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EXHIBIT 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of
December 10, 1998
by and among
CAPSTEAD MORTGAGE CORPORATION,
CAPSTEAD HOLDINGS, INC. AND CAPSTEAD INC.
and
HOMECOMINGS FINANCIAL NETWORK, INC.
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TABLE OF CONTENTS
ARTICLE I
SALE AND PURCHASE...................................................2
1.01 PURCHASE BY PURCHASER......................................2
1.02 EXCLUDED ASSETS............................................3
1.03 ASSUMED OBLIGATIONS........................................4
1.04 CLOSING....................................................5
1.05 PURCHASE PRICE.............................................6
1.06 ESCROWED PAYMENT...........................................9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CAPSTEAD COMPANIES
..................................................................10
2.01 ORGANIZATION..............................................10
2.02 SUBSIDIARIES OF THE COMPANY...............................10
2.03 GOOD STANDING.............................................10
2.04 VALIDITY OF AGREEMENT.....................................10
2.05 CAPITALIZATION............................................11
2.06 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK.................11
2.07 FINANCIAL STATEMENTS......................................12
2.08 SUBSEQUENT EVENTS.........................................13
2.09 CONTRACTS.................................................16
2.10 NO DEFAULT................................................18
2.11 PROPERTIES................................................19
2.12 REAL PROPERTY.............................................19
2.13 ENVIRONMENTAL.............................................20
2.14 QUALIFICATION AS LENDER...................................21
2.15 SERVICING. ..............................................21
2.16 ACCOUNTS RECEIVABLE.......................................21
2.17 BANK ACCOUNTS.............................................22
2.18 GUARANTEES................................................22
2.19 INSURANCE.................................................22
2.20 TAXES.....................................................22
2.21 EMPLOYEE BENEFITS.........................................27
2.22 COMPENSATION..............................................30
2.23 CERTAIN ADVANCES..........................................30
2.24 RELATED PARTIES...........................................30
2.25 LICENSES AND PERMITS......................................31
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2.26 PROPRIETARY RIGHTS........................................31
2.27 LABOR.....................................................32
2.28 COMPLIANCE WITH LAW.......................................32
2.29 LITIGATION................................................33
2.30 NO CONFLICT...............................................34
2.31 COPIES OF CERTAIN DOCUMENTS...............................34
2.32 UNDERLYING DOCUMENTS......................................34
2.33 BUSINESS OF THE COMPANY...................................34
2.34 BROKERS OR FINDERS........................................35
2.35 DISCLOSURE OF MATERIAL FACTS..............................35
2.36 FINANCIAL CONDITION.......................................35
2.37 EMPLOYEES.................................................36
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER........................36
3.01 ORGANIZATION..............................................36
3.02 VALIDITY OF AGREEMENT.....................................36
3.03 NO CONFLICT...............................................37
3.04 BROKERS OR FINDERS........................................37
3.05 BOARD ACTION..............................................37
ARTICLE IV
COVENANTS..........................................................37
4.01 CONDUCT OF BUSINESS.......................................37
4.02 NEGATIVE COVENANTS........................................38
4.03 PRESERVATION OF BUSINESS..................................38
4.04 UPDATING OF SCHEDULES.....................................38
4.05 ACCESS TO INFORMATION.....................................39
4.06 FULFILLMENT OF CONDITIONS AND COVENANTS...................39
4.07 PRESS RELEASES............................................39
4.08 THIRD PARTY CONSENTS......................................39
4.09 CERTAIN NOTIFICATIONS.....................................40
4.10 ANTITRUST MATTERS.........................................41
4.11 EMPLOYEE BENEFITS.........................................41
4.12 POST-CLOSING INFORMATION..................................43
4.13 ADMINISTRATION OF ACCOUNTS................................44
4.14 ASSUMPTION OF QUALIFICATION...............................44
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ARTICLE V
CONDITIONS TO OBLIGATIONS OF SELLERS...............................44
5.01 PERFORMANCE...............................................44
5.02 REPRESENTATIONS AND WARRANTIES............................45
5.03 LEGAL OPINION.............................................45
5.04 OFFICERS' CERTIFICATE.....................................45
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER.............................45
6.01 PERFORMANCE...............................................45
6.02 REPRESENTATIONS AND WARRANTIES............................45
6.03 MATERIAL ADVERSE EFFECT...................................46
6.04 LEGAL OPINION.............................................46
6.05 THIRD PARTY CONSENTS......................................46
6.06 DELIVERY OF BUSINESS RECORDS..............................46
6.07 EMPLOYMENT OF NEW HIRES...................................47
6.08 TERMINATION OF CONTRACTUAL ARRANGEMENTS...................47
6.09 OFFICERS' CERTIFICATES....................................47
6.10 RESERVED..................................................47
6.11 ADDITIONAL DOCUMENTS......................................47
6.12 ENVIRONMENTAL.............................................47
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF EACH OF THE PARTIES...................47
7.01 NO PROCEEDINGS............................................47
7.02 HART-SCOTT-RODINO ACT.....................................48
7.03 SERVICING PURCHASE AGREEMENT..............................48
7.04 TRANSITION SERVICES AGREEMENT.............................48
ARTICLE VIII
TERMINATION OF AGREEMENT...........................................48
8.01 TERMINATION...............................................48
8.02 EFFECT OF TERMINATION.....................................49
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ARTICLE IX
INDEMNIFICATION....................................................49
9.01 INDEMNIFIABLE CLAIMS......................................49
9.02 NOTICE OF CLAIM...........................................51
9.03 RIGHT OF OFFSET...........................................53
9.04 SURVIVAL..................................................53
9.05 TAX INDEMNIFICATION PAYMENTS..............................54
9.06 LIMITATION ON INDEMNITY...................................55
ARTICLE X
MISCELLANEOUS......................................................56
10.01 NOTICES...................................................56
10.02 ENTIRE AGREEMENT..........................................57
10.03 WAIVERS AND AMENDMENTS....................................57
10.04 CONFIDENTIALITY...........................................57
10.05 EXPENSES..................................................58
10.06 FURTHER ACTIONS...........................................58
10.07 SURVIVAL..................................................58
10.08 GOVERNING LAW.............................................58
10.09 ASSIGNMENT................................................58
10.10 VARIATIONS IN PRONOUNS....................................58
10.11 COUNTERPARTS..............................................58
10.12 SCHEDULES.................................................58
10.13 HEADINGS..................................................59
10.14 EXCLUSIVITY...............................................59
10.15 CONFIDENTIALITY AND NONCOMPETITION........................59
10.16 SEVERABILITY..............................................62
10.17 NO THIRD PARTY BENEFICIARIES..............................62
10.18 REMEDIES EXCLUSIVE........................................62
10.19 EQUITABLE REMEDIES........................................62
10.20 JOINT PREPARATION.........................................62
10.21 ATTORNEYS' FEES...........................................62
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of December
10, 1998, by and among CAPSTEAD INC., a Delaware corporation (the "Company"),
CAPSTEAD HOLDINGS, INC., a Delaware corporation ("Holdings" and, together with
the Company, the "Sellers"), and CAPSTEAD MORTGAGE CORPORATION, a Maryland
corporation ("CMC" and, together with Holdings and the Company, collectively the
"Capstead Companies" and each individually a "Capstead Company"), and
HOMECOMINGS FINANCIAL NETWORK, INC., a Delaware corporation ("Purchaser").
RECITALS
A. The authorized capital stock of the Company consists solely of 20,000
shares of common stock, par value $0.01 per share, of which 13,252 shares (the
"Shares") are issued and outstanding (exclusive of any treasury shares). All of
the Shares are owned by Holdings.
B. The Company is in the business of servicing and originating
residential mortgage loans and is the primary operator of the Business.
C. The parties believe that it is in their respective best interests for
Purchaser to acquire the Business by purchasing the Purchased Assets subject to
the Assumed Obligations (each as defined herein), subject to the terms and
conditions set forth in this Agreement.
D. The Company is entering into an asset purchase and sale agreement with
GMAC Mortgage Corporation ("GMACMC") for the sale of all or substantially all of
the Company's mortgage servicing rights and certain related assets and
liabilities (as set forth therein), a copy of which is attached hereto as
Exhibit I (the "Servicing Purchase Agreement").
E. For purposes of this Agreement, capitalized terms used herein and not
otherwise expressly defined herein shall have the respective meanings specified
or referred to in Appendix I attached hereto.
THEREFORE, the parties agree as follows:
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ARTICLE I
SALE AND PURCHASE
1.01 PURCHASE BY PURCHASER. Subject to the terms and conditions set forth
in this Agreement, other than Excluded Assets (as defined in Section 1.02
below), Purchaser agrees to purchase from the Sellers, and the Sellers agree to
sell, transfer and convey to Purchaser, at the Closing (as defined below) all of
the Sellers' right, title and interest in and to the Business and all the
properties, assets and rights of whatever kind and description, tangible or
intangible, real, personal or mixed, and wherever located, which are used or
held for use in, related to, or associated with, directly or indirectly (in
whole or in part), the Sellers' operation of the Business, including, without
limitation, all of Sellers' good will with respect to the Business, and all of
the following assets (collectively, the "Purchased Assets"):
(a) All leases of real property occupied by the Sellers in connection
with the Business as specified on Schedule 1.01(a) (collectively, the "Real
Property Leases");
(b) All office supplies used in connection with the Business;
(c) All machinery, equipment (including, without limitation, computer
equipment, telephonic systems and other communication and information systems),
fixtures and office furniture, vehicles and other tangible personal property
owned or leased by the Sellers and used or held for use in, related to, or
associated with, directly or indirectly (in whole or in part), the Sellers'
operation of the Business (collectively, the "Equipment");
(d) All books of account, records, files, invoices, customer lists,
supplier lists and other data used or held for use in, related to, or associated
with, directly or indirectly (in whole or in part), the Sellers' operation of
the Business;
(e) All rights under, and interest in, the Contracts listed on
Schedule 1.01(e) including, without limitation, the Capstead Inc. Retention
Incentive Plan dated as of September 24, 1998, and the Severance Benefits
Agreement dated as of September 25, 1998 between the Company and Christopher T.
Gilson (the "Employment Agreements") (collectively, including any and all
amendments and supplements disclosed on such Schedule, the "Assumed Contracts");
(f) All right, title and interest with respect to all Assumed
Obligations (as defined in Section 1.03) (including, without limitation,
refunds, claims thereto, security deposits, and any other claims thereunder);
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(g) All sales literature, promotional literature and other selling
material used or held for use in, related to, or associated with, directly or
indirectly (in whole or in part), the Sellers' operation of the Business;
(h) All intellectual property, including, without limitation, patents,
patent applications and patent rights to inventions, if any, owned, in-house
developed or licensed software (including, without limitation, all software
listed in Schedule 1.01(h)), customized modifications to software including
modifications to the servicing or default management software system (including,
without limitation, modifications to LSAMS), trademarks, trade names, service
marks and applications therefor, copyrights, registrations and applications
therefor, processes, products, apparatus, trade secrets and know-how used or
held for use in, related to, or associated with, directly or indirectly (in
whole or in part), the Sellers' operation of the Business; provided, however,
that Purchaser acknowledges and agrees that it shall not purchase hereby or
otherwise gain any interest in any rights to the "Capstead" name or trademark,
except as permitted in the Transition Services Agreement (as defined in Section
7.04);
(i) All government and other permits, licenses, approvals,
certificates of inspection, filings, franchises and other authorizations
pertaining to the Business or the Sellers' operation of the Business, which are
assignable to Purchaser, except as set forth on Schedule 1.01(i);
(j) All accounts receivable and prepaid expenses related to, or
associated with, directly or indirectly (in whole or in part), the operation of
the Business;
(k) All pending applications for residential mortgage loans; and
(l) All other property and rights, tangible and intangible, real,
personal or mixed, including, without limitation, Confidential Information,
which are used or held for use in, related to, or associated with, directly or
indirectly (in whole or in part), the Sellers' operation of the Business,
wherever located and regardless of whether (1) reflected on the Sellers' books
and records, or (2) enumerated in clauses (a) through (k), above, or on the
Schedules referred to in clauses (a) through (k), above.
