MMI has
complied with all applicable appraisal and accounting standards.
4.22 FORMS; POLICIES AND PROCEDURES. MMI has provided Purchaser
with all its standard consumer forms, including all form disclosures and
notices, brokers agreements, notes, mortgages, instruments and agreements
used in the Business (the "Consumer Forms"). MMI has provided Purchaser
with a copy of MMI's internal practices and procedures and MMI and its
employees have complied and are in compliance with such practices and
procedures in all material respects. All such practices and procedures and
all Consumer Forms comply in all material respects with (i) all applicable
Consumer Credit Law and (ii) any standards imposed by HUD, FHLMC, GNMA,
FNMA and the VA, to the extent applicable, and (iii) any other applicable
law or regulation.
4.23 LICENSES AND PERMITS. MMI has obtained all licenses, permits,
qualifications, franchises and other governmental authorizations and
approvals, including, without limitation, all state mortgage brokers and
mortgage bankers licenses and, as applicable, approvals by HUD, FHLMC,
GNMA, FNMA and the VA, required in order for it to conduct the Business as
presently conducted, all of which are listed on Schedule 4.23 hereto. All
of such licenses, permits, qualifications, franchises and other
authorizations are in full force and effect and will remain in full force
and effect immediately after the Closing and shall not be violated by or
affected, impaired or require any further action to remain effective as a
result of the Closing, except as set forth on Schedule 4.23. No material
violation exists in respect of any such license, permit, qualification,
franchise, authorization or approval. No proceeding is pending, or to the
knowledge of MMI, threatened to revoke or limit any such license, permit,
qualification, franchise, authorization or approval.
4.24 ENVIRONMENTAL WARRANTIES. No real property owned or leased by
MMI ("Real Property") contains any Hazardous Substance (as hereinafter
defined) or any underground or above-ground storage tank containing or
which has contained any Hazardous Substance. Neither MMI nor any of its
Affiliates or tenants (a) has conducted or authorized the generation,
transportation, storage, treatment, or disposal of any Hazardous Substance
at any parcel of real estate, except in compliance with Environmental Law
(as defined below in this Section 4.24); (b) has handled, treated, stored,
transported, released or disposed of any Hazardous Substance at any
off-site facility except in compliance with Environmental Law; (c) has
allowed the migration of any Hazardous Substance from any parcel of the
Real Property onto any neighboring property; (d) is aware of the migration
of any Hazardous Substance from any neighboring property onto the Real
Property; (e) is aware of any pending or threatened litigation or
proceedings before any court or any administrative agency in which any
person or entity has alleged the presence, release, threat of release, or
placement of any Hazardous Substance on or in any parcel of the Real
Property, or the generation, transportation, storage, treatment, or
disposal of any Hazardous Substance at any parcel of the Real Property; (f)
possesses actual knowledge that any governmental or quasi-governmental
authority or agency (federal, state or local) has determined, or threatens
to determine, that there is a presence, release, threat of release, or
placement of any Hazardous Substance on or in any parcel of the Real
Property, or the generation, transportation, storage, treatment or disposal
of any Hazardous Substance at any parcel of the Real Property; or (g) has
received any communications or entered into any agreement with any
governmental or quasi-governmental authority or agency (federal, state or
local) or any other person or entity including, but not limited to, any
prior owners of any parcel of the Real Property, relating in any way to the
presence, release, threat of release, damages from a release, placement of
any Hazardous Substance on or in any parcel of the Real Property, or the
generation, transportation, storage, treatment, or disposal of any
Hazardous Substance at the Real Property. For purposes of this Agreement,
"Hazardous Substance" shall mean any asbestos, polychlorinated biphenyls
(PCBs), petroleum and petroleum by-products, and any other substance,
waste, pollutant, contaminant, or other material which is listed, defined,
identified or regulated as such by any Environmental Law. For purposes of
this Agreement "Environmental Law" shall mean any applicable federal, state
or local law, rule, regulation, order, governmental policy, guideline or
procedure or rule or theory of common law (including theories based on
nuisance or strict liability), and any judicial interpretation of any of
the foregoing, which pertains to any Hazardous Substance, human health or
the environment, and shall include without limitation, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., and the Occupational Health and Safety Act, 29
U.S.C. 651, et seq.
4.25 PAYROLL LIST. Schedule 4.25 sets forth a complete list of all
employees of MMI, including their date of birth, date of first hire, rates
of compensation, unpaid accrued vacation and any other material terms of
their employment as of the date set forth in Schedule 4.25, the bonuses
paid to them with respect to the year ended December 31, 1997 and all other
benefits payable to or on behalf of employees by MMI, including without
limitation any benefits with respect to car or phone rental, entertainment,
travel or per diem allowances, club memberships, and similar such benefits,
whether related to business entertainment or otherwise, and separately
lists all current employees who have in either 1997 or 1998 had an increase
in their total annual salary (including any bonuses) from the previous
calendar year and the amount of each such increase.
4.26 LABOR RELATIONS. MMI is not a party to or bound by any
collective bargaining agreement. There are no current union organizational
activity with respect to the employees of MMI and there has not been any
such activity in the past twelve months. All employee policies, including
all policies with respect to salary, promotion and other terms of
employment, including, without limitation, all policies set forth in the
employee handbook, have been and are applied on the basis of merit and
without regard to race, color, religion, sex, national origin, handicap,
unfavorable discharge from the military and without regard to family
relationship with Sellers, Key Employees or other Affiliates of MMI. No
allegation, charge or complaint of age, disability, sex, race or other
unlawful discrimination or similar charge whether under federal, state or
local law, or of any violation of the Americans with Disabilities Act, has
been made or, to the knowledge of MMI, threatened against MMI.
4.27 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 4.27,
MMI does not sponsor, maintain or contribute to any "employee benefit plan"
(within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), employee fringe benefit plan
or program or program, nonqualified deferred compensation plan or program,
incentive compensation plan or program, stock option plan or program,
restrictive stock plan or program, stock appreciation rights plan or
program, phantom stock plan or program, or any other plan, program,
agreement, trust, fund or arrangement for the benefit of any employee
(collectively all of such plans or programs are referred to as "Employee
Plans"). Complete and accurate copies of each document under which an
Employee Plan is sponsored or maintained, related amendments, employee
summaries (including, but not limited to, summary plan descriptions), trust
agreements, Internal Revenue Service ("IRS") determination letters, if
applicable, and the three most current Form 5500 series filings (and
related schedules and reports), if applicable, have been provided to
Purchaser. Except as set forth on Schedule 4.27, each Employee Plan: (a)
which is intended or treated as a qualified retirement plan under Section
401(a) of the Code is, in fact, qualified thereunder, has received a
favorable determination letter from the IRS and no event has occurred which
could result in the revocation of such plan's qualified status; (b) which
is otherwise intended or treated as providing tax-advantaged benefits under
the Code, is in compliance with the applicable requirements under the Code;
(c) is not subject to, or governed by, Title IV of ERISA; (d) has been
operated and administered in compliance with all applicable requirements
under Federal and state law; and (e) is not the subject of, or a party to,
any pending or threatened litigation, investigation or audit. Except as set
forth on Schedule 4.27, no Employee Plan provides for any medical or health
care coverage following termination of employment, except to the extent
specifically required under Sections 601 through 608 of ERISA and Section
4980B of the Code (collectively such requirements are referred to as "COBRA
Continuation Coverage). Except as set forth on Schedule 4.27, no person is
currently receiving COBRA Continuation Coverage with respect to any
Employee Plan.
4.28 EMPLOYEE POLICIES. A current and accurate copy of the
employee handbook of MMI currently in effect has been made available to
Purchaser. Except as set forth in Schedule 4.28, such handbook covers all
employees of MMI and fairly and accurately summarizes all material employee
policies, vacation policies and payroll practices of MMI. Schedule 4.28
sets forth a list of all noncompete and nonsolicitation agreements that
MMI's employees have signed with MMI. To MMI's knowledge, none of its
employees is party to an agreement with a prior employer with respect to
confidentiality or a covenant not to compete or non-solicitation which is
still in force and effect.
4.29 REFERRAL SOURCES; INVESTORS. Except as set forth on Schedule
4.29, MMI has not been advised that any of its loan officers, referral
sources or investors may cease doing business with MMI, which cessation in
the aggregate or otherwise could have a material adverse effect on the
Business, financial condition or prospects of MMI.
4.30 BANK ACCOUNTS. Schedule 4.30 sets forth a complete list of
each financial institution in which MMI has an account or safe deposit box,
together with a list of all assets held in such box as of the date set
forth in Schedule 4.30, the number of each such account or box and the
names of all persons authorized to draw thereon, to give instructions with
respect thereto or to have access thereto.
4.31 POWERS OF ATTORNEY. Except as set forth in Schedule 4.31,
there are no outstanding powers of attorney executed on behalf of MMI.
4.32 PERSONAL GUARANTEES. Schedule 4.32 describes all guaranties
of Sellers of any obligations (including, without limitation, any lease
obligations) of MMI (the "Personal Guaranties").
4.33 BROKERAGE FEE. Neither Sellers nor MMI have engaged any
investment banker, finder, broker or similar agent with respect to the
transactions contemplated by this Agreement which may give rise to any
brokerage fee, finder's fee, commission or similar liability on the part of
Sellers, MMI or Purchaser.
4.34 FULL DISCLOSURE. The representations and warranties of Sellers
contained in this Agreement, all schedules prepared for this Article by or
on behalf of Sellers and elsewhere described herein (the "Disclosure
Schedules") and the documents executed and delivered to Purchaser pursuant
hereto, taken as a whole, do not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
4.35 BUSINESS RECORDS. No material records of accounts, personnel
records or other business records related to the Business have been
destroyed within the last five (5) years, other than in the ordinary course
of business consistent with past practices, and, there exist no such
records other than those records delivered by Seller and MMI to Purchaser
at or prior to the Closing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers, on the date hereof
and on the Closing Date, as follows:
5.1 ORGANIZATION AND STANDING Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Illinois, and has full corporate power and authority to enter into
and perform this Agreement and consummate the transactions contemplated
hereby.
