Exhibit 10.3
AGREEMENT FOR THE PURCHASE AND SALE
OF THE CAPITAL STOCK OF
MORTGAGE MARKET, INC.
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission.
The omitted text has been marked with a bracketed asterisk ("[*]") and has
been filed separately with the Securities and Exchange Commission.
TABLE OF CONTENTS
PAGE
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ARTICLE 1
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE 2
Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 Agreement to Sell and Purchase . . . . . . . . . . . . . . . . . . . . .5
2.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE 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 Tag-Along Right. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.5 No Other Equity or Ownership Interest Implied. . . . . . . . . . . . . 13
ARTICLE 4
Representations and Warranties of Sellers . . . . . . . . . . . . . . . . . . 13
4.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . 13
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 . . . . . . . . . . . . . . . . . . . . . 15
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 . . . . . . . . . . . . . . . . . . 20
4.17 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.18 Litigation; Regulatory Examination . . . . . . . . . . . . . . . . . . 23
4.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.20 Schedule of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.21 Compliance with Law Including Consumer Law . . . . . . . . . . . . . . 24
4.22 Forms; Policies and Procedures.. . . . . . . . . . . . . . . . . . . . 24
4.23 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.24 Environmental Warranties . . . . . . . . . . . . . . . . . . . . . . . 25
i
TABLE OF CONTENTS (CONT'D.)
PAGE
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4.25 Payroll List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.26 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.27 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 26
4.28 Employee Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.29 Referral Sources; Investors. . . . . . . . . . . . . . . . . . . . . . 27
4.30 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.31 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.32 Personal Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.33 Brokerage Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.34 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.35 Business Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 5
Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . 28
5.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . . . . 28
5.2 No Restrictions; Authorization; Binding Effect; Approval of Change
of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.3 Noncontravention . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Litigation; Regulatory Examination . . . . . . . . . . . . . . . . . . 29
5.5 Financial Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.6 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 6
Covenants of Sellers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1 Conduct of Businesses; Notification of Breaches in Representations
or Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.2 Notification of Breach of Representation, Warranty or
Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.3 Forebearances by MMI . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.4 Good Faith Negotiations; Due Diligence . . . . . . . . . . . . . . . . 32
6.5 Other Acquisition Proposals. . . . . . . . . . . . . . . . . . . . . . 32
6.6 Intentionally Deleted. . . . . . . . . . . . . . . . . . . . . . . . . 33
6.7 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.8 Government Approval. . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.9 Additional Financial Statements. . . . . . . . . . . . . . . . . . . . 33
6.10 Supplements to Schedules . . . . . . . . . . . . . . . . . . . . . . . 33
6.11 Consents of Third Parties. . . . . . . . . . . . . . . . . . . . . . . 34
6.12 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.13 Guarantees and Collateral Pledges. . . . . . . . . . . . . . . . . . . 34
ARTICLE 7
Covenants of Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Notification of Breach of Warranty or Covenant . . . . . . . . . . . . 34
ii
TABLE OF CONTENTS (CONT'D.)