1.02 EXCLUDED ASSETS. Anything herein to the contrary notwithstanding, the
Sellers are not selling to Purchaser, and Purchaser is not purchasing, any asset
sold to GMACMC pursuant to the Servicing Purchase Agreement or any of the assets
listed on Schedule 1.02 (the "Excluded Assets"). Purchaser may, at any time
prior to the commencement of the fifth calendar day before the Closing Date (but
excluding for the purpose of counting such number of calendar days the calendar
day on which the Closing occurs), at Purchaser's sole discretion, revise and
deliver to Sellers Schedule 1.02 to add to such Schedule any other assets which
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would have been included in the Purchased Assets but for the Purchaser's
determination that it is not in Purchaser's best interest to purchase such
asset; provided, however, that such five-day notice limitation shall not apply
with respect to (i) any assets disclosed or modified in a Permitted Supplement
to the Schedules delivered by the Sellers to Purchaser during such five-day
period, or (ii) if the Closing for any reason occurs prior to the Scheduled
Closing Date, any assets disclosed or modified on a Permitted Supplement (as
defined in Section 4.04) to the Schedules delivered by Sellers to Buyer at any
time prior to such Closing Date. Purchaser shall not be obligated to purchase or
assume, and shall not purchase or assume, any of such assets that are added to
Schedule 1.02 by Purchaser before the Closing Date as permitted by the
immediately preceding sentence, and all of such assets shall be considered
Excluded Assets hereunder and shall not be considered Purchased Assets hereunder
for any purpose whatsoever. The revision of Schedule 1.02 pursuant to this
Section 1.02 shall not result in any adjustment (as contemplated by Section
1.05(e)) to the Purchase Price (as defined in Section 1.05(a) below).
1.03 ASSUMED OBLIGATIONS. Upon the sale and purchase of the Purchased
Assets, Purchaser shall assume and agree to pay or discharge when due in
accordance with their respective terms, all Liabilities and obligations of each
Seller pursuant to the Assumed Contracts to the extent they are accrued and
outstanding at the time of the Closing (subject to Section 1.05(d)) or become
due on or after the Closing (the "Assumed Obligations"). Except for the Assumed
Obligations, Purchaser shall not assume, become responsible for, or incur, any
Liability or Contract of any Capstead Company of any nature whatsoever, whether
known or unknown, contingent or otherwise (the "Retained Liabilities"),
including, without limitation, the Retained Liabilities listed on Schedule 1.03.
Each of the Capstead Companies shall continue to be liable for and shall
appropriately discharge its respective obligations with respect to the Retained
Liabilities and any other obligations which are not Assumed Obligations.
Without limiting the foregoing, in no event shall Purchaser assume, or
otherwise be liable in any respect whatsoever with respect to the following
Retained Liabilities:
(i) any Liabilities incurred by any of the Capstead Companies in
connection with this Agreement and the transactions provided for herein,
including, without limitation, attorneys' and accountants' fees, and
expenses pertaining to the performance by any of the Capstead Companies of
their obligations hereunder;
(ii) except as otherwise set forth in Section 2.20(b)(iii) or
Section 9.05(b)(ii), any Taxes of the Capstead Companies (whether relating
to periods before or after the transactions contemplated in this Agreement
or incurred by any Capstead Company in connection with this Agreement and
the transactions provided for herein), including, without limitation, any
Liability for Taxes arising out of the inclusion of any
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Capstead Company in any group filing consolidated, combined or unitary tax
returns or arising out of any transferee Liability;
(iii) any Liabilities of any Capstead Company to its dissenting
shareholders, if any, under any applicable law;
(iv) any Liabilities of any Capstead Company with respect to any
options, warrants, agreements or convertible or other rights to acquire any
shares of its capital stock of any class;
(v) any Liabilities of any Capstead Company in connection with or
relating to all Proceedings, assessments and judgments, costs, losses,
Liabilities, damages, deficiencies and expenses (whether or not arising out
of third-party claims), including, without limitation, interest, penalties,
attorneys' and accountants' fees and out-of-pocket expenses and all amounts
paid in investigation, defense or settlement of any of the foregoing; and
(vi) any Liabilities of any Capstead Company with respect to or
arising out of the Capstead Litigation.
The assumption of the Assumed Obligations by Purchaser hereunder shall not
enlarge any rights of third parties under Contracts with Purchaser or any
Capstead Company, and nothing herein shall prevent any party from contesting in
good faith with any third party any of said Liabilities.
1.04 CLOSING.
(a) The sale and purchase of the Purchased Assets and the assumption
of the Assumed Obligations (the "Closing") shall occur at the offices of
Andrews & Kurth L.L.P., 1717 Main Street, Suite 3700, Dallas, Texas at
10:00 AM, Dallas time, on the date which is three Business Days following
the later of (i) the date of expiration or termination of any waiting
period or extension thereof which may be applicable to the purchase of the
Business contemplated under this Agreement pursuant to the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"),
or (ii) the date on which all other conditions set forth herein have been
fulfilled or waived, but in no event sooner than December 31, 1998 (herein,
the "Scheduled Closing Date"), or at such other place or such other date
and time as may be mutually agreed to by the parties in accordance with
this Agreement (the date of the Closing being the "Closing Date").
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(b) On the Closing Date, the following actions shall be taken:
(i) Purchaser shall pay the Closing Payment (as defined in
Section 1.05(b)) by wire transfer, payable to the Sellers or their agent in
immediately available funds to an account designated to Purchaser by the
Sellers in writing as set forth in Schedule 1.04(b) (and Sellers shall
allocate the Closing Payment, and all other payments made by the Purchaser
jointly to Sellers hereunder, in a manner consistent with Section
2.20(b)(iv));
(ii) The Purchaser shall deposit the Escrowed Payment with the
Escrow Agent (each as defined in Section 1.05(c));
(iii) The Sellers shall deliver, or caused to be delivered to
Purchaser (or otherwise surrender possession to Purchaser of), all of the
Purchased Assets, together with executed Consents, assignments, including,
without limitation, assignments of the Real Property Leases and related
estoppel certificates, full warranty bills of sale, warranty deeds and
other instruments of conveyance in form and substance reasonably
satisfactory to Purchaser, sufficient to convey to Purchaser good and valid
title to such Purchased Assets, free and clear of all Liens;
(iv) The Sellers and Purchaser shall execute and deliver such
bills of sale, assignments and assignment and assumption agreements as are
appropriate to transfer the Purchased Assets and the Assumed Obligations to
Purchaser; and
(v) Each party shall execute and deliver such other documents or
certificates required under this Agreement or reasonably requested by the
other parties to further evidence the consummation of the transactions
contemplated under this Agreement.
1.05 PURCHASE PRICE.
(a) The aggregate purchase price (the "Purchase Price"), subject to
adjustment pursuant to subparagraph (e) below, shall be an amount equal to the
sum of (i) the Closing Payment (as defined below), (ii) the Pipeline Loan
Payment (as defined below) and (iii) the Escrowed Payment (as defined below).
(b) (i) The portion of the Purchase Price payable to the Sellers at
the Closing shall be $42,673,855, as calculated in Schedule 1.05(b) (the
"Closing Payment"); and
(ii) the value of the Pipeline Loans as of the Closing Date
("Pipeline Loan Valuation Amount") shall be determined and paid as provided in
Section 1.05(f) hereto.
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(c) The portion of the Purchase Price payable to First Union National
Bank (the "Escrow Agent") at the Closing shall be $1,500,000 (the "Escrowed
Payment").
(d) All operating expenses and fees applicable to the Assumed
Contracts accrued or prepaid prior to the Closing Date, including, without
limitation, rents, license fees, utility payments, personal property taxes, and
any annual operation assessments (e.g., common area maintenance) relating to the
Purchased Assets, shall be equitably prorated between the parties to the extent
not otherwise provided for purposes of the September 30 Listing (as defined
below). Such payment shall be made by Purchaser to Sellers, or by Sellers to
Purchaser, as the case may be, within ninety (90) days following the Closing
based on a schedule prepared by Purchaser and Sellers in good faith promptly
after the Closing.
(e) Within ninety (90) calendar days following the Closing Date,
Purchaser shall deliver to Sellers true and complete copies of an acquisition
audit of the Purchased Assets and Assumed Obligations as of the Closing Date
(the "Carve Out Audit"). The Carve Out Audit shall be prepared by
PricewaterhouseCoopers LLP (which preparation shall be paid for by Purchaser),
in a form substantially comparable to Exhibit II hereto, which lists, and sets
forth values as of September 30, 1998 for, the Purchased Assets and Assumed
Obligations (the "September 30 Listing") and is prepared in accordance with
generally accepted accounting principles, applied on a consistent basis with
prior periods ("GAAP").
The "Adjustment Amount" (which may be a positive or negative number) shall
be calculated based on the Carve Out Audit and shall be an amount equal to (a)
the amount of any net increase or decrease in the book value of the Purchased
Assets and Assumed Obligations, minus (b) the amount of any increase in the
Purchased Assets attributable to the items listed on Schedule 1.05(e) hereto,
each for the period between September 30, 1998 and the Closing Date. For
purposes of determining the Adjustment Amount, the September 30, 1998 value of
the assets and Liabilities of the Business will be the values set forth in the
September 30 Listing, and the Closing Date values of the assets and Liabilities
will be the values set forth in the Carve Out Audit.
The Adjustment Amount shall be calculated by Purchaser, and Purchaser shall
notify the Sellers of the Adjustment Amount, within 14 calendar days of the
delivery of the Carve Out Audit to Purchaser. Subject to the following
paragraph, the Sellers shall have a period of 14 calendar days from the date of
notification to review the Adjustment Amount as determined by Purchaser. If the
Sellers agree with Purchaser as to the Adjustment Amount, then on the Business
Day immediately following the end of such 14-calendar day period (i) if the
Adjustment Amount is positive, Purchaser shall remit by wire transfer to the
Sellers (or their successors) the Adjustment Amount, and (ii) if the Adjustment
Amount is negative, at the option of the Purchaser, (A) the Sellers shall remit
to Purchaser by wire transfer the Adjustment Amount, or (B) the Purchaser shall
be entitled to claim against the funds held
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pursuant to the Escrow Agreement up to the Adjustment Amount (to the extent that
such funds are sufficient to satisfy such obligation, with the Sellers being
responsible to pay any deficiency within the timeframe contemplated by this
Section 1.05(e)).
If the Sellers do not agree with the Adjustment Amount calculated by the
Purchaser, the Sellers shall deliver to Purchaser, within 14 calendar days
following notification of the Sellers by Purchaser of the Adjustment Amount,
written notice containing specific objections (prepared in good faith) to the
Adjustment Amount as determined by Purchaser as well as the amount of the
Adjustment Amount as estimated by Sellers based upon such specific objections.
To the extent that there is no dispute as to any portion of the Adjustment
Amount, Purchaser or Sellers shall follow the provisions of the immediately
preceding paragraph with respect to such undisputed portion. Once the Sellers
give such notice of objection, a 10-day period shall commence whereby the
parties hereto agree to work to resolve such dispute. After such 10- day period,
any issues still in dispute will be submitted to KPMG Peat Marwick, certified
public accountants (the "Accountants"), for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party will furnish to the
Accountants such workpapers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party
or its subsidiaries (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (ii)
the determination by the Accountants, as set forth in a notice delivered to both
parties by the Accountants, will be binding and conclusive on the parties, each
of whom shall also have the right to enter a judgment upon the determination in
any court having jurisdiction; and (iii) Purchaser and Sellers will each bear
50% of the fees of the Accountants for such determination.