5.2 NO RESTRICTIONS; AUTHORIZATION; BINDING EFFECT; APPROVAL OF
CHANGE OF CONTROL. Purchaser is not subject to any material restriction,
agreement, law, rule, regulation, ordinance, code, writ, injunction, award,
judgment or decree which would prohibit or be violated by the execution and
delivery hereof or the consummation of the transactions contemplated
hereby. Purchaser has all necessary power and authority and has taken, or
will have taken prior to the Closing, as applicable, all corporate action
necessary to execute and deliver this Agreement and the instruments,
documents and agreements to be executed and delivered pursuant hereto, to
consummate the transactions contemplated by this Agreement and to perform
its obligations under this Agreement and the instruments, documents and
agreements to be executed and delivered pursuant hereto. This Agreement and
each of the instruments, documents and agreements to be executed and
delivered pursuant hereto has been duly executed and delivered by
Purchaser, and each constitutes a legal, valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditor's rights generally and subject to the availability of
equitable remedies.
5.3 NONCONTRAVENTION. Neither the execution and delivery of this
Agreement by Purchaser nor the consummation of the transactions
contemplated hereby and thereby will (a) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, memorandum of
understanding, regulatory order or understanding to which Purchaser is
subject, (b) conflict with or result in a breach of the provisions of the
Articles of Incorporation or By-laws of Purchaser, as amended to date, or
(c) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any person or entity the right to
accelerate, terminate, modify or cancel or require any notice under any
contract, lease, license, indenture, agreement, mortgage, instrument of
indebtedness or other instrument to which Purchaser is a party or by which
Purchaser or any property of Purchaser is bound.
5.4 LITIGATION; REGULATORY EXAMINATION. Except as set forth on
Schedule 5.16, Purchaser is not subject to any outstanding injunction,
judgment, order, decree, ruling, memorandum of understanding, cease and
desist order or administrative sanction. During the past five years,
Purchaser has not been audited by any instrumentality, commission,
division, subdivision, department, agency or procuring office or other
entity of the federal or state government other than routine examinations
by federal and state regulators, and such routine examinations have not
revealed any material non-compliance with law, regulation or applicable
standards.
5.5 FINANCIAL STATEMENT. The consolidated financial statements of
Purchaser and its subsidiaries for the years ended December 31, 1996 and
1997, including both the consolidated and the consolidating balance sheets
as of said dates and the statements of income, and statements of cash
flows, audited by McGladrey & Xxxxxx, LLP, Certified Public Accountants,
and the income statement and balance sheet for the period ending April 30,
1998 (collectively, the "Purchaser's Financial Statements"), copies of
which have been previously delivered to MMI, (a) have been prepared from
the books and records of Purchaser in accordance with generally accepted
accounting principles applied on a consistent basis, and (b) fairly present
the financial position of Purchaser as of the respective dates included
therein and results of operations, changes in equity, and cash flows of
Purchaser for the respective periods covered by the Purchaser's financial
statements. There have been no material adverse changes in the financial
condition of Purchaser and its subsidiaries since April 30, 1998.
5.6 FULL DISCLOSURE. The representations and warranties of
Purchaser contained in this Agreement, the Schedules and the documents
executed and delivered to Shareholders pursuant hereto, taken as a whole,
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE 6
COVENANTS OF SELLERS
Sellers, individually and on behalf of MMI, hereby covenant to
Purchaser the following, from the date hereof through the Closing:
6.1 CONDUCT OF BUSINESSES; NOTIFICATION OF BREACHES IN
REPRESENTATIONS OR WARRANTIES. Until the Closing, except as required or
specifically contemplated by this Agreement, the Sellers and MMI covenant
that MMI will conduct the Business in the ordinary and usual course of
business, consistent with past practices, and shall use its best efforts to
preserve the goodwill of its employees, representatives and suppliers. MMI
will promptly notify Purchaser in writing if MMI is advised that any of the
loan officers, referral sources or investors of MMI intends to cease doing
business with MMI because of the Closing or the announcement thereof or
otherwise which cessation either alone or when aggregated with other such
cessations could have a material adverse effect on the Business, financial
condition or prospects of MMI.
6.2 NOTIFICATION OF BREACH OF REPRESENTATION, WARRANTY OR
COVENANT. The Sellers will notify Purchaser immediately if any of the
representations, warranties or covenants in Section 4 hereof become untrue,
and shall make immediate efforts to correct or cure such breach.
6.3 FOREBEARANCES BY MMI. Except as contemplated by this Agreement
or consented to by Purchaser in writing, during the period from the date
hereof through the Closing, the Sellers covenant that MMI shall not:
(a) authorize or effect any change in its Articles of
Incorporation or by-laws;
(b) grant any option, warrant or other right to purchase or
obtain any of its capital stock, or issue, sell or otherwise
dispose of any of its capital stock (except upon the conversion or
exercise of options presently outstanding and in accordance with
the respective terms thereof or as disclosed in Schedule 4.17);
(c) declare, set aside or pay any dividend or distribution
with respect to its capital stock, or redeem, repurchase or
otherwise acquire any of its capital stock;
(d) create, incur, assume or guaranty any indebtedness for
borrowed money other than indebtedness incurred in the ordinary
course of business including, without limitation, under any
warehouse line of credit;
(e) grant any lien, pledge, security interest or other
encumbrance upon any of its assets other than capitalized leases
permitted under
Section 4.11(m);
(f) make any capital expenditure except capital expenditures
incurred in the ordinary course of business which do not exceed
$20,000 for any single
item or group of related items;
(g) make any loan to or investment in, or acquire any
securities or assets of any other person or entity, except for
mortgage loans made in the ordinary course of business made under
the same standards and guidelines as such loans were made prior to
December 31, 1997 and loans disclosed in
Schedule 4.11(e);
(h) increase the rate of compensation or materially increase
the benefits payable or to become payable to any of its directors,
officers or employees (other than raises made in the ordinary
course of business to employees who are not directors or officers
provided that such raise to any such employee shall not exceed 10%
of the base compensation of such employee in effect at December 31,
1997) or make any material change in any of the terms of employment
of any of its directors, officers or employees;
(i) change any material accounting policies, procedures or
practices employed by it;
(j) sell any of its assets, other than sales of loans in the
ordinary course of business made, where applicable, pursuant to
appropriate guidelines of the appropriate governing federal agency,
or issue, sell, encumber or give any option or right to purchase
any shares of MMI's capital stock or other securities;
(k) amend any Tax Return;
(l) enter into any material contract, agreement or lease
other than in the ordinary course which would be required to be
disclosed hereunder without Purchaser's consent which consent shall
not be unreasonably withheld, or make any change in any existing
contracts, agreements or leases other than in the ordinary course
of business without Purchaser's consent which consent shall not be
unreasonably withheld;
(m) pay or discharge any long-term liability other than in
accordance with its terms;
(n) take or omit to take any action, the effect of which act
or omission would render inaccurate any of the representations and
warranties set forth in Article 4 herein as of the Closing Date;
(o) implement or agree to any implementation of or amendment
or supplement to any employee profit sharing, pension, bonus,
commission, incentive, retirement, medical reimbursement, life
insurance, deferred compensation or any other employee benefit plan
or arrangement; or
(p) agree or commit to do any of the foregoing.
6.4 GOOD FAITH NEGOTIATIONS; DUE DILIGENCE. Sellers agree to
negotiate and proceed in good faith to promptly consummate the transactions
hereunder. Prior to the Closing Date, each of the Sellers shall afford or
shall cause MMI to afford to Purchaser and Purchaser's Representatives (as
defined in Section 8.1 hereof) such access during normal business hours and
at such other times as may be required under the circumstances to inspect,
investigate, and audit the contracts, operations and business of MMI and
its books records, offices, and other facilities and Purchaser and MMI
shall undertake, and shall cause each of their respective shareholders,
officers, directors, employees, investment bankers, attorneys, accountants,
and other agents or affiliates to undertake, their best efforts to promptly
and completely provide all information reasonably requested by Purchaser
and its Representatives. No investigation or absence of investigation by
Purchaser of MMI prior to the date hereof or pursuant to this Section shall
be deemed to modify any of the representations or warranties contained
herein.
6.5 OTHER ACQUISITION PROPOSALS. Neither Sellers nor MMI nor any of
MMI's officers, directors, employees, representatives or agents, shall (a)
directly or indirectly take (nor shall MMI permit any of its respective
officers, directors, employees, investment bankers, attorneys, accountants
or other agents or affiliates to take) any action to encourage, solicit,
initiate or otherwise facilitate the submission by a third party of, or
negotiate or enter into any agreement with a third party with respect to, a
proposal to acquire, directly or indirectly, any of the capital stock of
MMI, whether by stock purchase, merger, sale of shares of capital stock by
license agreement or otherwise or sale of any material portion of its
assets (except sales of loans in the ordinary course of business) (any such
submission, negotiations or agreement called an "Acquisition Proposal"),
and Sellers or MMI, as applicable, shall immediately terminate any current
negotiations and contacts, or (b) disclose directly or indirectly to any
person preparing to make an Acquisition Proposal any confidential
information regarding MMI, or (c) enter into any understanding, agreement
or commitment with any third party providing for a business combination,
equity investment, or sale or license of any significant assets of MMI.
Upon receipt of any such Acquisition Proposal by any third party, Sellers
shall promptly advise Purchaser of the proposal and provide it copies of
all materials pertaining thereto. If the parties have not consummated the
Closing prior to August 15, 1998 for any reason other than due to the
failure to obtain Required Regulatory Approvals then, subject to the
obligation to negotiate in good faith set forth in Section 6.4 above, the
provisions of this Section 6.5 shall be void with respect to any
Acquisition Proposal first received after such date.
6.6 Intentionally Deleted.
6.7 CONSENTS. Prior to the Closing, Sellers and MMI shall use
reasonable efforts to obtain the consents, waivers and other approvals,
which may be required from any lender, lessor or non-government customer in
order to effectuate the Closing.