PAGE
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7.2 Good Faith Negotiations. . . . . . . . . . . . . . . . . . . . . . . . 35
7.3 Notification of Material Adverse Information . . . . . . . . . . . . . 35
7.4 [Deliberately Omitted] . . . . . . . . . . . . . . . . . . . . . . . . 35
7.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 8
Joint Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
8.3 Put Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.4 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 37
8.5 Other Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9
Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . . . . . 37
9.1 Mutual Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.2 Conditions to Obligations of Purchaser to Effect the Purchase. . . . . 37
9.3 Conditions to Obligations of Sellers to Effect the Closing . . . . . . 39
ARTICLE 10
Post Closing Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.1 Post Closing Covenants of Purchaser Regarding Financing
of MMI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.2 Covenant Not to Compete by Sellers . . . . . . . . . . . . . . . . . . 41
10.3 Limited Indemnification by Sellers . . . . . . . . . . . . . . . . . . 45
10.4 Tax Liability of Xxxxxxx, Sellers. . . . . . . . . . . . . . . . . . . 46
10.5 Covenant Regarding Record Keeping by Purchaser . . . . . . . . . . . . 47
10.6 Release of Personal Guarantees . . . . . . . . . . . . . . . . . . . . 47
10.7 Recognition of MMI's Past Success; MMI Board . . . . . . . . . . . . . 47
10.8 Intent to Investigate an IPO . . . . . . . . . . . . . . . . . . . . . 47
10.9 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.10 Territorial Expansion. . . . . . . . . . . . . . . . . . . . . . . . . 48
10.11 MMI Acquisition and Expansion. . . . . . . . . . . . . . . . . . . . . 48
10.12 Rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.13 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 49
10.14 Contribution of Capital; Payments to Xxx Xxxxxxx . . . . . . . . . . . 49
ARTICLE 11
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.1 Cure by Sellers Upon Material Adverse Change . . . . . . . . . . . . . 49
11.2 Other Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.3 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . 50
iii
TABLE OF CONTENTS (CONT'D.)
PAGE
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ARTICLE 12
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.1 Survival of Representations and Warranties . . . . . . . . . . . . . . 50
12.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.3 Press Releases; Employee Communications. . . . . . . . . . . . . . . . 51
12.4 Right of Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 Written Agreement to Govern. . . . . . . . . . . . . . . . . . . . . . 51
12.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.7 Injunctive Remedy for Breach . . . . . . . . . . . . . . . . . . . . . 51
12.8 Notices and Other Communications . . . . . . . . . . . . . . . . . . . 51
12.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.10 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 54
12.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.12 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.13 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . 54
12.14 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.15 Waiver of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.16 ARBITRATION; LAW; JURISDICTION; WAIVER OF JURY TRIAL . . . . . . . . . 55
12.17 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
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
iv
TABLE OF CONTENTS (CONT'D.)
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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
v
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
vi
DEFINITION OF TERMS (CONT'D.)
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
vii
DEFINITION OF TERMS (CONT'D.)
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
viii
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:
1
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.
2
"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) the ratio of the [*] MMI, Purchaser
or its Affiliates (including MMI) relative to the [*] 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 allocated to MMI based on the ratio of [*] 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 based on the [*] MMI
and funded by Purchaser or its Affiliates (including MMI) to the [*]
Purchaser or its Affiliates (including MMI) taking into account [*] compared
to [*]; (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.
3
By way of example, assume MMI [*] of $500 Million [*] of $200 Million
[*] of $300 Million, that mortgage banking operations [*] $250 Million [*]
$300 Million [*] and $500 Million [*] Assume further Purchaser and its
Affiliates [*] of $10 Million [*] $5 Million in [*] and $15 Million [*] $1
Million in hedging costs [*] $10 Million in mortgage banking operating
expenses [*] 3,000 loans [*].
MMI Mortgage Banking Net Income would equal [*].
($500 Million/$750 Million x $10 Million) + ($200 Million/$500 Million
x $5 Million)
[*] ($300 Million/$800 Million x $15 Million)
[*] [3,000/10,000 x $10 Million - [($1 Billion/$2.05 Billion x $1
Million]
[*] [$6,666,666.66 + 2,000,000 + $5,625,000] - [$3,000,000 - $487,804]
[*] $10,803,862
"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 the [*] of MMI Operations,
such as [*] shall not be a direct or indirect expense [*].
"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.
4
"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:
5
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
6
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.
- 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) [*] twelve-month period ending with
the final day of the calendar quarter immediately prior to such
IPO or Sale of Purchaser. 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 [*] the value of [*]
in the IPO or Sale of Purchaser [*] after the IPO or
immediately prior to the Sale [*] twelve month period ending
with the final day of the quarter immediately prior to such IPO
or Sale of Purchaser.