No interest will be due on any Adjustment Amount paid in accordance with
the provisions hereof; provided, however, that interest shall accrue daily at
the Prime Rate published in the Wall Street Journal as of the first date of the
interest period for any period following the date on which the payment of the
Adjustment Amount is required to be made (which, with respect to disputed
amounts submitted to the Accountants, shall be the date following the date of
resolution by the Accountants).
(f) Within forty-five (45) calendar days following the Closing Date,
Purchaser shall deliver to Sellers true and complete copies of its determination
of the Pipeline Loan Valuation Amount as of the Closing Date. The Pipeline Loan
Valuation Amount shall be prepared by Purchaser in a manner consistent with the
requirements of Schedule 1.05(f).
Subject to the following paragraph, the Sellers shall have a period of
fourteen (14) calendar days from the date of notification to review the Pipeline
Loan Valuation Amount as determined by Purchaser. As soon as the Sellers agree
with Purchaser as to the Pipeline Loan Valuation Amount (in whole or part), then
on the Business Day immediately following such
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agreement Purchaser shall remit by wire transfer to the Sellers (or their
successors) the agreed portion of the Pipeline Loan Valuation Amount.
If the Sellers do not agree with the Pipeline Loan Valuation Amount
calculated by the Purchaser, the Sellers shall deliver to Purchaser, within 14
calendar days following notification of the Sellers by Purchaser of the Pipeline
Loan Valuation Amount, written notice containing specific objections (prepared
in good faith) to the Pipeline Loan Valuation Amount as determined by Purchaser
as well as the amount of the Pipeline Loan Valuation Amount as estimated by
Sellers based upon such specific objections. To the extent that there is no
dispute as to any portion of the Pipeline Loan Valuation Amount, Purchaser shall
follow the provisions of the immediately preceding paragraph with respect to
such undisputed portion. Once the Sellers give such notice of objection, a
10-day period shall commence whereby the parties hereto agree to work to resolve
such dispute. After such 10-day period, any issues still in dispute will be
submitted to the Accountants for resolution. If issues in dispute are submitted
to the Accountants for resolution, (i) each party will furnish to the
Accountants such workpapers and other documents and information relating to the
disputed issues as the Accountants may request and are available to that party
or its subsidiaries (or its independent public accountants), and will be
afforded the opportunity to present to the Accountants any material relating to
the determination and to discuss the determination with the Accountants; (ii)
the determination by the Accountants, as set forth in a notice delivered to all
parties by the Accountants, will be binding and conclusive on the parties, each
of whom shall also have the right to enter a judgment upon the determination in
any court having jurisdiction; and (iii) Purchaser and Sellers will each bear
50% of the fees of the Accountants for such determination.
No interest will be due on any Pipeline Loan Valuation Amount paid in
accordance with the provisions hereof; provided, however, that interest shall
accrue daily at the Prime Rate published in the Wall Street Journal as of the
first date of the interest period for any period following the date on which the
payment of the Pipeline Loan Valuation Amount is required to be made (which,
with respect to disputed amounts submitted to the Accountants, shall be the date
following the date of resolution by the Accountants).
1.06 ESCROWED PAYMENT. The Escrowed Payment will be administered in
accordance with the provisions of an escrow agreement (the "Escrow Agreement")
substantially in the form attached as Exhibit III hereto.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CAPSTEAD COMPANIES
Each of the Capstead Companies, jointly and severally, represent and
warrant to Purchaser, as of the date hereof and hereafter through the Closing
Date, as follows:
2.01 ORGANIZATION. Each of the Company and Holdings is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. CMC
is a corporation duly organized, validly existing and in good standing under the
laws of Maryland. Each Seller has all requisite corporate power and authority to
own, lease and operate its properties and assets in the manner in which such
properties and assets are now owned, leased and operated and to carry on the
business in which it is now engaged. Prior to the date hereof, each of the
Sellers has delivered or made available to Purchaser true and complete copies of
its Certificate of Incorporation and its by-laws, as currently in effect.
2.02 SUBSIDIARIES OF THE COMPANY. The Company does not own any equity
interest, directly or indirectly, in any corporation, partnership, joint
venture, firm or other Person.
2.03 GOOD STANDING. Each of the Sellers is qualified to transact business
and is in good standing as a foreign corporation in each state or jurisdiction
in which it is required to be so qualified. Schedule 2.03 sets forth the states
in which each of the Sellers is qualified. There is no other jurisdiction in
which the ownership, leasing, licensing or use of property or assets by each of
the Sellers or the conduct of their respective businesses makes such
qualification necessary, and where the failure to be so qualified would have a
Material Adverse Effect with respect to the Sellers or the Business.
2.04 VALIDITY OF AGREEMENT.
(a) Each Capstead Company has full power and authority to execute and
deliver this Agreement and all of the other Contracts and documents referred to
herein, executed in connection herewith or contemplated hereby to which such
Capstead Company is a party (all other Contracts and documents referred to
herein, executed in connection herewith or contemplated hereby, including,
without limitation, the Servicing Purchase Agreement, are herein referred to
collectively as the "Related Agreements") and this Agreement constitutes, and
the Related Agreements, when executed and delivered, will constitute, the legal,
valid and binding obligations of each Capstead Company which is a party thereto,
enforceable against each of them in accordance with their respective terms. Each
Capstead Company's execution and delivery of this Agreement and the Related
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by the board of
directors (and, if necessary, stockholders) of such Capstead Company and any
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other vote or corporate Consent necessary for due authorization and, except as
set forth in Schedule 2.04, such execution and delivery, and the consummation of
such transactions, does not require the Consent of any other Person other than
such as may be required under the HSR Act.
(b) Each Capstead Company has the right and power to execute this
Agreement and each Related Agreement to which it is a party, and each Seller has
the right and power to sell, transfer and assign the Purchased Assets being
sold, transferred or assigned by it pursuant to this Agreement or such Related
Agreement.
2.05 CAPITALIZATION.
(a) None of the Company's capital stock has been issued in violation
of any federal or state law. The authorized capital stock of the Company
consists of 20,000 shares of common stock, $0.01 par value, of which 13,252
shares are duly and validly issued, outstanding, fully paid and non-assessable
(excluding treasury shares) and of which 6,748 shares are authorized but
unissued.
(b) Each Share and each outstanding share of capital stock of each of
the Sellers is validly authorized and issued, fully paid, nonassessable and free
of preemptive rights.
(c) Holdings owns of record and beneficially all of the Shares as set
forth in Recital A and Section 2.05(a) of this Agreement free and clear of any
Lien, including, without limitation, any Contracts or other rights of any
character whatsoever granted to any Person.
(d) The authorized capital stock of Holdings consists of (i) 100,000
shares of Class A Common Stock, $0.01 par value, (ii) 100,000 shares of Class B
Common Stock, $0.01 par value, and (iii) 100,000 shares of Class A Preferred
Stock, $0.01 par value. CMC owns of record and beneficially 18,857 shares of the
Class A Preferred Stock of Holdings; approximately 265 shares of Class A Common
Stock of Holdings are held by approximately 27 individuals. Such shares of Class
A Common Stock outstanding may change only due to repurchases of such stock by
Holdings in the event of termination of employment of such individuals. No other
shares of Holdings are outstanding, and no shares of the Class B Common Stock of
Holdings have been issued.
2.06 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth on
Schedule 2.06 to this Agreement, the Company does not have any commitment or
obligation, either firm or conditional, to issue, deliver or sell, under any
offer, subscription, stock option Contract, stock bonus Contract, stock purchase
plan, incentive compensation plan, warrant, call, conversion right or otherwise,
any shares of its capital stock or other securities. No
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Capstead Company has any commitment or obligation, either firm or conditional,
to issue, deliver or sell, under any offer, subscription, stock option Contract,
stock bonus Contract, stock purchase plan, warrant, call, conversion right or
otherwise, with respect to any of the Shares, except as specifically described
in Section 4.11. There are no voting agreements, trusts, proxies or other
Contracts or instruments with respect to the voting of the Company's capital
stock to which any Capstead Company is a party. There are no other equity
securities of any class of the Company issued, reserved for issuance or
outstanding.
2.07 FINANCIAL STATEMENTS.
(a) Attached hereto as Appendix II is a true and complete copy of
audited financial statements of the Company for the years ended December 31,
1997 and 1996 (the "Year End Financial Statements"). The Year End Financial
Statements include audited balance sheets of the Company as of December 31, 1997
and 1996 (and notes thereto) (such 1997 balance sheet being termed the "1997
Balance Sheet"), together with related statements of operations, changes in
stockholder's equity and cash flows of the Company (and notes thereto) for each
of such periods and together with the report thereon of Ernst & Young LLP,
certified independent public accountants. The Year End Financial Statements
fairly present in accordance with GAAP the financial position and the results of
operations of the Company for the periods therein identified.
(b) Attached hereto as Appendix III is a true and complete copy of
unaudited financial statements of the Company for the nine months ended
September 30, 1998 (the "1998 Financial Statements"). The 1998 Financial
Statements include an unaudited balance sheet of the Company as of September 30,
1998 (the "1998 Balance Sheet"). The 1998 Financial Statements fairly present in
accordance with GAAP the financial position and the results of operations of the
Company for the period therein identified.
(c) Promptly following the end of each calendar month after the date
of execution and delivery of this Agreement which is completed prior to the
Closing Date, the Sellers shall deliver to Purchaser the "Month End Management
Report" prepared by the Company with respect to such month (the first of which
shall in any event cover each calendar month completed since September 30, 1998)
in the ordinary and usual course of business consistent with past practices,
which report shall include (i) a balance sheet of the Company as of the end of
such month prepared in a manner consistent with, and in a format comparable to,
the 1998 Balance Sheet (a "Monthly Balance Sheet"), and (ii) a report of the
results of operations for such month (the "Monthly Operations Report").
(d) Each of the Monthly Balance Sheets contained or to be contained
in the Month End Management Reports presents (or will present) fairly in
accordance with GAAP, the financial condition, assets, Liabilities and
stockholder's equity of the Company as of its
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date; results of operations contained or to be contained in the Month End
Management Report presents (or will present) fairly in accordance with GAAP, the
financial condition and the results of operations of the Company for the periods
therein identified. The financial statements referred to in Section 2.07
(including, without limitation, those contained or to be contained in the Month
End Management Reports), including all notations and schedules thereto, have
been (or will be) prepared in accordance with GAAP, subject, in the case of
interim unaudited financial statements, to normal recurring year-end adjustments
other than those which have a year-to-date impact, and the absence of notes; the
financial statements referred to in this Section 2.07 (including, without
limitation, those contained or to be contained in the Month End Management
Reports) reflect the consistent application of GAAP throughout the periods
involved and are (or will be) in accordance with the books and records of the
Company, which books and records are true and complete in all material respects.
(e) At the dates of the aforementioned balance sheets, to the
Knowledge of each Capstead Company, except as set forth in Schedule 2.07(e), the
Company did not have (nor will have with respect to such balance sheets dated
subsequent to the date hereof) any Liabilities of any nature, whether accrued,
absolute, contingent or otherwise, whether due or to become due, whether related
to the Business or otherwise, and whether or not required to be disclosed on a
balance sheet prepared in conformity with GAAP, not fully or properly reflected
or reserved against in such balance sheets, or in any notes thereto.
2.08 SUBSEQUENT EVENTS. Except as otherwise described in the attached
Schedule 2.08 or consented to in writing by Purchaser:
(a) Since December 31, 1997, the Business has not been in default in
any material respect of any Contract, suffered the revocation of any license or
right to do business, total or partial termination, suspension, or adverse
modification of any Contracts, or been the subject of any restriction,
regulation, investigation or inquiry by any Governmental Body.
(b) Since September 30, 1998, there has been no Material Adverse
Effect with respect to the Business.
(c) Since September 30, 1998, neither the Company nor Holdings has
issued, or authorized for issuance, any equity security, bond, note or other
security of the Company, and neither the Company nor Holdings has granted, or
entered into, any Contract to issue or sell any such equity security, bond, note
or other security of the Company, whether pursuant to any offer, underwriting
Contract, stock option Contract, stock bonus Contract, stock purchase plan,
incentive compensation plan, warrant, call, conversion right or otherwise.