6.8 GOVERNMENT APPROVAL. Promptly following the execution of this
Agreement, MMI with the reasonable cooperation of Purchaser and Sellers
shall notify, or obtain approvals from, to the extent required or
appropriate under applicable law, all governing federal and state agencies
regarding the transactions contemplated by this Agreement to the extent
such notice or approval is required to continue the current business and
operations of MMI after the Closing (those approvals required to be
obtained prior to the Closing called the "Required Regulatory Approvals").
MMI shall immediately notify Purchaser if MMI receives any inquiry from
such agencies regarding the Closing or any indication that MMI's licensed
status with such agency will be impaired by such merger. The reasonable
costs of obtaining such consents, including but not limited to those of
outside counsel, shall be costs payable by MMI pursuant to Section 12.2. To
the extent such costs when aggregated with other costs described in Section
12.2 exceed the $[*] maximum set forth in Section 12.2, such costs shall be
borne by Sellers.
6.9 ADDITIONAL FINANCIAL STATEMENTS. MMI shall furnish to Purchaser
unaudited financial statements for MMI for each month which closes more
than 25 days prior to the Closing within 25 days after the end of such
month. Such financial statements shall be certified by the Chief Financial
Officer or Treasurer of MMI, in his or her capacity as such, as having been
prepared in accordance with generally accepted accounting principles on a
basis consistent with the Financial Statements and as fairly presenting the
financial position of MMI as of their respective dates and the results of
its operations for the periods then ended (subject in the case of the
monthly financial statements to normal year end adjustments which, in the
aggregate, are not material).
6.10 SUPPLEMENTS TO SCHEDULES. From time to time after the date
hereof and prior to the Closing Date, MMI will promptly supplement or amend
the Disclosure Schedules with respect to any matter which MMI deems
necessary or advisable to include therein. However, no such supplement or
amendment of the Disclosure Schedules shall be deemed to cure any breach of
any representation or warranty made in this Agreement even if Purchaser
proceeds with the Closing. Notwithstanding any supplement or amendment to
the Schedules, Purchaser shall be entitled to its rights and remedies under
Section 10.3 or Section 11.1.
6.11 CONSENTS OF THIRD PARTIES. On or prior to the Closing Date,
Sellers, at their expense, shall obtain or cause to be obtained all
consents and other approvals of all lessors, lenders, governmental
authorities and other third parties including, without limitation, any
spousal consents which are required to be obtained by Sellers or MMI as a
result of the transactions contemplated by this Agreement, which consents
and approvals shall continue each applicable lease, loan or other
arrangement related to MMI on substantially identical terms as exist on the
date hereof. The reasonable costs of obtaining such consents, including but
not limited to those of outside counsel, shall be costs payable by MMI
pursuant to Section 12.2. To the extent such costs when aggregated with
other costs described in Section 12.2 exceed the $[*] maximum set forth in
Section 12.2, such costs shall be borne by Sellers.
6.12 TRANSFER OF SHARES. At the Closing, Sellers shall cause the
certificate or certificates for the Shares to be delivered to Purchaser,
duly endorsed for transfer or
with executed stock powers attached.
6.13 GUARANTEES AND COLLATERAL PLEDGES. Except for those guaranties
set forth on Schedule 6.13, Sellers acknowledges that MMI has not
guaranteed the indebtedness of any affiliates of Sellers other than MMI
itself (collectively the "Affiliate Guarantees") at any banks or lending
institutions or otherwise which have not been terminated, cancelled and of
no further force or effect, and any security interest or lien right or
security interest which such bank or lending institution had or may have
had with respect to the Affiliate Guarantees have been released. At the
Closing on the Closing Date, Sellers shall deliver to Purchaser written
evidence of the termination of any Affiliate Guarantees and any liens or
security interests securing such Affiliate Guarantees. Except for the
Personal Guaranties (as defined in Section 4.32), Sellers have not
guarantied the indebtedness or any obligations of MMI.
ARTICLE 7
COVENANTS OF PURCHASER
Purchaser hereby covenants to Sellers that from the date hereof
through the Closing as follows:
7.1 NOTIFICATION OF BREACH OF WARRANTY OR COVENANT. Purchaser will
notify Sellers immediately if any of the warranties or covenants in Section
5 hereof become untrue in any material respect and shall make immediate
efforts to correct or
cure such breach.
7.2 GOOD FAITH NEGOTIATIONS. Purchaser agrees to negotiate and
proceed in good faith to promptly consummate the transactions hereunder.
7.3 NOTIFICATION OF MATERIAL ADVERSE INFORMATION. If, prior to
Closing, Purchaser discovers any material adverse information regarding MMI
unknown to Sellers, it shall promptly notify Sellers.
7.4 [Deliberately Omitted]
7.5 CONSENTS. Prior to the Closing, Purchaser shall use reasonable
efforts to cooperate with Purchaser in obtaining the consents, waivers and
other approvals set forth in Schedule 6.7, which may be required in order
to effectuate the Closing.
ARTICLE 8
JOINT COVENANTS
8.1 CONFIDENTIAL INFORMATION.
(a) All Confidential Information (as hereinafter defined)
disclosed to a Recipient (as hereinafter defined) and its
Representatives shall be utilized by the Recipient and its
Representative for the sole purpose of evaluating the Closing and
shall be kept confidential until the Closing is consummated. In the
event the Closing is not consummated, each Recipient and its
Representatives shall continue to keep the Confidential Information
confidential and shall not directly or indirectly utilize such
Information in any way detrimental to the Disclosing Party.
(b) As used herein, "Disclosing Party" means Purchaser, MMI
or the Sellers, whichever discloses Confidential Information (as
hereinafter defined), and "Recipient" means Purchaser, its
subsidiaries, MMI or the Sellers, whichever is receiving
Information from a Disclosing Party.
(c) As used herein, "Confidential Information" means all
information delivered by or on behalf of a Disclosing Party, its
subsidiaries or their respective officers, directors, employees
and/or agents to the Recipient or its Representatives before or
after the date of this Agreement, whether orally or in writing, and
identified as "confidential" by the Disclosing Party, but does not
include any information which at the time of disclosure to the
Recipient or thereafter (i) is generally available to and known by
the public (other than as a result of a disclosure directly or
indirectly by the Recipient or its Representatives), (ii) was
available to the Recipient on a nonconfidential basis from a source
other than the Disclosing Party and its subsidiaries and
Representatives, provided that such source is not, and was not,
bound by a confidentiality agreement with the Disclosing Party or
another party or otherwise prohibited from transmitting such
information by a contractual, legal or fiduciary obligation to the
Disclosing Party, its subsidiaries or another party, or (iii) has
been independently acquired or developed by the Recipient as shown
by written records without violating any of the Recipient's
obligations under this Agreement.
(d) As used herein, "Representatives" mean those directors,
officers, employees, representatives, auditors, legal counsel,
advisors and other authorized representatives of the Recipient who
need to know Information for the purpose of evaluating the
Recipient's participation in the Closing (it being understood that
prior to any disclosure of Confidential Information by a Recipient
to any Representative, the Recipient will inform such
Representative of the confidential nature of the Confidential
Information and obtain from such Representative an agreement to be
bound by the terms of this Section to the same extent as if such
Representative had joined this Agreement for the purpose
of agreeing to be bound by this Section). A Recipient shall be
responsible for any breach of the terms of this Section by any of its
Representatives.
(e) If a Recipient or any of its Representatives becomes
legally compelled (by deposition, interrogatory, request for
documents, subpoena, civil investigative demand or similar process)
to disclose any of the Confidential Information, or reasonably
determines that such disclosure is required in order to defend
itself against a legal proceeding brought by a third party, the
Recipient shall provide the Disclosing Party with prompt prior
written notice of such requirement or determination so that the
Disclosing Party may seek a protective order or other appropriate
remedy and/or waive compliance with the terms of this Section. In
the event that such protective order or other remedy is not
obtained, or that the Disclosing Party waives compliance with the
provisions of this Section, the Recipient shall exercise reasonable
commercial efforts to obtain assurance that confidential treatment
will be accorded such Confidential Information. The provisions of
this paragraph shall not apply to Purchaser and its Representatives
after the Closing Date.
(f) If the Closing is not consummated, each Recipient will
return to the Disclosing Party all copies of Confidential
Information in the Recipient's possession or in the possession of
its Representatives.
8.2 PUBLICITY. Prior to Closing, neither Purchaser nor Sellers
shall announce or disclose publicly the terms or provisions hereof without
the prior written approval of the other party, except such disclosure as
may be required under securities law or common law (subject to giving the
other party notice as promptly as possible of the intention to make such
disclosure and providing the other party an opportunity to review the
wording of such disclosure), and disclosure to its attorneys, accountants,
lenders, bankers, investment bankers, government agencies and employees.
8.3 PUT AGREEMENT. Purchaser and Sellers shall enter into the Put
Agreement.
8.4 EMPLOYMENT AGREEMENTS. At the Closing, Purchaser and each of
the Sellers shall enter into their respective Executive Employment
Agreements in the form and substance acceptable to the parties thereto (the
"Employment Agreements") and the Senior Managers shall enter into the
Additional Compensation Agreements (the "Additional Compensation
Agreements") in form and substance acceptable to the parties thereto.
8.5 OTHER DOCUMENTATION. At the Closing, Sellers shall deliver all
the Shares, together with stock powers and all other documents required or
appropriate to effect the transactions contemplated hereby.
ARTICLE 9
CONDITIONS TO OBLIGATION TO CLOSE
9.1 MUTUAL CONDITIONS. The obligations of each party to effect the
Closing shall be subject to the fulfillment at or prior to the Closing Date
of the following
conditions:
(a) LITIGATION. Immediately prior to the Closing, there
shall be no material action or proceeding initiated by any
governmental agency or third party which seeks to restrain,
prohibit or invalidate the transactions hereunder or to recover
substantial damages or other substantial relief with respect
thereto, and no injunction or restraining order shall have been
issued by any court restraining, prohibiting or invalidating the
transactions hereunder.