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
7
IPO had occurred on the final day of the quarter immediately
preceding such date, i.e., the [*] shall be calculated [*] the
final day of the quarter immediately preceding the date 15
months after the [*] for the twelve-month period ending on such
final day of the quarter preceding the date 15 months after the
[*].
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 [*] for the twelve-month period ending
on the final day of the quarter immediately preceding the IPO
[*], 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 [*] for
the twelve-month period ending on the final day of the quarter
immediately preceding the IPO [*], 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) [*] for the twelve-month period ending on the
final day of the last quarter ending within twenty-four (24)
months of the [*]. 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 [*] as of the final day of the
final quarter ending within 24 months of the date of [*] for
the 12-month period ending on the final day of the final
quarter ending within twenty-four (24) months of the [*].
8
By way of example:
EXAMPLE 1: If Purchaser completed an IPO prior to 24
months following the Closing and [*] for the twelve-month
period ending on the final day of the last quarter ending
within twenty-four (24) months of the [*] 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.
- 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) [*] for the twelve month period
ending with the final day of the calendar quarter immediately
prior to such IPO or Sale or Purchaser [*] for the twelve
month period ending with the final day of the calendar quarter
immediately prior to [*]. 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 [*] for the twelve month period ending
with the final day of the quarter immediately prior to such IPO
or Sale of Purchaser [*] for the twelve-month period ending
with the final day of the quarter immediately prior to such [*].
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
9
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
10
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.
11
(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 TAG-ALONG RIGHT. If at any time any sales of the stock of the
Purchaser (exclusive of the GEM Offering) either through one sale or a series
of sales, which in the aggregate exceeds 15% of the then existing outstanding
stock of Purchaser, the selling shareholder or Purchaser shall first give
written notice thereof (a "Tag-Along Notice") to Xxxxxxx specifying the
amount of stock to be sold, the percentage in the Purchaser that such stock
represents and the price and terms of such sale. Xxxxxxx may elect to
participate in any such transaction as an additional selling or transferring
shareholder on identical terms and conditions by delivering a written notice
thereof (a "Tag-Along Election Notice") to the Purchaser within fifteen (15)
days after Xxxxxxx'
12
receipt of such Tag-Along Notice, thereby electing to sell or transfer in
such transaction all or a portion of the vested Additional Consideration or
Additional Compensation of Xxxxxxx up to the amount computed as provided
below. Upon receipt of the Tag-Along Election Notice, the Purchaser shall
first compute the amount of stock in the Purchaser that would be represented
by the vested Additional Consideration or Additional Compensation of Xxxxxxx
expressed as a percentage (the "Vested Interest") upon the sale of all the
stock of the Purchaser. The maximum amount of stock to be transferred by
Xxxxxxx shall then be computed by multiplying (i) the total aggregate stock
which is proposed to be transferred in the transaction by (ii) a fraction,
the numerator of which is the Vested Interest of Xxxxxxx, and the denominator
of which is the aggregate percentage of the Purchaser owned by the selling
shareholder or shareholders and the Vested Interest of all Sellers electing
to participate in such transaction.
Immediately prior to such sale, the Purchaser shall issue Purchaser
Shares necessary to effect such sale or transfer by Xxxxxxx if he has made a
Tag-Along Election 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 Tag-Along Election 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 tag-along right 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
13
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
14
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
15
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
16
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
17
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.
18
(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.
19
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.
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(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;
21
(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,
22
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
23
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
24
(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,
25
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
26
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.
27
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
28
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
29
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);
30
(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
31
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
32
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
33
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.
34
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
35
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.
36
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.
37
(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
38
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
39
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 DIVIDED BY 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:
40
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 DIVIDED BY 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
41
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
42
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
43
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
44
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,
45
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
46
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.
47
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
48
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
49
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
50
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
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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
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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.: 503/968-3178
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
53
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
54
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
55
(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. Sections 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
56
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. Sections 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
57
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
58