(d) Since September 30, 1998, the Business has not incurred
additional debt for borrowed money, or, to the Knowledge of each Capstead
Company, incurred any other
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obligation or Liability (fixed, contingent or otherwise), except in the ordinary
and usual course of its business and consistent with past practices.
(e) Since September 30, 1998, the Capstead Companies have not paid or
prepaid any obligation or Liability (fixed, contingent or otherwise), or
discharged or satisfied any Lien, or settled any Liability, claim, dispute, or
Proceeding, relating to the Business, except for current Liabilities included in
the September 30 Listing and current Liabilities incurred since that date in the
ordinary and usual course of business of the Business.
(f) Except as contemplated by the Servicing Purchase Agreement, since
September 30, 1998, the Sellers have not mortgaged, pledged or otherwise
encumbered or subjected to a Lien any of the assets or properties of the
Business, tangible or intangible, including, without limitation, servicing
rights, except for Liens for current Taxes which are not yet due and payable and
Permitted Liens arising out of the ordinary and usual course of business.
(g) Except as contemplated by the Servicing Purchase Agreement, since
September 30, 1998, none of the Sellers has sold, leased or otherwise disposed
of any asset or property, tangible or intangible, relating to the Business,
including, without limitation, any mortgage loans or mortgage servicing rights,
except in the ordinary and usual course of business, and in each case for
consideration at least equal to the fair value of such asset or property, nor
have any of the Sellers leased or licensed to others (including, without
limitation, officers and directors) any asset or property, or discontinued any
product or service line, or the sale or other disposition of any of its products
or services.
(h) Since September 30, 1998, the Company has not purchased or
otherwise acquired any debt securities or equity securities of any Person other
than in connection with ordinary hedging activities and not for investment
purposes.
(i) Since September 30, 1998, except for individual expenditures and
commitments made in the ordinary and usual course of business and involving
amounts not exceeding $10,000 individually, the Business has not made any
expenditure for the purchase, acquisition, construction or improvement of a
capital asset; the aggregate amount of all such expenditures and commitments
made in the ordinary and usual course of business has not exceeded $100,000 in
the aggregate.
(j) Since September 30, 1998, the Capstead Companies have not entered
into any transaction or Contract with respect to the Business, except in the
ordinary and usual course of business and not involving an amount in any case in
excess of $25,000, and the Business has not waived any right, canceled any debts
or claims, or voluntarily suffered any losses, in each case of a value of more
than $25,000.
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(k) Since December 31, 1997, the Capstead Companies have not sold,
assigned, transferred or conveyed any Proprietary Right (as defined in Section
2.26 of this Agreement) with respect to the Business.
(l) Since December 31, 1997, the Company has not effected any
amendment or supplement to, or extension of, any employee profit-sharing, stock
option, stock purchase, pension, bonus, incentive, retirement, medical
reimbursement, life insurance, deferred compensation or any other employee
benefit plan or arrangement other than as set forth in the Employment
Agreements.
(m) Since December 31, 1997, the Company has not paid to or for the
benefit of any of its directors, officers, employees or shareholders any
compensation of any kind other than wages, salaries, bonuses, dividends and
benefits, other than as set forth in the Employment Agreements.
(n) Since December 31, 1997, none of the Sellers has effected any
change in its directors or executive management (e.g., Senior Vice President and
more senior officers).
(o) Since September 30, 1998, none of the Sellers has effected any
amendment or modification to its charter documents, by-laws or other governing
documents.
(p) Since December 31, 1997, the Business has not experienced any
material problems in employee relations, including, without limitation, strikes,
shutdowns, slowdowns, work stoppages or threats thereof.
(q) Since December 31, 1997, none of the Sellers has made any change
in accounting methods or principles used for financial reporting purposes,
except as required by a change in GAAP and concurred with by its independent
public accountants.
(r) To the Knowledge of each Capstead Company, since December 31,
1997, there have been no instances of fraud involving management or employees of
the Company in respect to the Business.
(s) Since December 31, 1997, the Business has otherwise been
conducted in the ordinary and usual course.
(t) To the extent a representation or warranty has been made by a
Seller in this Section 2.08, such Seller has not entered into any Contract to
take any action described in this Section 2.08.
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(u) Since December 31, 1997, through the date of this Agreement,
there have been no resignations of key employees with respect to the Business.
2.09 CONTRACTS.
(a) The attached Schedule 2.09 constitutes a true and complete list
(subject, in the case of clauses (i), (xi) and (xiv) below, to the dollar amount
indicated therein, and in the case of clause (xviii) the time limitations
indicated therein) of each Contract to which any Capstead Company is a party or
by which any Capstead Company is bound in any respect and, in each case, which
relates to the Business (except for any Contract described in Section 2.20, 2.21
or 2.24 hereof or any Contract referenced in Section 1.8 of the Servicing
Purchase Agreement or the Schedules thereto or any forward delivery Contracts
with FNMA and FHLMC (as hereinafter defined)), including, without limitation,
any and all:
(i) Contracts for the disposition, by sale, lease or
otherwise, of Equipment, goods, materials, research and development,
supplies, studies or capital assets, or for the performance of services
(other than mortgage loan servicing), in any case involving more than
$100,000 each, except that such limitation as to dollar amounts shall not
apply as to any Contracts covered by Section 2.26 of this Agreement;
(ii) Contracts for the disposition, by sale, lease or
otherwise, of mortgage loans, or mortgage servicing, or for the performance
of mortgage servicing under any pooling and/or servicing Contracts;
(iii) Contracts for the joint performance of work or services,
and all other joint venture, partnership or other similar Contracts,
including, without limitation, any sub-servicing Contracts or mortgage
origination Contracts;
(iv) management or employment Contracts, consulting Contracts,
collective bargaining Contracts or other Contracts with any labor union, or
termination and severance Contracts;
(v) notes, mortgages, deeds of trust, loan Contracts, security
Contracts, guarantees, debentures, indentures, credit Contracts,
warehousing Contracts, repurchase Contracts and other evidences of
indebtedness as to which any Capstead Company is an obligor other than
endorsements for collection or deposit in the ordinary and usual course of
business;
(vi) pension, retirement, profit-sharing, deferred
compensation, bonus, incentive, life insurance, hospitalization, or other
employee benefit plans or
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arrangements (including, without limitation, any Contracts with trustees,
insurance companies or others relating to any such employee benefit plan or
arrangement);
(vii) stock option, stock purchase, warrant, repurchase or other
Contract with any employee or officer of the Company relating to any Shares
or other equity security of the Company;
(viii) Contracts with underwriters, agents, brokers or sales
representatives;
(ix) Contracts with any director or officer of any of the
Sellers or with any Person affiliated or associated with such a director or
officer;
(x) powers of attorney or similar authorizations granted by
any Capstead Company to any third party;
(xi) licenses, sublicenses, royalty Contracts and any other
Contract to which any Capstead Company is a party, or otherwise subject,
relating to technical assistance, Proprietary Rights, confidentiality,
non-disclosure, non-use or other similar Contracts in any case involving
more than $25,000 each;
(xii) deeds or Contracts relating to real property owned of
record or beneficially by any Capstead Company;
(xiii) leases, whether as lessor or lessee, with respect to (i)
individual items of personal property, which are not terminable without
material penalty in 30 days and (ii) any real property;
(xiv) Contracts for the purchase of any Equipment, capital
assets or services (other than mortgage loan servicing), except individual
service orders made in the ordinary and usual course of business involving
less than $25,000 each; provided, however, that if the aggregate of such
individual service orders from one party exceeds $100,000, such information
shall be included on Schedule 2.09;
(xv) Contracts for the purchase of any mortgage loan or
mortgage loan servicing;
(xvi) Contracts containing covenants limiting the freedom of any
Capstead Company to compete in any line of business or with respect to any
particular product or service or with any Person;
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(xvii) requirements Contracts in which any Capstead Company is
the purchaser or the seller; and
(xviii) any material Contract, not of the type covered by or
excluded from any of the other items of this Section 2.09, which by its
terms is either not to be completely performed by a Capstead Company within
30 days of the date hereof or is not to terminate or is not terminable
without penalty to a Capstead Company prior to 30 days from the date
hereof.
(b) Except as set forth in Schedule 2.09 (and except for any Contract
referenced in the Servicing Purchase Agreement or the Schedules thereto), the
Company is not a party to, nor is it bound by, any Contract which:
(i) it can reasonably foresee will result in any material loss
upon the performance thereof (including, without limitation, any Liability
for penalties or damages, whether liquidated, direct, indirect, incidental,
or consequential); and
(ii) is not reflected or adequately reserved against on the
Company's 1998 Balance Sheet.
(c) The Capstead Companies have made available to representatives of
Purchaser, for their review and examination, written summaries of all oral
Contracts referred to in this Section 2.09 and all of the written Contracts
referred to in this Section 2.09, and have provided true and complete copies of
all of such written Contracts upon request.
2.10 NO DEFAULT.
(a) The Capstead Companies, in each case to the extent involving or
relating to the Business, have in all respects performed, or are now performing,
the obligations of, and are not in default (and would not by the lapse of time
and/or the giving of notice be in default), nor have they received notice of
default or notice of termination, in respect of, any Contract binding upon them
or their assets or properties (including, without limitation, any Contract
described in Section 2.09 hereof). Each of the Contracts or other instruments
required to be shown on the Schedules referred to in this Agreement is a legal,
binding and enforceable obligation of or against the Sellers. Except as set
forth in the attached Schedule 2.10(a), to the Knowledge of the Capstead
Companies, no party with whom one or more Sellers has a Contract described in
the preceding sentence is in default thereunder or has Breached any terms or
provisions thereof. To the Knowledge of each Capstead Company, there are no
currently existing facts or circumstances which make a default under, or
termination or suspension of, any of the Contracts referred to in this Section
2.10 likely to occur subsequent to the date hereof nor has any third party
raised any claim, dispute or controversy with respect
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to any such Contracts. With respect to any servicing agreement, no Capstead
Company has received any notice or other information from an investor that such
investor has terminated the applicable servicing agreement or that it intends to
do so. All fees and expenses due and owing to any investor under any servicing
agreement have been remitted on a timely basis to the applicable investor, with
the exception of bona fide disputes as to said amounts.
(b) Without limiting the scope of the representations and warranties
set forth in Section 2.10(a) above, no Capstead Company has received any notice
of, or is otherwise aware of facts or circumstances which would form the basis
of, any default by the Company with respect to the servicing of any mortgage
loan or the performance of the respective obligations of the Company under any
Contract relating to mortgage loans owned or serviced by it, and, to the
Knowledge of the Capstead Companies, no other party thereto is in default under
any such Contract. Without limiting the generality of the foregoing, no Seller
has received any notice of default from HUD, FHLMC, FNMA (as such terms are
defined in Section 2.14) or any other Governmental Body with respect to the
servicing obligations relating to any mortgage loans or other loans serviced by
the Company.
2.11 PROPERTIES. The September 30 Listing reflects all of the assets and
properties, real and personal, used by the Sellers in the Business or otherwise
held by the Company, except for (a) property acquired or disposed of in the
ordinary and usual course of business since the date of such September 30
Listing, (b) property not required under GAAP to be reflected thereon and (c)
assets and properties which are subject to transfer pursuant to the Servicing
Purchase Agreement. Except as set forth on the attached Schedule 2.11 and except
for property disposed of in the ordinary and usual course of business since the
date of the September 30 Listing, the Company has good and valid title to all
assets and properties included in such September 30 Listing and thereafter
acquired, free and clear of any imperfection of title or Lien, of any kind or
nature, except for the Lien of current Taxes not yet due and payable. All of the
Equipment, software and properties reflected on the September 30 Listing and
thereafter acquired are in good operating condition and repair, reasonable wear
and tear only excepted, and are free from any material defect; provided,
however, that solely with respect to any matter relating to the Year 2000
compliance of any such Equipment, software or properties, reference is made to
the representation and warranty set forth in Section 2.26(b), which is the only
representation and warranty made herein with respect to any such Equipment,
software or properties being Year 2000 Compliant. The attached Schedule 2.11
contains a true and complete list of each item of Equipment and software and
other property consisting of personal property and having an original cost in
excess of $1,000.