(b) PUT AGREEMENT. Purchaser and the Sellers shall have
entered into the Put Agreement.
9.2 CONDITIONS TO OBLIGATIONS OF PURCHASER TO EFFECT THE PURCHASE.
The obligations of Purchaser to effect the Closing shall be subject to the
fulfillment on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers set forth in Article 4 of this Agreement
shall be true and correct on the date of this Agreement and as of
the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS. The Sellers and MMI shall
have performed all obligations required to be performed by it under
this Agreement on and prior to the Closing Date. Purchaser shall
have received a certificate executed by the President of MMI to
that effect dated the Closing Date.
(c) DUE DILIGENCE. Purchaser shall have completed its due
diligence investigation of MMI and nothing shall have come to
Purchaser's attention in the course of such due diligence which
causes Purchaser to determine not to proceed with the Closing.
(d) EMPLOYMENT. Francis, Bartley, Stashin and XxxxxxXxxxxx
shall each have entered his or her respective Employment Agreement
with MMI and Xxxxxxx, Stashin and XxxxxxXxxxxx shall each have
entered into his or her respective Additional Compensation Agreement.
(e) EQUITY VALUE PLAN AGREEMENT. Senior Managers and the Key
Employees shall have entered into the Equity Value Plan Agreement
among MMI, Purchaser, Senior Managers and Key Employees.
(f) OPINION OF COUNSEL. Purchaser shall have received
written opinions of Xxxxx, Xxxxx & Xxxxxxx, counsel to MMI and
Xxxxxx Xxxxxxx, and Xxxxxxx Xxxxxx LLP, counsel to Sellers, both
dated the Closing Date and in form and substance acceptable to the
Purchaser.
(g) EXECUTION AND DELIVERY OF ALL ANCILLARY DOCUMENTS. There
shall have been executed by the parties thereto and delivered to
Purchaser all other documents necessary to effect the transactions
contemplated.
(h) REGULATORY APPROVAL. All Required Regulatory Approvals
shall have been obtained.
(i) CONSENTS. MMI shall have received all consents, waivers
and other approvals, including, without limitation, any consents of
landlords or other counter-parties, as required by any change of
control or other material provision in any lease, sublease or other
contract or agreement necessary in order for it to effect the
Closing without causing a default under any note, loan agreement,
contract, instrument, lease or mortgage or any material adverse
effect on the business or assets of MMI.
(j) CASUALTY. No casualty shall have occurred at the
facilities of MMI as a result of which Purchaser reasonably expects
that MMI will be unable to conduct the business in substantially
the same manner as previously conducted for a period of at least
thirty (30) days after the Closing Date.
(k) DELIVERY OF CORPORATE DOCUMENTS AND LIEN SEARCHES.
Sellers, at their sole expense, shall have delivered to Purchaser:
(i) Certificates of Good Standing of MMI, for any state within
which MMI is qualified to do business as a foreign corporation, all
of which shall be dated within ten (10) business days of the
Closing Date; (ii) a certified copy of the Certificate of
Incorporation and By-Laws, and all continuations thereof and
amendments thereto, of MMI; and (iii) Purchaser shall, at Seller's
sole expense, have obtained to its reasonable satisfaction lien
searches under the Uniform Commercial Code and other applicable
statutes for each County and, where appropriate, other local
jurisdictions in which MMI or any Affiliate of MMI makes loans or
has a place of business, as well as a judgment and tax lien search
respecting MMI in each such jurisdiction.
(l) MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the business or financial condition of
MMI.
Notwithstanding anything herein to the contrary, Purchaser may waive any of
the foregoing conditions in Section 9.2 hereof, or to the extent such
conditions are imposed on MMI or Sellers, in Section 9.1, or at Purchaser's
option, cure any such noncompliance with such conditions as provided in
Section 11.1.
9.3 CONDITIONS TO OBLIGATIONS OF SELLERS TO EFFECT THE CLOSING..
The obligations of Sellers to effect the Closing shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser set forth in Article 5 of this Agreement
shall be true and correct as of the date of this Agreement and as
of the Closing Date, as if made
again on such date.
(b) PERFORMANCE OF OBLIGATIONS. Purchaser shall have
performed all material obligations required to be performed by it
under this Agreement prior to the Closing Date, and MMI shall have
received a certificate executed by the President or an Executive
Vice President of Purchaser to that effect dated the Closing Date.
ARTICLE 10
POST CLOSING COVENANTS
10.1 POST CLOSING COVENANTS OF PURCHASER REGARDING FINANCING OF
MMI.
(a) After the Closing, Purchaser will arrange warehouse
lines reasonably necessary for MMI Operations and will charge MMI
quarterly a 15% per annum cost of capital to the extent additional
capital is required in excess of capital generated by MMI from MMI
Operations to support the warehouse lines being used for MMI
Operations. For purposes of determining whether additional capital
is necessary, (i) MMI Net Income will be allocated to MMI's balance
sheet and (ii) a leverage ratio of 20 to 1 will be assumed. For
purposes of computing the MMI Net Income for this Section 10.1(a),
MMI Net Income shall be computed on a pretax basis for such periods
when MMI is an S Corporation, but shall be computed on an after-tax
basis for such periods as MMI and Purchaser are C Corporations if
and when MMI becomes a C Corporation.
By way of example assume MMI's net worth as of the Closing
is $2 million. Further assume that MMI generated $1 million of
capital in the fourth quarter of 1998 (i.e. after tax estimated net
income for such quarter) and that capital was not needed for
operations or other purposes. Finally, assume that the maximum
dollar amount of MMI loans outstanding on Purchaser's warehouse
lines at any time during such quarter was $80 million. MMI would be
charged a 15% per annum cost of capital on $1 million ($37,500) for
the quarter computed as follows:
(80,000,000)
------------
20 = 4,000,000 required capital
4,000,000 - (2,000,000 + 1,000,000) = $1,000,000
$1,000,000 x 15% per annum = $150,000
$150,000 / 4 = $37,500
(b) After the Closing, if MMI identifies acquisition
opportunities and Purchaser, in its reasonable discretion, approves
such acquisition, then Purchaser shall make capital available to
MMI to implement such acquisition opportunities to the extent
additional capital over and above that generated by and credited to
MMI is required. MMI will be charged a 15% cost of capital on such
capital in excess of capital generated from MMI Operations after
subtracting capital required to support warehouse lines described
in 10.1(a) above.
By way of example, assume MMI's net worth as of the end of
the last quarter of 1998 is $2 million. Further assume that MMI
generated $2 million of capital in 1999 and that was not needed for
operations or other purposes except $2.75 million of such capital
was needed to support MMI's warehouse lines in accordance with
Section 10.1(a). If $1.5 million is needed to implement an
acquisition, MMI would be charged a 15% per annum cost of capital
on $250,000 computed as follows:
MMI Available Capital = (2,000,000 + 2,000,000) - 2,750,000 = $1,250,000
Additional Capital = 1,500,000 - 1,250,000 = $250,000
$250,000 x 15% = $37,500
$37,500 / 4 = $9,375 per quarter
10.2 COVENANT NOT TO COMPETE BY SELLERS. The following covenants
are made by Sellers to Purchaser and MMI in consideration of the
transaction contemplated by this Agreement, and it is expressly
acknowledged and agreed by Sellers that such covenants are material
inducements for Purchaser to enter into this Agreement and to consummate
the transaction contemplated hereby. In addition, Sellers each acknowledge
that MMI, Purchaser and their Affiliates have and will expend considerable
time, money and resources in recruiting, training and developing the skills
and abilities of their employees; developing business relationships with
referral sources and customers so as to improve the goodwill of MMI;
establishing branches of MMI, including, but not limited to, entering into
long term leases for office space; and establishing and maintaining close
business relationships between MMI's employees and MMI's customers. Sellers
each acknowledge and agree that MMI is entitled to protect its investment
in the foregoing and to keep the results of its efforts for its exclusive
use. Accordingly, Sellers agree to the covenants and conditions set forth
in Sections 10.2(a) through 10.2(f) hereof, and acknowledge and agree that
they are necessary to preserve and protect the legitimate business
interests of MMI, and shall be binding upon Sellers during and after their
respective employment with MMI in accordance with their terms:
(a) NON-COMPETITION. During Xxxxxxx and each Senior
Manager's employment with MMI, pursuant to their respective
Employment Agreements or otherwise under another employment
agreement or arrangement with Purchaser, MMI or its Affiliates and
for the lesser of (i) a three (3) year period after their
employment under the Employment Agreement or other employment
agreement or arrangement with Purchaser, MMI or its Affiliates is
terminated by Purchaser, unless such termination is "without cause"
as defined in the penultimate sentence of this Section 10.2(a) or
such termination by such Seller is "for cause" as provided in the
final sentence of this Section 10.2(a) [*] and (ii) the longest
period of time allowed by applicable law, Sellers each covenant to
not, directly or indirectly, compete with MMI or its Affiliates
(including without limitation Purchaser and its Affiliates), with
respect to the business (i.e., the residential mortgage lending and
brokerage business) of MMI or its Affiliates (including without
limitation Purchaser and its Affiliates), including any expansion
of such business of MMI or its Affiliates (including without
limitation Purchaser and its Affiliates), which occurs during the
term of the Employment Agreement or other employment agreement or
arrangement with MMI, Purchaser or their respective Affiliates, and
any renewal term, including ancillary and related activities which
occur during the term of the Employment Agreement or other
employment agreement or arrangement with MMI, Purchaser or their
respective Affiliates, in the geographic region which is the
smaller of (i) all areas in which MMI or its Affiliates, including
Purchaser, conduct any of their residential mortgage operations and
where they maintain branches, and (ii) the largest geographical
area allowed by law.