2.12 REAL PROPERTY. No Capstead Company owns or has an option to purchase
any real property which is used or held for use in, related to, or associated
with, directly or indirectly (in whole or in part) the Sellers' operation of the
Business, including any real estate
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acquired under mortgage servicing agreements. The attached Schedule 2.12
constitutes a true and complete list of all real property leased, or under
option to be leased, by any Seller to the extent it is used or held for use in,
related to, or associated with, directly or indirectly (in whole or in part) the
Sellers' operation of the Business. All such property leased by each Seller is
held under valid and existing leases. Except as set forth on Schedule 2.12, no
Seller leases any real or personal property as lessor or sub-lessor. Each Seller
enjoys peaceful and undisturbed possession of all property described on Schedule
2.12. The operations of the Sellers on any of such real property, including
improvements thereon, do not violate any applicable building code, zoning
requirement or classification, or pollution control ordinance or statute
relating to the particular property or to such operations, and such
non-violation is not dependent, in any instance, on so-called non-conforming use
exceptions.
2.13 ENVIRONMENTAL.
(a) To the Knowledge of each Capstead Company, no Hazardous Materials
(as defined in clause (f) below) have been used, stored or otherwise handled in
any manner on, under, in, from or affecting any real property leased, owned or
managed by any Capstead Company or in which any Capstead Company has an
interest, in each case to the extent it is used or held for use in, related to,
or associated with, directly or indirectly (in whole or in part), the Sellers'
operation of the Business (any such real property being herein referred to in
this Section 2.13 as the "Property"). No Capstead Company has and, to the
Knowledge of any Capstead Company, no prior or current owner or prior occupant
of the Property has, used Hazardous Materials on, under, in, from or affecting
the Property.
(b) To the Knowledge of each Capstead Company, no Hazardous Materials
have at any time been released into, stored or deposited over, upon or below the
Property, into any water systems on or below the surface of the Property, or
directly or indirectly onto any property or water system adjoining, adjacent to
or abutting the Property, or have been used in the construction of any
improvements located on or about the Property.
(c) To the Knowledge of each Capstead Company, there are no, and
never have been, underground storage tanks located on or under the Property.
(d) No Capstead Company has received any notice of any violations
(nor are they aware of any existing violations) of any Legal Requirements
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials on, under, in, from or
affecting the Property and, to the Knowledge of each Capstead Company, there are
not any Proceedings commenced or Threatened by any Person with respect to any
such violations.
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(e) The Property is currently being, and has in the past been,
operated by one of the Capstead Companies in accordance with, and in compliance
with, all applicable Environmental Laws, and to the Knowledge of each Capstead
Company, the Property has been operated in the past by third parties in
accordance with, and in compliance with, all applicable Environmental Laws.
(f) "Hazardous Materials" are any hazardous materials, hazardous
wastes, hazardous constituents, hazardous or toxic substances or petroleum
products (including gasoline, crude oil or any fraction thereof), defined or
regulated as such in or under any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls and urea formaldehyde
insulation. "Environmental Laws" are any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any governmental authority or other requirements of law
(including common law) regulating, relating to or imposing Liability or
standards of conduct concerning protection of human health or the environment.
2.14 QUALIFICATION AS LENDER. The Company is approved by the U.S.
Department of Housing and Urban Development ("HUD") as a lender and servicer of
mortgage loans and meets all applicable HUD regulations so as to be entitled to
originate and service mortgage loans sold to or insured by HUD. The Company is
also an approved servicer of mortgage loans to the Federal Home Loan Mortgage
Corporation ("FHLMC") and the Federal National Mortgage Association ("FNMA") and
meets all applicable FHLMC and FNMA guidelines so as to be entitled to service
mortgage loans sold to FHLMC and FNMA. In addition, the Company is in good
standing and eligible to sell mortgage loans to each of FHLMC and FNMA. The
Company is in good standing and is eligible as a mortgage lender and servicer
under applicable rules, regulations and procedures promulgated by each of the
mortgage participation or sale of mortgage-backed bond or pass-through
certificate programs for which the Company originates or services mortgage
loans. The Company is in compliance in all material respects with all
eligibility requirements under any correspondent or servicing arrangement
pursuant to which the Company services mortgage loans.
2.15 SERVICING. Each mortgage loan serviced by the Company and the
servicing of each such mortgage loan complies, in all respects, with the terms
of any Governmental Body program, FNMA or FHLMC program, or other investor
commitment or arrangement related thereto, including, without limitation, the
terms of any applicable regulation or servicing Contract and all applicable
documents relating to such mortgage loan.
2.16 ACCOUNTS RECEIVABLE. All of the accounts receivable of the Company
shown on the September 30 Listing or thereafter acquired arose and are
collectible in the ordinary and usual course of the business of the Company. The
values at which accounts receivable, net of
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reserves, are carried on the Company's books and records reflect the amounts
deemed fully collectible and are determined in accordance with GAAP.
2.17 BANK ACCOUNTS. The attached Schedule 2.17 constitutes a true and
complete list of all the bank accounts, including escrow accounts, of the
Company, together with the names of Persons authorized to draw thereon. Except
as set forth in such Schedule, all cash in such accounts is held in demand
deposits and is not subject to any restriction or limitation as to withdrawal.
All of such accounts are reconciled on a timely basis, are fully funded and are
free from errors.
2.18 GUARANTEES. Except as otherwise noted on the attached Schedule 2.18,
none of the Liabilities of the Company is guaranteed by any Person. Schedule
2.18 is a true and complete list of all guarantees by, or other similar
Liabilities of, the Company (including, without limitation, any repurchase
Contracts) showing the parties and amounts involved and the expiration dates
thereof.
2.19 INSURANCE. The attached Schedule 2.19 constitutes a true and complete
list of all policies of insurance to which the Company or Holdings is a party or
is a beneficiary or named insured, other than insurance policies with respect to
individual mortgage loans serviced by the Company. All such policies of
insurance are in full force and effect, with all premiums due thereon paid.
Schedule 2.19 also sets forth a list of insurance policies to which other
parties (including Sellers and other affiliates of the Company) are a party or a
beneficiary which relate to the properties, assets or operations of the Business
and the names of such other parties. No notice of cancellation or termination
has been received with respect to any insurance policy described in this Section
2.19. The Business carries insurance in amounts and types of coverage which are
adequate and customary in the industry and against risks and losses which are
adequate and usually insured against by Persons holding or operating similar
properties and similar businesses. Except as specifically disclosed on such
Schedule 2.19, no claims have been asserted with respect to the Business by any
Capstead Company under any of such insurance policies.
2.20 TAXES.
(a) For purposes of this Agreement, the following definitions shall
apply:
"Applicable Tax Law" means any Law of any nation, state, region,
province, locality, municipality or other jurisdiction relating to Taxes,
including, without limitation, regulations and other official pronouncements of
any Governmental Body of such jurisdiction charged with interpreting such Laws.
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"Post-Closing Period" means, with respect to the Company, any Tax
Period beginning after the Closing Date and the portion of any Straddle Period
beginning after the Closing Date.
"Pre-Closing Period" means, with respect to the Company, any Tax
Period ending on or before the Closing Date and the portion of any Straddle
Period ending on the Closing Date.
"Straddle Period" means, with respect to the Company, any Tax Period
that begins before and ends after the Closing Date.
"Tax" or "Taxes" mean:
(i) any income, corporation, gross receipts, franchise, profits,
gains, capital stock, capital duty, withholding, social security, unemployment,
disability, property, wealth, welfare, stamp, excise, occupation, sales, use,
value added, payroll, premium, property, or windfall profits tax, estimated, ad
valorem or excise tax, alternative or add-on minimum tax or other similar tax
(including, without limitation, any fee, assessment or other charge in the
nature of or in lieu of any tax) imposed by any Governmental Body; and
(ii) any Liability for the payment of any amount of the type
described in clause (i) as a result of the Company being a successor to or
transferee of any other corporation at any time on or prior to the Closing Date,
and any interest, penalties, additions to tax (whether imposed by law,
contractual agreement or otherwise) and any Liability in respect of any tax as a
result of being a member of any affiliated, consolidated, combined, unitary or
similar group.
"Tax Authority" means, with respect to any Tax, the Governmental Body
that imposes such Tax, and the Governmental Body (if any) charged with the
collection of such Taxes, including, without limitation, any governmental or
quasi-governmental entity or agency that imposes, or is charged with collecting,
social security or similar charges or premiums.
"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under Applicable Tax Laws.
"Tax Return" or "Tax Returns" mean any or all returns, declarations,
reports, statements and other documents required to be filed in respect of
Taxes, and any claims for refunds of Taxes, including any amendments or
supplements to any of the foregoing.
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"Code" means the Internal Revenue Code of 1986, as amended. All
citations to the Code, or to the Treasury Regulations promulgated thereunder,
shall include any amendments or any substitute or successor provisions thereto.
(b) Except as otherwise set forth in Schedule 2.20(b), the Capstead
Companies represent, warrant and covenant as follows with regard to the
Purchased Assets:
(i) Filing of Tax Returns. Each of the Capstead Companies has
timely filed all Tax Returns, statements and reports, including any
attachment thereto or amendment thereof, with respect to Taxes required to
be filed with any Tax Authority through the date hereof with the
appropriate Taxing Authorities and shall prepare and timely file, in a
manner consistent with prior years and applicable law and regulations, all
Tax Returns required to be filed on or before the Closing Date.
(ii) Payment of Taxes. Each of the Capstead Companies has paid,
and as of the Closing Date, each will have paid each material Tax due and
owing with respect to the Purchased Assets, ownership, operations and
activities of the Business (whether or not shown on any Tax Return) and has
withheld and paid each material Tax required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other Person.
(iii) Sales or Transfer Taxes. All sales Taxes, documentary and
stamp Taxes, transfer Taxes, use Taxes, gross receipts Taxes and all other
charges for filing and recording documents in connection with the transfer
of the Purchased Assets (including, without limitation, patent and
trademark filing and recording fees) will be paid by the Purchaser.
(iv) Allocation of Purchase Price. Sellers and Purchaser shall
allocate the Purchase Price (and all other capitalized costs) among the
Purchased Assets. Such allocation shall be made in accordance with the
provisions of Section 1060 of the Code and mutually agreed upon by Sellers
and Purchaser prior to the Closing Date. Such allocations shall be used in
preparing IRS Form 8594, Asset Acquisition Statement, for the Sellers and
Purchaser (which Form 8594 shall be completed, executed and delivered by
such parties at the Closing) and all Tax Returns. The Sellers and Purchaser
shall each file Form 8594 prepared in accordance with this Section 2.20
with their federal income tax returns for their tax period which includes
the Closing Date. All allocations made pursuant to this Section 2.20 shall
be binding upon the parties hereto and upon each of their successors and
assigns, and the parties hereto shall report the transactions contemplated
by this Agreement in accordance with such allocations.
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(v) Tax Obligations of the Capstead Companies. Subject to the
provisions of Section 2.20(b)(iii) above, the Capstead Companies will be
liable for, and will promptly pay when due, any and all Taxes for any Tax
Period ending on or before the Closing Date due or payable with respect to
the Purchased Assets.
(vi) Tax Obligations of the Purchaser. Subject to the provisions
of Section 2.20(b)(iii) above, the Purchaser will be liable for, and will
promptly pay when due, any and all Taxes with respect to the Purchased
Assets, for any Tax Period beginning after the Closing Date.
(vii) Allocation of Certain Taxes.