Competition, for the purpose of this Agreement, shall
include, but not be limited to: (i) owning, maintaining, operating
or engaging in the same or similar line of business as MMI or its
Affiliates (including without limitation Purchaser and its
Affiliates), or in any business which competes with MMI or its
Affiliates (including without limitation Purchaser and its
Affiliates); (ii) serving, advising, consulting with or being
employed by any individual, firm, agency, partnership, company or
corporation (including any pre-incorporated association) which
engages in the same or similar business as MMI or its Affiliates
(including without limitation Purchaser and its Affiliates), or
which competes with MMI or its Affiliates, including without
limitation Purchaser and its Affiliates; and (iii) undertaking any
efforts or activities toward pre-incorporating, incorporating,
organizing, financing or commencing any competing business or
activity which engages in the same or similar line of business as
MMI or its Affiliates, including without limitation Purchaser and
its Affiliates, provided that Xxxxxxx may make (i) "hard money"
loans from his personal funds or funds raised from private
individual investors, or if the loans are not funded with private
money they must be brokered to MMI or Purchaser, and (ii) to
borrowers whose credit does not meet FNMA or FHMLC guidelines
(provided that such loans are brokered to MMI or Purchaser) and
Xxxxxxx may engage a staff of one (1) assistant and one (1)
originator in the first twelve (12) months and a staff of three (3)
assistants and three (3) originators thereafter, and may consult
with Xxx Xxxxxxx as a technical consultant, provided further that
except as expressly provided herein this proviso shall not impair,
abridge or otherwise affect Xxxxxxx' covenants or obligations as to
competition hereunder and with respect to solicitations of
employees, agents, customers or referral sources or otherwise under
his Employment Agreement or other employment agreements or
employment arrangements between Xxxxxxx and Purchaser, MMI or their
respective Affiliates. If any Sellers' employment with Purchaser,
MMI or their respective Affiliates, is terminated by Purchaser, MMI
or its Affiliates without cause, this Section 10.2(a) shall be void
with respect to such Seller.
For purposes of this provision, "without cause" shall mean
(as applied separately to each Seller) an involuntary discharge by
MMI, Purchaser or any of their respective Affiliates for a reason
other than the following: (i) conviction of fraud, embezzlement or
theft; (ii) disclosing of confidential or proprietary information
of MMI, Purchaser or their Affiliates; aiding a competitor of MMI,
Purchaser or their Affiliates, or misappropriation of a corporate
opportunity of MMI, Purchaser or their Affiliates, which
disclosure, aid or misappropriation is in breach of such Seller's
fiduciary duty to MMI as an officer or employee of MMI; (iii)
conviction of such Seller of a felony or entry of any guilty plea
or plea of nolo contendere to a felony or Seller's conviction of,
or entry of any guilty plea or plea of nolo contendere to any
criminal charge (x) resulting in MMI, Purchaser or their Affiliates
being in violation of any mortgage brokerage licensing act in any
state in which MMI, Purchaser or their Affiliates is then licensed
or relating to the business of MMI, Purchaser or their Affiliates;
(y) involving moral turpitude resulting in harm or embarrassment to
MMI, Purchaser or their Affiliates; (iv) any material
misrepresentation to Purchaser or MMI by such Seller in connection
with such Seller's employment; (v) gross negligence in the
performance of any employment duties with MMI, Purchaser or their
Affiliates defined as a "Principal Responsibility" or words of like
import in such Seller's employment agreement with MMI (such
employment duties called "Principal Duties"), Purchaser or their
Affiliates; (vi) any charge brought in a court of competent
jurisdiction or with an appropriate regulatory agency of
unlawful tortious conduct involving moral turpitude or unlawful
discrimination is made against such Seller which MMI or Purchaser
reasonably and in good faith believes to be credible, which charge
results in (x) substantial and material damage or harm to the
business of MMI, Purchaser, or their Affiliates; or (y) negative
publicity which embarrasses and materially damages the image or
reputation of MMI, Purchaser, or their Affiliates; or (vii) failure
or breach in performing or complying with any obligations under any
employment agreement between such Seller and MMI, Purchaser or any
of their Affiliates relating to any breach of his or her covenants
in his or her employment agreement [*], or repeated negligent acts
or omissions with respect to, or repeated incompetent performance
of, Principal Duties after such Seller has been given written
notice specifying the nature of the failure or breach and has
failed to correct or discontinue such failure or breach within
thirty (30) days after such notice.
A termination by Xxxxxxx or a Senior Manager "for cause"
shall mean the voluntary resignation by such Seller as a result of
(i) any failure by MMI to comply with the provisions of any
employment agreement concerning the payment of wages, salary or
other compensation, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is
remedied by MMI promptly after receipt of notice thereof given by
such Seller; or (ii) MMI's imposition of a requirement that such
Seller be permanently located at any office or location more than
25 miles distant from the current employment location of employee.
(b) NON-SOLICITATION OF EMPLOYEES OR AGENTS. Sellers each
hereby agree that, so long as such Seller is employed by MMI under
the Employment Agreement or otherwise, and for the lesser of (i) a
three (3) year period after their employment is terminated for any
reason, and (ii) the longest period of time allowed by law, such
Sellers shall not engage in soliciting, diverting, hiring or
inducing, or attempting to solicit, divert, hire or induce to
terminate his or her relationship with MMI or any such Affiliate,
including without limitation Purchaser and its Affiliates, directly
or indirectly, whether on such Seller's own behalf, or that of any
other person, business or entity, any employee or agent of MMI or
of any Affiliate, including without limitation Purchaser and its
Affiliates, who was employed by or under contract with MMI or any
Affiliate, including without limitation Purchaser and its
Affiliates, within three (3) years of the date of the termination
of such Seller's employment thereunder.
(c) NON-SOLICITATION OF CUSTOMERS AND REFERRAL SOURCES.
Sellers each hereby agree that so long as employed, and for the
lesser of (i) a three (3) year period after their employment is
terminated by either party hereto, for any reason, and (ii) the
longest period of time allowed by law, they shall not, either
directly or indirectly, engage in calling upon, soliciting,
diverting or inducing, or attempting to call upon, solicit, divert
or induce (i) to do business with a competitor of MMI except to the
extent such Business is outside the scope of the business of MMI,
provided that this subclause (i) shall not be deemed to modify,
impair or diminish a Seller's obligations concerning
confidentiality or records in such Seller's respective Employment
Agreement, or (ii) not to do business with MMI, or any of its
Affiliates, including without limitation Purchaser and its
Affiliates, and shall not, directly or indirectly, use any
non-public information relating to a customer or referral source of
MMI or its Affiliates, including without limitation Purchaser and
its Affiliates, obtained during their employment with MMI for
calling upon, diverting, soliciting or inducing, or attempting to
call upon, divert, solicit or induce, any customer or referral
source of MMI, or of any Affiliate, including without limitation
Purchaser and its Affiliates, including any individual or entity
which has done business with MMI or its Affiliates, including
without limitation Purchaser and its Affiliates, at any time within
the three (3) years preceding the termination of their employment
hereunder.
(d) ENFORCEMENT. Sellers each recognize that the provisions
of this Section 10.2 are vitally important to the continuing
welfare of MMI and its Affiliates and that money damages constitute
an inadequate remedy for any violation thereof. Accordingly, in the
event of any such violation by Sellers, MMI and its Affiliates, in
addition to any other remedies they may have, shall have the right
to institute and maintain a proceeding to compel specific
performance thereof or to issue an injunction restraining any
action by Sellers in violation of this Section 10.2, without the
necessity of posting a bond.
(e) SURVIVAL OF COVENANTS. Except as specifically set forth
in Section 10.2(a), the provisions of this Section 10.2 shall
survive termination of Sellers employment for any reason.
(f) EXCLUSIVITY. Sellers each hereby represent, covenant and
warrant that as of the date of this Agreement, he or she is bound
by no employment agreement or non-competition agreement with a
party other than MMI and Purchaser, or any other similar agreement,
except for this Agreement and the Employment Agreement.
Furthermore, during any period of employment with Purchaser, MMI or
otherwise, he or she shall not enter into, or otherwise become
bound by, any other employment agreement, consulting agreement or
non-competition agreement, or other similar agreement with any
other party other than Purchaser, MMI and their respective
Affiliates.
10.3 LIMITED INDEMNIFICATION BY SELLERS.
(a) INDEMNIFICATION BY SELLERS FOR UNDISCLOSED LIABILITIES
OR LOSS FOR SCHEDULED ITEMS. Subject to the limitations of the two
final sentences of Section 10.3(b), the Sellers hereby jointly and
severally indemnify and hold harmless Purchaser and MMI with
respect to any Indemnification Claim for Undisclosed Liabilities or
Loss for Liabilities Not Arising in the Ordinary Course of Business
resulting in an actual loss or any liability, provided that such
indemnification shall only be effective (i) for any Claim for
Undisclosed Liabilities or Loss from for Liabilities Not Arising in
the Ordinary Course of Business before the [*] year anniversary
of the date of Closing and (ii) to the extent the aggregate of all
Indemnification Claims exceeds $[*] (the "Indemnification Threshold
Amount"). Notwithstanding the foregoing, the aggregate of such
claims shall not be payable to the extent they exceed $[*] (the
"Indemnification Cap"), provided that regardless of the joint and
several nature of the foregoing indemnification, the aggregate of
such Claims for which an individual Seller shall be liable --
either to Purchaser or, after all Claims to Purchaser have been
satisfied, by way of a contribution claim from other individual
Sellers -- shall not exceed the respective amounts set forth next
to such Seller's name below:
Xxxxxxx -- $[*].
Xxxxxxx -- $[*].
Stashin -- $[*].
XxxxxxXxxxxx -- $[*].
(b) DEFINITION OF INDEMNIFICATION CLAIM. For the purposes of
this Section 10.3, "INDEMNIFICATION CLAIM FOR UNDISCLOSED
LIABILITIES OR LOSS FROM LIABILITIES NOT ARISING IN THE ORDINARY
COURSE OF BUSINESS" or "INDEMNIFICATION CLAIM" shall mean any
liabilities, losses, costs and expenses (after exhausting all
reasonable remedies available through insurance remedies in force)
incurred by MMI, Purchaser or their respective Affiliates which
arise as a result of any liabilities, demands, liens, damages,
claims, expenses, causes of action including without limitation
cross-claims, counterclaims, rights of set-off and recoupment,
suits, administrative action, agreements, damages, compensations,
demands, actions, losses, court costs and filing fees, attorneys'
and paralegals' fees and expenses of every kind and nature,
including, without limitation, those in law or in equity, arising
with respect to any liability, whether known or unknown, which does
not arise in the Ordinary Course of Business of MMI, (i) which is
not disclosed in the Financial Statements delivered in connection
herewith or the Disclosure Schedules attached hereto, or (ii) which
relates to a breach of representations or warranties. In the case
of Indemnification Claims arising out of a breach of a
representation or warranty of a Senior Manager, such
Indemnification Claim may be asserted against such Senior Manager
only to the extent that such Senior Manager knew such
representation or warranty was false, incomplete or misleading at
the time such representation or warranty was made. Notwithstanding
anything to the contrary in Sections 4.10, 4.17 and 4.20, an
Indemnification Claim arising therefrom may be asserted against a
Senior Manager only to the extent such Senior Manager had knowledge
of the matters giving rise to the Indemnification Claim.
(c) INDEMNITY WITH RESPECT TO BREACH, FRAUD OR VIOLATION OF
COVENANTS. Notwithstanding anything else in Section 10.3(a) - (b)
herein to the contrary, the Sellers further agree to jointly and
severally indemnify Purchaser and MMI without respect to any
Indemnification Threshold Amount or Indemnification Cap, for (i)
any breach of the covenants in this Section 10.2 of this Agreement,
(ii) any fraud on the part of MMI or of any Seller occurring at any
time, or (iii) any wilful, knowing or intentional breach of any
representation, warranty, or covenant of MMI or the Sellers
contained in this Agreement (it being understood that any other
breach of covenant (other than the covenants set forth in Section
10.2), representation, or warranty if not willful, knowing or
intentional, shall be covered by the indemnification contained in
Section 10.3(a)), provided that no Senior Manager shall have any
liability under this Subparagraph (c) unless such claims were
caused by such Senior Manager's own action or inaction or such
Senior Manager had knowledge of the events from which such claim
arose.
10.4 TAX LIABILITY OF XXXXXXX, SELLERS. To the extent Xxxxxxx has
income tax liability as a result of the income generated by MMI during 1998
prior to Closing, Purchaser agrees that it shall permit (if prior to
Closing) or cause MMI to pay on Xxxxxxx' behalf or fully reimburse Xxxxxxx,
either through a distribution prior to Closing or through such other method
as the parties shall reasonably agree, the full amount of such income tax
liability five (5) days prior to the date such tax is due, without penalty,
adjusted for tax distributions already paid by MMI which relate to
liability for taxes on income generated by MMI during 1998. Purchaser
agrees to fully reimburse Xxxxxxx for all additional income tax liability
to the extent it results from any reimbursement pursuant to this Section
10.4 for Xxxxxxx. Purchaser and Xxxxxxx agree that in determining the
amount of such distribution the parties shall assume that Xxxxxxx shall
receive a 5% per annum return by investing such funds during the period
from such distribution until income taxes are required to be paid without
penalty. At the option of Purchaser, the purchase of the Shares from Seller
shall be treated as an asset acquisition by Purchaser rather than as a
stock acquisition provided that to the extent there is additional tax
liability to the Sellers resulting from such tax treatment as an asset
acquisition rather than a stock acquisition, Purchaser and the Sellers
shall each pay one-half of such additional tax liability. Nothing in this
Agreement shall be deemed to require Purchaser or MMI to pay any late
penalties, fees or interest for or on behalf of the Sellers.
10.5 COVENANT REGARDING RECORD KEEPING BY PURCHASER. Regardless of
any merger, reorganization or liquidation of MMI after the Closing,
Purchaser shall maintain separate profit and loss statements and other
financial data and records reasonably necessary for determining Net Income
and After Tax Profits so long as the determination of MMI Net Income and
After Tax Profits is necessary for the determination of Additional
Compensation as provided herein.
10.6 RELEASE OF PERSONAL GUARANTEES. Purchaser and MMI shall use
all best efforts to cause all Personal Guarantees still in existence at the
Closing to be released within ninety (90) days thereof. If any such
Personal Guarantees are not released within ninety (90) days of the
Closing, Purchaser shall indemnify Sellers and hold them harmless for and
from any and all claims and any and all losses arising under such Personal
Guarantees for obligations under such Personal Guarantees arising because
of advances or obligations (including lease payments) arising after the
Closing.
10.7 RECOGNITION OF MMI'S PAST SUCCESS; MMI BOARD. Purchaser
recognizes that the success of MMI has been built upon the management
procedures and guidelines MMI has developed. In order to xxxxxx the
continuation of such successful strategies, Purchaser agrees that for five
(5) years after the date of Closing Purchaser shall, as sole shareholder of
MMI, cause Xxxxxxx and a designate of Xxxxxxx (which designate shall be
subject to Purchaser's reasonable approval) to be elected as a director of
MMI, except upon the occurrence of one of the following events ("Director
Termination Events"): (i) any event that would permit Purchaser, MMI or
their respective Affiliates to terminate Xxxxxxx pursuant to the
penultimate sentence of Section 10.2(a) regardless of whether Xxxxxxx is
still employed by MMI; or (ii) Xxxxxxx' resignation other than "for cause"
(as such term is defined in Section 10.2(a)). If one of the Director
Termination Events occurs or if Xxxxxxx dies, becomes disabled or otherwise
becomes disqualified to serve as director, at the end of Xxxxxxx' tenure as
a director, Purchaser agrees to cause a nominee of Xxxxxxx' director
designee (which nominee shall be subject to Purchaser's reasonable
approval) to be elected as a director of MMI in Xxxxxxx' place.
10.8 INTENT TO INVESTIGATE AN IPO. It is the present intention of
Purchaser to pursue an initial public offering at some point within the
next five years and Purchaser shall in good faith investigate the
feasibility of an IPO within such period, provided that such investigation
shall not bind Purchaser to go forward with any IPO if it decides in its
sole discretion that such IPO does not make sense in its sole business
judgment.
10.9 NAME. Purchaser agrees that for the first twelve months after
the Closing, MMI shall continue to use the name "Mortgage Market, Inc." and
other variations thereof, shall continue to take reasonable steps to
protect such trademark and tradename, consistent with past practices,
except that Purchaser may, after consultation with senior management and
with the prior approval of the Board of MMI, require MMI to use the phrases
"member of the Prism family," "a Prism lender," or similar phrases.
10.10 TERRITORIAL EXPANSION. For the 12 month period after the
Closing, Purchaser agrees that it shall not expand the mortgage origination
activities conducted by Purchaser or its other Affiliates, in the
Washington and Oregon markets, other than through the following venues
(called "Permissible Venues"): the Internet, computer mortgage or other
online mortgage lending networks or through comarketing or other affinity
relationships, existing branches of Purchaser and its Affiliates, new or
existing Net Branches of Purchaser's existing Affiliates, and Net Branches
of Affiliates that became Affiliates after the Closing, which Net Branches
were operated by such Affiliates at the commencement of such affiliation.
For the period from 12 to 60 months after the Closing, Purchaser shall not
expand such activities other than through Permissible Venues in the Oregon
market, if MMI is at least the [*] largest originator of mortgage loans
(based on volume) in such market. For the 60 months after Closing,
Purchaser shall not expand such activities in the Washington market other
than through Permissible Venues, (1) for the period 12 months through 18
months, if MMI is the [*] largest originator of mortgage loans (based on
volume) in the Washington market, (2) for the period from 18 months through
24 months, the [*] largest originator of mortgage loans (based on volume)
in the Washington market and (3) for the period from 24 months through 60
months, the [*] largest originator of mortgage loans (based on volume) in
the Washington market. The determination of market share ranking shall be
made during each respective period at the end of each calendar quarter
using market data on the retail origination for such state for the
immediately preceding quarter.
Notwithstanding the provision of the first sentence of Section
10.10 identifying mortgage origination activities through the Internet,
computer mortgage or other on-line mortgage lending network, during any
period in which the above provision limiting Purchaser's expansion into
Oregon or Washington is effective based on MMI's having met the foregoing
benchmarks established for market share, Purchaser covenants and agrees
that all loans originated on the Internet, computer mortgages or other
on-line mortgage lending network requiring personnel to effect a physical
origination in Oregon or Washington shall be originated by MMI. Upon the
failure of MMI to meet any of the foregoing benchmarks with respect to the
Oregon or Washington markets, all of Purchaser's obligations to MMI and the
Sellers under this Section 10.10 shall immediately and thereafter cease
with respect to such market.
10.11 MMI ACQUISITION AND EXPANSION. Purchaser agrees to act
reasonably in considering and, where it deems appropriate, approving
requests by MMI concerning expansion and agrees to respond to requests
regarding expansion within 30 days of Purchaser's request for approval
thereof, and Purchaser's approval of such expansion shall not be
unreasonably withheld.
10.12 RATES. Purchaser agrees to extend for loans originated by MMI
interest rates at least as favorable as those extended by Purchaser for
loans originated by Purchaser and its other Affiliates, subject to
adjustment for fees and differentials based
on geographic location.
10.13 FURTHER ASSURANCES. The parties hereto agree to execute such
further documents, instruments and consents and to perform such further
acts, as may be necessary to effect the Closing and the transactions
contemplated hereunder.
10.14 CONTRIBUTION OF CAPITAL; PAYMENTS TO XXX XXXXXXX. Immediately
following the Closing, Purchaser shall have contributed $40,000 to the
capital of MMI and shall cause MMI to pay $40,000 to Xxx Xxxxxxx, in
discharge of MMI's obligations to Xxx Xxxxxxx under Addendum C of Xxx
Xxxxxxx'x employment agreement with MMI.