(A) Subject to the provisions of Section (iii) above, any
Taxes other than Income Taxes ("Non-Income Taxes"), refunds or credits
of non-income Taxes for a Straddle Period pertaining to the Purchased
Assets and reflected in a Tax Return covering the Straddle Period (a
"Straddle Period Return") will be apportioned between the Purchaser
and the Sellers based on the number of days during the portion of the
assessment period occurring on and before the Closing Date, and the
number of days during such period occurring after the Closing Date,
and for purposes of Sections (v), (vi) and (viii), each portion of
such period will be deemed to be a Tax Period (whether or not it is,
in fact, a Tax Period).
(B) To the extent estimated Non-Income Taxes have been paid
before the Closing Date with respect to a Straddle Period, the
Sellers' Liability with respect thereto shall be reduced by that
amount, provided that, if such payment or accrual of Non-Income Taxes
exceeds the Sellers' Liability as calculated pursuant to this Section
(vii), the Purchaser shall promptly pay the Sellers the amount of such
excess.
(C) Prior to 45 days from the due date of any Straddle
Period Return, the Purchaser will allow the Sellers (or the tax
advisors or accountants of the Sellers, as the case may be) to review
such Straddle Period Return and related work papers for the purpose of
determining the accuracy of the amount of Non-Income Taxes determined
to be due from, or due to, the Sellers.
(D) The Sellers or the Purchaser, as the case may be, will
pay the other at least 10 days prior to the date any payment for
Non-Income Taxes described in this Section (vii) is due.
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(E) The Sellers also agree not to change any accounting
methods or take any filing position inconsistent with Tax Returns
filed for prior Tax Periods to the extent that taking such position
could result, directly or indirectly, in an increase in any Taxes of
the Purchaser for any Tax Periods ending after the Closing Date,
without first consulting with the Purchaser.
(viii) Refunds and Credits.
(A) The Sellers will be entitled to any refunds or credits
of Taxes with respect to the Purchased Assets attributable to or
arising in Tax Periods ending on or before the Closing Date.
(B) The Purchaser will be entitled to any refunds or
credits of Taxes with respect to the Purchased Assets attributable to
or arising in Tax Periods beginning after the Closing Date.
(C) The Purchaser will promptly forward to the Sellers or
reimburse the Sellers for any refunds or credits due the Sellers
(pursuant to the terms of Sections (vi) and (vii) hereof) within 15
days after receipt thereof, and the Sellers shall promptly forward to
the Purchaser (pursuant to the terms of Sections (vi) and (vii)
hereof) or reimburse the Purchaser for any refunds or credits due the
Purchaser within 15 days after receipt thereof.
(ix) Cooperation and Exchange of Information.
(A) Each Capstead Company and the Purchaser (including
their tax advisors or accountants) will cooperate in the preparation
of all Tax Returns with regard to the Purchased Assets relating in
whole or in part to Tax Periods ending on or before or including the
Closing Date that are required to be filed after such date.
(B) Such cooperation will include, without limitation,
provision of powers of attorney for purposes of signing Tax Returns
and defending audits and providing copies of relevant Tax Returns or
return preparation packages illustrating previous reporting practices
or containing historical information (with accompanying schedules and
related work papers, documents relating to rulings or other
determinations by any domestic or foreign Tax Authority) and records
concerning the ownership and Tax basis of property with regard to the
Purchased Assets which may be relevant to the preparation of such Tax
Returns, and providing such other information within such party's
possession requested by the party filing such Tax Returns as may be
relevant to
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their preparation or to respond to audits by any domestic or foreign
Tax Authority with respect to the Purchased Assets and to otherwise
enable the Purchaser to satisfy its internal accounting, Tax and other
legitimate requirements. The Capstead Companies and the Purchaser will
make their employees, facilities and tax advisors or accountants
available on a mutually convenient basis to provide explanation of any
documents or information provided hereunder.
(C) For a period of ten years after the Closing Date or
such longer period as may be required by law, the Capstead Companies
(or their tax advisors or accountants) will retain and not destroy or
dispose of all Tax Returns, books and records (including computer
files and software programs) of, or with respect to the activities of,
the Purchased Assets for all Tax Periods ending on or prior to the
Closing Date. Thereafter, the Capstead Companies (or their tax
advisors or accountants) may not destroy or dispose of any Tax
Returns, books or records unless it first offers in writing to provide
such Tax Returns, books and records to the Purchaser, and the
Purchaser fails to accept such offer within 60 days of its being made.
(D) In the case of any state, local or foreign joint,
consolidated, combined or unitary Tax Returns, such cooperation will
also relate to any other Tax Periods in which one party could
reasonably require the assistance of the other party in obtaining any
necessary information with regard to the Purchased Assets.
(E) The Purchaser and the Capstead Companies, upon request,
will use their respective Commercially Reasonable Efforts to obtain
any certificate or other document from any Tax Authority or other
Person as may be necessary to mitigate, reduce or eliminate any Taxes
that would otherwise be imposed with respect to the Purchased Assets.
The party requesting such information and assistance pursuant to this
Section (ix)(E) will reimburse the other party for all reasonable
out-of-pocket costs and expenses incurred by such party in providing
such information and in rendering such assistance.
2.21 EMPLOYEE BENEFITS.
(a) Sellers have made available to Purchaser true and complete copies
(including all amendments) of each of the following, a true and complete list of
which is attached as Schedule 2.21: (i) each "employee pension benefit plan"
(within the meaning of Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) of which the Company is the plan sponsor
(within the meaning of Section 3(16)(A)
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of ERISA) and which provides benefits to employees of the Company, together with
the related trust agreement providing the funding medium for pension benefits
thereunder, such plans being hereinafter referred to in this Section 2.21 as the
"Pension Plans"; (ii) each "employee welfare benefit plan" (within the meaning
of Section 3(1) of ERISA) of which the Company is the plan sponsor and which
provides benefits to employees of the Company, together with the related trust
agreement or insurance contract providing the funding medium for benefits
thereunder and any related contracts thereunder, such plans being hereinafter
referred to in this Section 2.21 as the "Welfare Plans"; (iii) the summary plan
description for each Pension Plan and Welfare Plan; (iv) the most recent
financial statement, if any, including audit reports thereon, Annual Report Form
5500 and actuarial report for each such Pension Plan and Welfare Plan; (v) any
investment management agreement which delegates authority for investment of the
assets of any such Pension Plan or Welfare Plan; and (vi) the most recent
qualification letter from the IRS for each Pension Plan and for any Welfare Plan
funded through any tax-exempt trust qualified under Section 501(c) of the Code.
(b) With respect to any Pension Plan or Welfare Plan (hereinafter, the
"Plans"):
(i) the financial statements relating to the Plans furnished to
Purchaser have been prepared in accordance with GAAP consistently applied
throughout the periods involved and are in accordance with the books and
records of such Plans, which books and records are true and complete in all
respects;
(ii) the Sellers do not maintain or contribute to, or have any
obligation to contribute to, or otherwise make payments under, any Plan or
material compensation arrangement relating to the Business or arrangement
other than those listed on Schedule 2.09 or Schedule 2.21;
(iii) all such Plans comply in all material respects with the
applicable requirements of ERISA, all such Pension Plans comply with the
qualification requirements under Section 401(a) and the requirements for
tax-exempt status under Section 501(a) or (c) of the Code, and each Plan
has been operated in all material respects in accordance with its terms;
(iv) [Intentionally Left Blank];
(v) all required contributions to the Plans have been timely
made; the Company has not incurred any Liability under Title IV of ERISA
which has not been paid in full prior to the date hereof; all premiums due
to the Pension Benefit Guaranty Corporation ("PBGC") have been paid; no
Pension Plan maintained by the Company and subject to Title IV of ERISA has
any "unfunded benefit liabilities" within the
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meaning of ERISA Section 4001(a)(18), as of the Closing Date which could
subject the Company to Liability either directly or indirectly (including,
without limitation, through any obligation of indemnification or
contribution);
(vi) [Intentionally Left Blank];
(vii) there have been no transactions between any such Plan and
any "party in interest" or "disqualified person", within the meaning of
Section 3(14) of ERISA or Section 4975(e)(2) of the Code, which might
subject the Company to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code or to a civil action under Section 502
of ERISA;
(viii) no investigation or review by the IRS is pending or is
contemplated in which the IRS has asserted or may assert that any Pension
Plan is not qualified under Section 401(a) of the Code or that any related
trust, including any trust for a Welfare Plan, is not exempt from tax under
Section 501 of the Code. No assessment of any federal income taxes has been
made or is contemplated against the Company or any related trust of any
such Plan on the basis of failure of such qualification or exemption nor is
there any basis for any such assertion or assessment; and
(ix) no event has occurred or, to Sellers' Knowledge, is
Threatened or about to occur for which is required to be filed a notice of
a reportable event, within the meaning of Section 4043(b) of ERISA and the
PBGC regulations issued thereunder. No notice of termination has been filed
by the plan administrator pursuant to Section 4041 of ERISA or issued by
the PBGC pursuant to Section 4042 of ERISA with respect to any such Pension
Plan nor is there any basis for the filing of any such notice of
termination.
(c) The Company neither is nor has been a contributing employer to
any multiemployer pension plan (within the meaning of Section 3(37) of ERISA);
the Company is not under any obligation to make contributions to any
multiemployer pension plan; and the Company does not have not any actual or
potential Liability under Section 4201 of ERISA for any complete or partial
withdrawal from any multiemployer pension plan relating to employees or officers
of the Company. To the Knowledge of the Capstead Companies, the Company is not
obligated to provide health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of Title I of ERISA) and has not promised to provide such
post-termination benefits.
(d) Except for the Plans or the programs and arrangements,
contractual or otherwise, listed or referred to in Schedule 2.09 to this
Agreement (i) the Company does not
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maintain or contribute to, or otherwise have any obligation under, any plans,
programs or arrangements providing for (A) payment of deferred compensation or
retirement benefits; (B) the accrual or payment of bonuses or special or
incentive compensation of any kind; (C) any severance or termination payments;
(D) loans, loan guarantees or other extensions of credit to directors, officers
or employees of the Company; (E) life, health, disability or other welfare
benefits; or (F) moving or other relocation expense benefits or reimbursements;
and (ii) the Company does not maintain any other stock bonus, stock option,
stock purchase or similar plans or practices, whether formal or informal.
(e) [Intentionally Left Blank].
(f) No payment that is owed or may become due to any director,
officer, employee, or agent of any of the Sellers as a consequence of the
transaction contemplated by this Agreement will be non-deductible to the Sellers
or subject to tax under Section 280G or Section 4999 of the Code; nor will any
Seller nor the Purchaser be required to "gross-up" or otherwise compensate any
such person because of the imposition of any excise tax on such a payment to
such person.
2.22 COMPENSATION. The attached Schedule 2.22 constitutes a true and
complete list of each director, officer, employee or consultant of the Company
whose total compensation from the Company on an annualized basis in respect of
calendar year 1998 exceeds $80,000, specifying their names and job designations,
the total amount paid or payable, the basis of such compensation, whether fixed,
commission or bonus or a combination thereof, and their current rate of pay.
Except as otherwise disclosed on such Schedule 2.22, since December 31, 1997,
there has been no material change in compensation, by means of wages, salaries,
bonuses, gratuities or otherwise, to any such director, officer, employee or
consultant of the Company, or any change in compensation, either material in
amount or other than in the ordinary and usual course of business, to any other
director, officer, employee or consultant of the Company.
2.23 CERTAIN ADVANCES. There are no receivables of the Company owing by
directors, officers, employees, Holdings, CMC, consultants of the Business, or
owing by any Affiliate of any director or officer of the Company, other than
advances in the ordinary and usual course of business to directors, officers and
employees for reimbursable business expenses.
2.24 RELATED PARTIES. Except as set forth in the attached Schedule 2.24, no
Seller, or to the Knowledge of the Capstead Companies, no officer or director of
any Seller, or any Affiliate of any such Person, has, either directly or
indirectly, (a) any greater than 5% interest in any corporation, partnership,
firm or other Person which furnishes or sells services or products which are
similar to those furnished or sold by the Business, or (b) a beneficial
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interest, or alleges a claim of beneficial interest, in any Contract to which
any Seller may be bound pertaining to the Business. Such Schedule 2.24 shall
list and describe all of the Contract relationships between or among any
Capstead Companies, and any beneficial interest or claim of beneficial interest
of any Capstead Company in any property, asset, or right (including, without
limitation, any Proprietary Right (as defined in Section 2.26(a))) which is
owned, leased, used or held for use by any other Capstead Company in, related
to, or associated with, directly or indirectly (in whole or in part) the
operation of the Business.
2.25 LICENSES AND PERMITS. The Sellers have obtained, and are in compliance
in all material respects with, all necessary licenses, permits, Consents,
Orders, certificates, authorizations, declarations and filings
("Authorizations") required by any Governmental Bodies (including, without
limitation, any Governmental Body regulating consumer lenders, assignees of
consumer credit receivables, mortgage bankers, brokers, servicers or originators
and their operations) and all courts and other tribunals for the conduct of the
Business as now conducted. The attached Schedule 2.25 contains a true and
complete list of all such Authorizations. There are no Proceedings pending or,
to the Knowledge of the Capstead Companies, Threatened which may result in the
revocation, cancellation or suspension, or any adverse modification, of any such
Authorizations. There are no disciplinary actions under any such Authorizations
pending or, to the Knowledge of the Capstead Companies, Threatened. No prior
Proceeding or disciplinary action has resulted in adverse action against the
Business and, to the Knowledge of the Capstead Companies, there are no facts
which may give rise to such Proceedings or disciplinary actions.
2.26 PROPRIETARY RIGHTS.
(a) The attached Schedule 2.26 constitutes a true and complete list
of all trademarks, trade names, service marks, copyrights and patents, or
applications therefor, owned, leased, used or held for use in, related to, or
associated with, directly or indirectly (in whole or in part), the Sellers'
operation of the Business. The Sellers own or possess adequate licenses or other
rights to use all patents, patent applications, trademarks, trademark
registrations, applications for trademark registrations, trade secrets, service
marks, service mark registrations, applications for service mark registrations,
trade names, labels, slogans, claims of copyright, copyright registrations,
applications for copyright registrations, copyrights, drawings, designs,
proprietary know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights" and individually as a
"Proprietary Right"), owned, leased, used or held for use in, related to, or
associated with, directly or indirectly (in whole or in part), the Sellers'
operation of the Business, and the same are sufficient to conduct such Business
as it has been and is now being conducted. The operations of the Business do not
conflict with or infringe upon, and, to the Knowledge of the Capstead Companies,
no one has asserted to any Capstead Company that such operations conflict with
or infringe upon, any Proprietary Rights owned, possessed or used by any third
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party. To the Knowledge of the Capstead Companies, there are no third parties
whose operations conflict with or infringe upon, nor has anyone asserted that
such operations conflict with or infringe upon, any Proprietary Rights owned,
leased, used or held for use in, related to, or associated with, directly or
indirectly (in whole or in part), the Sellers' operation of the Business. The
Sellers have the unrestricted right to use, free of any rights or claims of
others, all Proprietary Rights in the development, provision, use, sale or other
disposition of any or all products or services presently being, or contemplated
to be, used, furnished or sold in connection with the operation of the Business.
Without limiting the generality of the foregoing, the Capstead Companies have
conducted routine audits to ensure the removal of unlicensed software used in
the Business, and licenses have been obtained for all software used in the
Business that require license.
(b) All of the Business' internal systems and all products and
services marketed by the Business are in the process of review and revision
pursuant to the Company's plan to make such systems Year 2000 Compliant and,
pursuant to such plan, such systems are reasonably scheduled and expected to be
Year 2000 Compliant by June 30, 1999, so long as Purchaser, in its operation of
the Business following the Closing Date, continues to proceed with such plan and
does not depart in any material respect therefrom. There are no pending, and
none of the Capstead Companies has any Knowledge of any Threatened, claims
against the Business relating to whether the products and services of the
Business are Year 2000 Compliant. Sellers will assign to Purchaser all
contractual indemnification and warranty rights that could be exercised by
Sellers with respect to any Year 2000 Compliant issue.
2.27 LABOR.
(a) There are no labor controversies pending or, to the Knowledge of
each Capstead Company, Threatened which would have, individually or in the
aggregate, a Material Adverse Effect with respect to the Business or the
Company, as the case may be.
(b) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not constitute "plant closings" or
"mass layoffs" (each as defined in the Workers Adjustment and Retraining
Notification Act ("WARN")) or otherwise require notification to employees under
WARN.
(c) The employees of the Sellers involved in the Business are neither
subject to any collective bargaining agreement nor subject to any petition
pending, or to the Knowledge of the Capstead Companies, Threatened before the
National Labor Relations Board seeking recognition of a collective bargaining
unit.
2.28 COMPLIANCE WITH LAW. The operation of the Business has been conducted
in all material respects in accordance with all applicable Legal Requirements of
Governmental
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Bodies, including, without limitation, ERISA, all Environmental Laws, all Legal
Requirements, and orders relating to antitrust or trade regulation, employment
practices and procedures, the health and safety of employees, consumer credit,
servicing and mortgage lending or brokering. No Seller has received any notice
of alleged violations of any of the foregoing, except as set forth in the
attached Schedule 2.28, nor has the Business been the subject of any criminal
proceedings or convicted of any felony or misdemeanor. In particular, and
without limiting the foregoing, neither any Seller nor, to the Knowledge of the
Capstead Companies, any director, officer, agent, employee, or other Person
associated with or acting on behalf of any Seller has, directly or indirectly in
connection with or related to the Business, used any corporate funds of any
Seller for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity; made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; established or maintained any
unlawful or unrecorded fund of corporate moneys or other assets of any Seller;
made any false or fictitious entry on the books or records of any Seller; made
any bribe, rebate, payoff, influence payment, kickback, or other unlawful
payment of a similar or comparable nature, whether lawful or not, to any Person,
private or public, regardless of form, whether in money, property, or services,
to obtain favorable treatment in securing business or to obtain special
concessions, or to pay for favorable treatment for business secured or for
special concessions already obtained.
2.29 LITIGATION. Except as set forth in the attached Schedule 2.29, and
whether or not covered by insurance, to the extent it relates to or is
associated with, directly or indirectly (in whole or in part) the Sellers'
operation of the Business, there is no claim, dispute, Proceeding, appeal or, to
the Knowledge of each Capstead Company, investigation or inquiry, at law or in
equity, involving any Seller, or involving any of the Purchased Assets
(including, without limitation, claims relating to the use of any Proprietary
Rights) before any court, agency, authority, arbitration panel or other
Governmental Body (other than those, if any, with respect to which service of
process or similar notice has not yet been made on such Seller), and, to the
Knowledge of the Capstead Companies, none have been Threatened against any
Seller. To the Knowledge of each Capstead Company, there are no facts which, if
known to shareholders, customers, Governmental Bodies, bondholders or other
investors, mortgage insurance companies, HUD, FHLMC, FNMA or other Persons,
would form the basis of any such claim, dispute, Proceeding, or appeal which
would have a Material Adverse Effect on the Business. No Seller is subject to
any settlement agreement, writ, injunction, decree or other Order (including any
consent decree) of any court, agency, authority, arbitration panel or other
Governmental Body relating to, or associated with, directly or indirectly (in
whole or in part), the Business or that would affect the execution or
performance of this Agreement or any Related Agreement or the performance of any
Capstead Company's obligations hereunder or thereunder.
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2.30 NO CONFLICT. The execution and delivery of this Agreement and any
Related Agreement by the Capstead Companies, and the performance of their
respective obligations hereunder or thereunder, (a) are not in violation or
breach of, and will not conflict with or constitute a default under, any of the
terms of the charter documents or by-laws of the applicable Capstead Company or
any note, debt instrument, security agreement, lease, deed of trust or mortgage,
license, franchise, permit or any other Contract binding upon the applicable
Capstead Company, or upon any of its assets or properties; (b) will not result
in the creation or imposition of any Lien in favor of any third party upon any
of the material assets or properties of the applicable Capstead Company,
(including, without limitation, any of the Purchased Assets); and (c) will not
conflict with or violate any Order or any applicable Legal Requirement of any
Governmental Body having jurisdiction over any Capstead Company or any of the
Purchased Assets. The attached Schedule 2.30 contains a true and complete list
of all permits, Authorizations and Consents of third parties required to be
obtained by any Capstead Company in connection with (i) the execution and
delivery of this Agreement and any applicable Related Agreement by each Capstead
Company and the performance of its respective obligations hereunder or
thereunder, (ii) the continuation of the Business through the Closing Date, or
(iii) the sale, transfer and assignment of the Purchased Assets (including,
without limitation, any Consents), and the assumption by Purchaser of the
Assumed Liabilities, in each case in order to avoid a Breach, default,
termination, acceleration or modification of any Contract included within the
foregoing.
2.31 COPIES OF CERTAIN DOCUMENTS. Each Seller has heretofore delivered or
made available to Purchaser true and complete copies of: (a) all Contracts
entered into by such Seller, if any, providing for the acquisition or
disposition of businesses or product or service lines to the extent it relates
to or is associated with, directly or indirectly (in whole or in part), the
Sellers' operation of the Business and; (b) all federal and other Tax Returns
filed by the Company and, to the extent it relates to or is associated with,
directly or indirectly (in whole or in part), the Sellers' operation of the
Business, by any Seller for the years ended December 31, 1997 and December 31,
1996.
2.32 UNDERLYING DOCUMENTS. Any underlying documents listed or described in
the Schedules referred to in this Agreement have heretofore been delivered or
made available to Purchaser or its representatives. All such documents furnished
to Purchaser are true and complete copies, and there are no amendments or
modifications thereto, except as expressly noted in the Schedules in which such
documents are incorporated.
2.33 BUSINESS OF THE COMPANY. There exist no condition or conditions with
respect to the markets, products, facilities or personnel of the Company or the
operation of the Business which either individually or in the aggregate could
have a Material Adverse Effect with respect to the Business.
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2.34 BROKERS OR FINDERS. No Capstead Company has incurred, and no Capstead
Company will incur, directly or indirectly, any Liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or the transactions contemplated hereby, except for fees to
Merrill Lynch & Co. and to Cohane Rafferty Securities, Inc., payment of which
fees shall be the sole responsibility of the Capstead Companies. There are no
outstanding liabilities or claims for brokerage or finders' fees or agents'
commissions or any other similar charges in connection with any Purchased Asset
or Assumed Obligation.
2.35 DISCLOSURE OF MATERIAL FACTS. To the Knowledge of each Capstead
Company, the representations and warranties contained in this Article II of this
Agreement and in the Schedules hereto, and any other documents or information
furnished to Purchaser by or on behalf of any Capstead Company, do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements contained herein or therein in the
light of the circumstances under which they were made, not misleading.
2.36 FINANCIAL CONDITION.
(a) The Capstead Companies, both individually and taken as a whole
are solvent; and no bankruptcy, reorganization, insolvency or similar proceeding
with respect to any Capstead Company has been initiated or is presently
contemplated;
(b) Sellers have received reasonably equivalent value for the
Purchased Assets from Purchaser;
(c) The transactions contemplated by this Agreement and the Related
Agreements are not being entered into:
(i) with any intent to hinder, delay or defraud any Person to
which the Capstead Companies or any of them were or will become indebted on
or after the Closing Date;
(ii) while the Capstead Companies or any of them was insolvent,
nor will the consummation of such contemplated transactions render the
Capstead Companies or any of them insolvent;
(iii) at a time when or under circumstances where the Capstead
Companies or any of them were engaged in business or a transaction, for
which any property remaining with the transferor would constitute
unreasonably small capital; or
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(iv) at a time when or under circumstances where the Capstead
Companies or any of them intended to incur, or believed that any of them
would incur, Liabilities that would be beyond the ability of the Capstead
Companies or any of them to pay as such Liabilities matured;
(d) To the Knowledge of each Capstead Company, the Purchaser is not a
creditor of the Capstead Companies or any of them. The transactions contemplated
by this Agreement and the Related Agreements are not being made on account of or
in satisfaction of any claim held by the Purchaser, other than such claim or
claims that might arise or have arisen in connection with the execution of this
Agreement or any Related Agreement; and
(e) Except as set forth in Schedule 2.36(e), since November 30, 1997,
there have been no transfers, sales or assignments between or among any of the
Capstead Companies with respect to any of the Purchased Assets or Assumed
Obligations. Each such sale, transfer or assignment set forth on Schedule
2.36(e) was for consideration at least equal to the fair value of such asset or
property.