ARTICLE 11
TERMINATION
11.1 CURE BY SELLERS UPON MATERIAL ADVERSE CHANGE. If prior to
Closing there has been a material adverse change in MMI, a material breach
of a representation, warranty or covenant of Sellers, Sellers shall have
thirty (30) days from the date of notice by Purchaser to cure or remedy the
situation which led to the notice. If Sellers and MMI are unable or
unwilling to cure or remedy the situation, Purchaser shall have the option
to pursue one of the following: (i) terminate this Agreement immediately in
which event the parties shall have no further obligation to consummate the
Closing, or (ii) waive such material adverse change, breach or
distribution, or pursue any other remedies available to such party at law
or equity; provided, however, that if and only if the material adverse
change was done with the intent to impair or prevent the Closing, Purchaser
may elect to consummate the Closing and adjust the Base Cash Price by the
full amount of the material adverse change or cost of curing the breach and
pursue any other remedies available to such party at law or equity.
11.2 OTHER TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual consent of Sellers and Purchaser;
(b) by either Sellers or Purchaser if the Closing Date or
Closing has not occurred by October 31, 1998 unless such delay in
the Closing Date or Closing is due to a failure to obtain an
approval for a federal or state regulating authority of a change of
control application related to this Agreement or caused by any act
or omission of the party attempting to affect such termination.
(c) by Purchaser, subject to the Sellers' right to cure and
subject to Section 11.1 if any condition imposed on Sellers (unless
waived by Purchaser) in Section 9.1 or 9.2 cannot be satisfied or
cured by October 31, 1998; or
(d) by MMI and the Sellers if any condition imposed on
Purchaser (unless waived by MMI) in Section 9.1 or 9.3 cannot be
satisfied by October 31, 1998.
Any such termination shall be effected by the party asserting such
termination notifying the other party hereto as set forth in Section 12.8
hereof. Notwithstanding the foregoing, all parties agree to act in good
faith to effect the transactions hereunder and reconcile and mitigate any
technical or nonmaterial noncompliance with the terms of this Agreement.
11.3 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 11.1 or 11.2, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of the
Purchaser, MMI or their respective directors and officers under this
Agreement except as set forth in Sections 8.1, 8.2, 12.1, 12.2, 12.3 and
12.16.
ARTICLE 12
MISCELLANEOUS
12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The covenants,
representations or warranties contained herein shall survive the Closing,
and any claims arising therefrom shall expire after [*] years from the
later of the date hereof or the date of Closing unless notified prior to
[*] ([*]) years from the date hereof as provided in Section 10.3, except
for breach of covenants set forth in Sections 10.1 or 10.2 or claims of
fraud or intentional, willful or knowing misrepresentation to the other
party until the applicable statute of limitation has expired. Nothing
contained in this Article shall affect the obligations of any party to
perform the agreements and covenants to be performed by such party
hereunder or in connection herewith either before or after the Closing.
12.2 EXPENSES. Purchaser and Sellers will each be solely
responsible for and have all of its own respective expenses, activities and
other advisors, incurred at any time in documenting, negotiating,
consummating or executing this Agreement and the transactions contemplated
thereby; provided that MMI shall pay an amount not in excess of $[*] for
the reasonable costs of Sellers' accountants, attorneys, and other advisors
and costs of obtaining government approvals and other consents as all other
costs incurred in connection with the consummation of the sale, any such
costs in excess of such amount to be borne by Sellers.
12.3 PRESS RELEASES; EMPLOYEE COMMUNICATIONS. Any press releases,
news releases or other communication issued or to be issued to the press,
the media or otherwise to the public or any communication to the employees
or customers of MMI by any of the parties hereunder shall first be reviewed
and approved in writing by both Purchaser and Xxxxxxx.
12.4 RIGHT OF OFFSET. To the extent any indemnification claim is
not paid on demand, after reasonable time for MMI's or Seller's
investigation and confirmation of such claim, Purchaser may offset
indemnification claims against any amount or claim due or owing to such
Seller by MMI or Purchaser.
12.5 WRITTEN AGREEMENT TO GOVERN. This Agreement, together with all
Exhibits, Schedules and other documents to be delivered pursuant hereto,
set forth the entire understanding and supersede all prior oral or written
agreements among the parties hereto relating to the subject matter
contained herein and all prior and contemporaneous discussions among the
parties hereto are merged herein. No party hereto shall be bound by any
definition, condition, representation, warranty, covenant or provision
other than as expressly stated in this Agreement or the Exhibits and other
documents to be delivered pursuant hereto, or as hereafter set forth in a
written instrument executed by such party or by a duly authorized
representative of such party.
12.6 SEVERABILITY. The parties hereto expressly agree that it is
not the intention of any party hereto to violate any public policy,
statutory or common law rules, regulations, treaties or decisions of any
government or agency thereof. If any provision of this Agreement is
judicially or administratively interpreted or construed as being in
violation of any such provision, such articles, sections, sentences, words,
clauses or combinations thereof shall be modified to the extent necessary
to make them enforceable or, if necessary, shall be inoperative, and the
remainder of this Agreement shall remain binding upon the parties hereto.
12.7 INJUNCTIVE REMEDY FOR BREACH. The parties agree that
irreparable damage could occur if any provision of this Agreement is not
performed in accordance with its specific terms or is otherwise breached.
The parties accordingly agree that the party not in breach shall be
entitled to injunction to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in addition to any other right
or remedy provided hereunder or at law or in equity.
12.8 NOTICES AND OTHER COMMUNICATIONS. All notices, demands or
requests provided for or permitted to be given pursuant to this Agreement
must be in writing. All notices, demands and requests shall be deemed to
have been properly served if given by personal delivery, or if transmitted
by telecopy, or if delivered to Federal Express or other reputable
overnight carrier for next business day delivery, charges billed to or
prepaid by shipper, or if deposited in the United States mail, registered
or certified with return receipt requested, proper postage prepaid,
addressed as follows:
If to MMI prior to the Closing, to: Mortgage Market, Inc.
0 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: 503/940-8821
With a copy to:
Xxxxx, Xxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxxxx Xxxxx
0000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Xx.
Facsimile No.: 503/273-2712
If to MMI after the Closing, to: c/o Prism Mortgage Company
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxx, Esq.
Facsimile No.: 312/494-0184
c/o Prism Mortgage Company
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile No.: 312/494-0184
If to Sellers prior to the Closing,
to: Xxxxxx X. Xxxxxxx
c/o Mortgage Market Inc.
0 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: 503/968-3178
If to Sellers after the Closing,
to: Xxxxxxx Xxxxxxx
c/o Mortgage Market, Inc.
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: 503/968-3178
Xxxxxxx Xxxxxxx
c/o Mortgage Market, Inc.
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: 503/968-3178
Xxxx XxxxxxXxxxxx
c/o Mortgage Market, Inc.
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: 503/968-3178
Xxxxxx X. Xxxxxxx
c/o Mortgage Market, Inc.
0 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxxx, Xxxxxx 00000
Facsimile No.: 03/968-3178
If to Purchaser before or after
Closing, to: Prism Mortgage Company
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Facsimile: 312/494-0184
Prism Mortgage Company
000 Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx Xxxxxx, Esq.
Facsimile: 312/494-0184
With a copy to: Xxxxxxx & Xxxxx
Suite 1800
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Each notice, demand or request shall be effective upon personal
delivery, or upon confirmation of receipt of the applicable telecopy, or
one (1) business day after delivery to a reputable overnight carrier in
accordance with the foregoing, or three (3) business days after the date on
which the same is deposited in the United States mail in accordance with
the foregoing. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall not
adversely impact the effectiveness of any such notice, demand or request.
Service by personal delivery upon Purchaser shall be valid only if
delivered personally to the President, Executive Vice President or General
Counsel of the Purchaser.
Any addressee may change its address for notices hereunder by
giving written notice in accordance with this Section.
12.9 COUNTERPARTS. This Agreement may be executed in multiple
counterparts and by the parties in separate counterpart, and shall become
effective when at least one counterpart has been signed by each party and
delivered personally or by facsimile machine to the other party. Each
counterpart shall constitute an original document, and all counterparts
taken together shall constitute one and the same document. The parties
intend that a facsimile signature shall have the same force and effect as
an original signature.
12.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
assigns.
12.11 FURTHER ASSURANCES. At any time on or after the closing on
the Closing Date, the parties hereto shall each perform such acts, execute
and deliver such instruments, assignments, endorsements and other documents
and do all such other things consistent with the terms of this Agreement as
may be reasonably necessary to accomplish the transaction contemplated in
this Agreement or otherwise carry out the purpose of this Agreement.
12.12 INTERPRETATION. The masculine, feminine or neuter pronouns
used herein shall be interpreted without regard to gender, and the use of
the singular or plural shall be deemed to include the other whenever the
context so requires. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or
affect the meaning of this Agreement. Unless otherwise expressly stated
herein, all references herein to sections and paragraphs are to sections
and paragraphs in this Agreement and all references herein to Schedules and
Exhibits are to Schedules and Exhibits to this Agreement. All references
herein to "including" shall mean "including, but not limited to".
12.13 SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred
to herein, whether or not attached hereto, are incorporated herein by such
reference as if fully set forth in the text hereof.
12.14 MODIFICATION. The parties to this Agreement may, by mutual
written consent executed by all of the parties hereto, modify or supplement
this Agreement.
12.15 WAIVER OF PROVISIONS. The failure in any one or more
instances of a party to insist upon performance of any of the terms,
covenants or conditions of this Agreement, to exercise any right or
privilege in this Agreement conferred, or the waiver by said party of any
breach of any of the terms, covenants or conditions of this Agreement,
shall not be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and remain in
full force and effect as if no such forbearance or waiver had occurred. No
waiver shall be effective unless it is in writing and signed by the waiving
party or an authorized representative of the waiving party. A breach of any
representation, warranty or covenant shall not be affected by the fact that
a more general or more specific representation, warranty or covenant was
not also breached.
12.16 ARBITRATION; LAW; JURISDICTION; WAIVER OF JURY
TRIAL.
(a) NEGOTIATION. EXCEPT FOR CONTROVERSIES, DISPUTES OR CLAIMS
RELATED TO OR BASED ON SELLERS' USE OF THE TRADEMARKS OR SELLERS' OR ANY
AFFILIATED PARTY'S COVENANT NOT TO COMPETE OR TO PROTECT TRADE SECRETS, FOR
WHICH PURCHASER OR MMI MAY SEEK INJUNCTIVE OR SUCH OTHER RELIEF AS SUCH
PARTY MAY DEEM APPROPRIATE, OR LITIGATION WITH CONSUMERS OR ANY
GOVERNMENTAL AGENCIES, NEITHER PARTY SHALL INSTITUTE ANY PROCEEDING IN ANY
COURT OR ADMINISTRATIVE AGENCY OR ANY ARBITRATION TO RESOLVE A DISPUTE
BETWEEN THE PARTIES BEFORE THAT PARTY HAS SOUGHT TO RESOLVE THE DISPUTE
THROUGH DIRECT NEGOTIATION WITH THE OTHER PARTY. IF THE DISPUTE IS NOT
RESOLVED WITHIN THREE WEEKS AFTER A DEMAND FOR DIRECT NEGOTIATION, THE
PARTIES SHALL THEN ATTEMPT TO RESOLVE THE DISPUTE THROUGH ARBITRATION AS
PROVIDED IN THIS SECTION.
(b) SCOPE OF ARBITRATION. EXCEPT FOR CONTROVERSIES, DISPUTES OR
CLAIMS RELATED TO OR BASED ON SELLERS' USE OF THE TRADEMARKS OR SELLERS' OR
ANY AFFILIATED PARTY'S COVENANT NOT TO COMPETE OR TO PROTECT TRADE SECRETS,
FOR WHICH PURCHASER OR MMI MAY SEEK INJUNCTIVE OR SUCH OTHER RELIEF AS SUCH
PARTY MAY DEEM APPROPRIATE, OR LITIGATION WITH CONSUMERS OR ANY
GOVERNMENTAL AGENCIES, ALL CONTROVERSIES, DISPUTES OR CLAIMS BETWEEN
PURCHASER AND SELLERS (AND ANY OWNERS, GUARANTORS, AFFILIATES AND EMPLOYEES
THEREOF, IF APPLICABLE) ARISING OUT OF OR RELATED TO:
(i) THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN PURCHASER
AND SELLERS THAT DO NOT HAVE THEIR OWN SPECIFIC ARBITRATION
PROVISIONS ("OTHER COVERED AGREEMENTS"), ANY DISPUTE BETWEEN
PURCHASER AND SELLERS OR ANY PROVISION OF ANY SUCH AGREEMENT; OR
(ii) THE VALIDITY OF THIS AGREEMENT OR ANY OTHER
COVERED AGREEMENT BETWEEN PURCHASER AND SELLERS OR
ANY PROVISION OF ANY SUCH AGREEMENT
WILL BE SUBMITTED FOR BINDING ARBITRATION TO THE CHICAGO, ILLINOIS OFFICE
OF AMERICAN ARBITRATION ASSOCIATION ON DEMAND OF PURCHASER OR SELLERS. SUCH
ARBITRATION PROCEEDING WILL BE CONDUCTED IN CHICAGO, ILLINOIS AND, EXCEPT
AS OTHERWISE PROVIDED IN THIS AGREEMENT, WILL BE HEARD BY ONE ARBITRATOR IN
ACCORDANCE WITH THE THEN CURRENT RULES OF THE AMERICAN ARBITRATION
ASSOCIATION. ALL MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE
FEDERAL ARBITRATION ACT (9 U.S.C. xx.xx. 1 ET SEQ.) AND NOT BY ANY STATE
ARBITRATION LAW.
THE DECISION AND AWARD OF THE ARBITRATOR SHALL BE BINDING AND
CONCLUSIVE UPON BOTH PURCHASER AND SELLERS, AND ENFORCEABLE IN ANY COURT OF
COMPETENT JURISDICTION. THE ARBITRATOR WILL HAVE THE RIGHT TO AWARD OR
INCLUDE IN THE AWARD ANY LAWFULLY APPROPRIATE RELIEF AND TO ASSESS COSTS OR
EXPENSES TO ONE OR BOTH PARTIES, PROVIDED THAT THE ARBITRATOR WILL NOT HAVE
THE RIGHT TO DECLARE ANY TRADEMARK GENERIC OR OTHERWISE INVALID.
PURCHASER AND SELLERS AGREE TO BE BOUND BY THE PROVISIONS OF ANY
LIMITATION ON THE PERIOD OF TIME IN WHICH CLAIMS MUST BE BROUGHT UNDER
APPLICABLE LAW OR THIS AGREEMENT, WHICHEVER EXPIRES EARLIER. PURCHASER AND
SELLERS FURTHER AGREE THAT, IN CONNECTION WITH ANY SUCH ARBITRATION
PROCEEDING, EACH MUST SUBMIT OR FILE ANY CLAIM WHICH WOULD CONSTITUTE A
COMPULSORY COUNTERCLAIM (AS DEFINED BY RULE 13 OF THE FEDERAL RULES OF
CIVIL PROCEDURE) (EXCEPT ONE THAT COULD BE FILED UNDER ANOTHER AGREEMENT
HAVING ITS OWN ARBITRATION AGREEMENT) WITHIN THE SAME PROCEEDING AS THE
CLAIM TO WHICH IT RELATES. ANY SUCH CLAIM WHICH IS NOT SUBMITTED OR FILED
AS DESCRIBED ABOVE WILL BE FOREVER BARRED.
EACH PARTY AGREES THAT ARBITRATION WILL BE CONDUCTED ON AN
INDIVIDUAL, NOT A CLASS-WIDE, BASIS, AND THAT AN ARBITRATION PROCEEDING
BETWEEN PURCHASER AND SELLERS MAY NOT BE CONSOLIDATED WITH ANY OTHER
ARBITRATION PROCEEDING BETWEEN PURCHASER OR SELLERS, AS APPLICABLE, AND ANY
OTHER PERSON, CORPORATION, LIMITED LIABILITY COMPANY OR PARTNERSHIP EXCEPT
BY THE AGREEMENT OF THE PARTIES, PROVIDED THAT PURCHASER OR SELLERS MAY
CONSOLIDATE ANY ARBITRATION PROCEEDING COMMENCED UNDER THIS SECTION 12 WITH
ANY ARBITRATION PROCEEDING COMMENCED BY PURCHASER OR SELLERS UNDER ANY
OTHER COVERED AGREEMENT EXECUTED IN CONNECTION HEREWITH.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION,
PURCHASER AND SELLERS SHALL EACH HAVE THE RIGHT IN A PROPER CASE TO OBTAIN
TEMPORARY RESTRAINING ORDERS AND TEMPORARY OR PRELIMINARY INJUNCTIVE RELIEF
FROM A COURT OF COMPETENT JURISDICTION; PROVIDED, HOWEVER, THAT PURCHASER
OR SELLERS MUST CONTEMPORANEOUSLY SUBMIT THE DISPUTE FOR ARBITRATION ON THE
MERITS AS PROVIDED HEREIN.
THE PROVISIONS OF THIS SECTION WILL CONTINUE IN FULL FORCE AND
EFFECT SUBSEQUENT TO AND NOTWITHSTANDING THE EXPIRATION OR TERMINATION OF
THIS AGREEMENT.
(c) GOVERNING LAW. ALL MATTERS RELATING TO ARBITRATION WILL BE
GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. xx.xx. 1 ET SEQ). EXCEPT
TO THE EXTENT GOVERNED BY THE FEDERAL ARBITRATION ACT, THE UNITED STATES
TRADEMARK ACT OF 1946 (XXXXXX ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR
OTHER FEDERAL LAW, THIS AGREEMENT AND ALL CLAIMS ARISING FROM THE
RELATIONSHIP HEREUNDER BETWEEN PURCHASER AND SELLERS WILL BE GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS AND THE UNITED STATES OF AMERICA WITHOUT
REGARD TO ITS CONFLICT OF LAWS PRINCIPLES.
(d) CONSENT TO JURISDICTION. EACH PARTY AGREES THAT THE OTHER PARTY
MAY INSTITUTE ANY ACTION AGAINST IT (WHICH IS NOT REQUIRED TO BE ARBITRATED
HEREUNDER OR UNDER ANOTHER ARBITRATION AGREEMENT IN ANY OTHER AGREEMENT) IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED IN THE CITY OF
CHICAGO, STATE OF ILLINOIS, AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF
SUCH COURTS AND WAIVES ANY OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION
OF OR VENUE IN SUCH COURTS.
(e) WAIVER OF JURY TRIAL. PURCHASER AND SELLERS IRREVOCABLY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR
IN EQUITY, BROUGHT BY EITHER OF THEM AGAINST THE OTHER.
12.17 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Closing are for the sole benefit of such
party and may be waived by such party in whole or in part to the extent
permitted to applicable law.
12.18 CONSTRUCTION. Each of the parties has been advised by counsel
and actively negotiated the terms of this Agreement. Accordingly, the fact
that this Agreement or any particular provision hereof was drafted by
counsel for any party shall not be considered in construing this Agreement.
IN WITNESS WHEREOF, Purchaser has caused this Agreement to be
executed on its behalf by its officer thereunto duly authorized and each
Seller has executed said Agreement, all on or as of the day and year first
above written.
PRISM MORTGAGE COMPANY,
an Illinois corporation
By:/s/ Xxxxx Xxxxxx
Its: Vice President
SELLERS:
/s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
---------------------
Xxxxxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxxx
--------------------
Xxxxxxx Xxxxxxx
/s/ Xxxx XxxxxxXxxxxx
---------------------
Xxxx XxxxxxXxxxxx