2.37 EMPLOYEES. The Company employs a total of approximately 265 full-time
employees, 5 part-time employees and 21 part-time interns; to the Knowledge of
the Capstead Companies, all employees employed by the Company work solely in the
Business and no employees involved in the Business are employed by anyone other
than the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers, as of the date hereof and
hereafter through the Closing Date, as follows:
3.01 ORGANIZATION. Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware, and is a wholly owned
subsidiary of Residential Funding Corporation, a Delaware corporation.
3.02 VALIDITY OF AGREEMENT. Purchaser has full corporate power and
authority to execute and deliver this Agreement and any applicable Related
Agreement and to perform its obligations hereunder and thereunder. This
Agreement constitutes, and each Related Agreement to which Purchaser is a party,
when executed and delivered, will constitute, the legal, valid and binding
obligation of Purchaser, enforceable against it in accordance with its terms.
The execution and delivery of this Agreement and any applicable Related
Agreement by Purchaser, as the case may be, and the consummation of the
transactions contemplated hereby
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and thereby, have been duly authorized by the Board of Directors of Purchaser,
and such executions and delivery, and the consummation of such transactions, do
not require the Consent of any Person other than the Board of Directors of
HomeComings Financial Network, Inc., Residential Funding Corporation, GMAC
Mortgage Group, Inc., General Motors Acceptance Corporation, and General Motors
Corporation and such Consent as may be required under the HSR Act.
3.03 NO CONFLICT. The execution and delivery of this Agreement and any
Related Agreement by Purchaser, and the performance of its obligations hereunder
or thereunder, are not in violation or breach of, and will not conflict with or
constitute a default under, any of the terms of its Certificate of Incorporation
or by-laws (each as amended to date), or any note, debt instrument, security
instrument, deed of trust or mortgage or any other Contract binding upon
Purchaser or its assets or properties, and will not result in the creation or
imposition of any Lien in favor of any third party upon any of the assets or
properties of Purchaser, or conflict with or violate any applicable Legal
Requirement or Order of any Governmental Body having jurisdiction over Purchaser
or its assets or properties.
3.04 BROKERS OR FINDERS. Purchaser has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or the
transactions contemplated hereby, except for fees to Countrywide Capital
Markets, which fees shall be the sole responsibility of Purchaser.
3.05 BOARD ACTION. The execution and delivery of this Agreement and each
Related Agreement and the consummation of the transactions contemplated hereby
and thereby have been submitted to the Board of Directors of each of General
Motors Acceptance Corporation and General Motors Corporation accompanied by a
request that each such Board find no objection with respect thereto.
ARTICLE IV
COVENANTS
4.01 CONDUCT OF BUSINESS. Except for matters required by this Agreement,
and such other matters, if any, as may be consented to by Purchaser in writing,
from the date of this Agreement until the Closing Date, the Capstead Companies
shall conduct the Business and the affairs of the Business only in the ordinary
and usual course and shall not engage in any activity or enter into any
transaction outside the ordinary and usual course of business. The Sellers shall
maintain their books, accounts and records in the ordinary and usual manner and
in accordance with GAAP. Anything herein to the contrary notwithstanding,
acquisition of additional servicing rights (not including sub-servicing) other
than pursuant to pre-existing
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"flow" agreements or pursuant to the Company's origination program
or other Contracts, activities and businesses as set forth on Schedule 4.01,
shall not be considered a transaction in the ordinary and usual course of
business, and shall require the consent of Purchaser.
4.02 NEGATIVE COVENANTS. Except as contemplated by this Agreement, no
Seller shall, without the prior written consent of Purchaser, take or cause to
be taken any action described in clauses (c) through (u), inclusive, of Section
2.08 between the date of this Agreement and the Closing Date to the extent
applicable to such Seller.
4.03 PRESERVATION OF BUSINESS. Except as otherwise contemplated in Section
6.08 of this Agreement, from the date of this Agreement until the Closing Date,
each Seller shall use Commercially Reasonable Efforts to preserve intact the
Business' business organization and to preserve for Purchaser the goodwill of
the Business as to employees, suppliers, customers and others having business
relations with the Business or to the extent it relates to or is associated
with, directly or indirectly (in whole or in part), the Sellers' operation of
the Business or the Company. From the date of this Agreement until the Closing
Date, the Company shall use its Commercially Reasonable Efforts to retain the
active employment of its employees and to assist Purchaser in hiring such
employees as New Hires (as defined in Section (b)) as Purchaser shall desire.
The Sellers agree to cooperate with Purchaser by permitting Purchaser throughout
the period prior to the Closing Date to meet with employees of the Company at
such times as shall be approved by a representative of the Company.
4.04 UPDATING OF SCHEDULES. Between the date of this Agreement and the
Closing Date, each Capstead Company will promptly notify Purchaser in writing if
such Capstead Company becomes aware of any fact or condition that causes or
constitutes a Breach of any of the Capstead Companies' representations and
warranties as of the date of this Agreement, or if such Capstead Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that would cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Schedules if the Schedules were dated the
date of the occurrence or discovery of any such fact or condition, the Capstead
Companies will promptly deliver to Purchaser a supplement to the Schedules
specifying such change; provided, that to the extent any such facts or
conditions are solely the result of any of the activities permitted by Section
4.01 and not prohibited by Section 4.02, such facts or conditions, when
disclosed by such Seller in a supplement to the Schedule in accordance with this
Section 4.04 (each such supplement to the extent it relates solely to facts or
conditions referred to in this proviso, a "Permitted Supplement"), shall not
constitute a Breach hereunder. During the same period, each Capstead Company
will promptly notify Purchaser of the occurrence of any Breach of any covenant
of the Capstead Companies in this Agreement.
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4.05 ACCESS TO INFORMATION. The Capstead Companies will afford to the
officers, attorneys, accountants and other representatives of Purchaser full
access during reasonable business hours to all of the assets, properties, books
and records of the Business to the extent it relates to, or is associated with,
directly or indirectly (in whole or in part), the Sellers' operation of the
Business in order to afford Purchaser such full opportunity of review,
examination and investigation as Purchaser shall desire with respect to the
affairs of the Business. The Capstead Companies shall furnish or cause to be
furnished to Purchaser such financial and operating data and other information
as to the condition (financial or otherwise), business, net worth, assets,
properties, servicing rights, escrow accounts, operations or future prospects of
the Business as Purchaser may reasonably request and which is either normally
available to the Capstead Companies in the ordinary and usual course of business
or which may be obtained or produced by the Capstead Companies at a reasonable
cost to the Sellers. No such review, examination or investigation by Purchaser
shall affect or in any way diminish the representations, warranties or covenants
of the Capstead Companies hereunder. In addition, the Capstead Companies shall
furnish to Purchaser any information or copies of any document in their
possession or control which may be relevant to any audit, examination or
proceeding arising subsequent to the Closing Date and relating to the assessment
or collection of any Tax relating, directly or indirectly, to the Purchased
Assets, the Assumed Obligations, or the Business.
4.06 FULFILLMENT OF CONDITIONS AND COVENANTS. No party will take any course
of action inconsistent with satisfaction of the requirements or conditions
applicable to it set forth in this Agreement. Each party shall use its
Commercially Reasonable Efforts to perform as early as possible the obligations
herein provided to be performed by it.
4.07 PRESS RELEASES. No party will issue or authorize to be issued any
press release or similar announcement concerning this Agreement or any of the
transactions contemplated hereby without the prior approval of the other
parties, which approval shall not be unreasonably withheld and which approval
shall be given in order to allow compliance with the disclosure requirements of
applicable laws and regulatory authorities.
4.08 THIRD PARTY CONSENTS. Each Capstead Company shall use Commercially
Reasonable Efforts to obtain, as soon as reasonably practicable, all Consents
required to be obtained by any of the Capstead Companies from third parties or
Governmental Bodies necessary to consummate this Agreement and the transactions
contemplated hereby, including, without limitation, (i) any such Consents
required to be obtained by any of the Capstead Companies in connection with the
transfer of the Purchased Assets or the Assumed Obligations to Purchaser and
(ii) all Consents necessary to permit the assignment of the Assumed Contracts
listed on Schedule 1.01(e). All such Consents shall be obtained at the joint and
several expense of the Capstead Companies. With respect to the assignment of the
Assumed Contracts, Purchaser's assumption of such Contracts shall be on terms no
less favorable than,
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and at prices no greater than, currently in effect. Without in any way limiting
or modifying the conditions to the Purchaser's obligations set forth in Section
6.05, each Capstead Company will continue to use Commercially Reasonable Efforts
after the Closing Date to obtain any Consents that are not obtained prior to the
Closing Date. This Agreement shall not operate to assign any Contract, or any
claim, right or benefit arising thereunder or resulting therefrom, if an
attempted assignment thereof, without the Consent of a third party thereto,
would constitute a Breach, default or other contravention thereof or in any way
adversely affect the rights of any Capstead Company or Purchaser thereunder. If
a Consent required to assign any Contract is not obtained on or prior to the
Closing Date, then, to the extent permitted by law, the Capstead Companies will
(until such time as such Consent is obtained and the assignment of such Contract
to Purchaser is effected to Purchaser's reasonable satisfaction) use
Commercially Reasonable Efforts at their sole expense to (i) provide to
Purchaser the benefits of the applicable Contract on terms no less favorable
than, and at prices no greater than, are currently in effect with respect to the
Capstead Companies, (ii) cooperate in any reasonable and lawful arrangement
designed to provide the benefits of the applicable Contract to Purchaser,
including, without limitation, entering into subcontracts for performance, and
(iii) enforce at the request of Purchaser and for the account of Purchaser any
rights of the Capstead Companies arising from any such Contract (including,
without limitation, the right to elect to terminate such Contract in accordance
with the terms thereof upon the request of Purchaser), which termination shall,
upon becoming effective, relieve the Capstead Companies of any further
obligation under this Section 4.08 with respect to such Contract. Until such
time as any Consent is obtained and the assignment of such Contract to Purchaser
is effected to Purchaser's reasonable satisfaction, such Contract shall not be
an Assumed Contract and shall be deemed an Excluded Asset and a Retained
Liability. Notwithstanding anything contained in this Section 4.08 or elsewhere
in this Agreement to the contrary, except with respect to Contracts which
Purchaser has requested be terminated (and as to which such termination has
become effective), the Capstead Companies shall not be relieved of (i) their
obligation to assign effectively to Purchaser all of the Assumed Contracts
listed in Schedule 1.01(e) or (ii) any Liability for failing to have done so.
Purchaser covenants, upon request of any of the Capstead Companies, to use its
Commercially Reasonable Efforts to provide the following assistance to the
Capstead Companies (at the sole expense of the Capstead Companies) in connection
with their attempting to obtain any Consents required hereunder: (i) providing
reasonable access to an appropriate employee or employees of Purchaser solely
for the purpose of speaking with third parties (from whom any such Consents are
requested by any of the Capstead Companies) concerning the general nature of the
business of Purchaser to the extent it reasonably relates to Purchaser's
obligations to acquire the Purchased Assets and the Assumed Contracts and (ii)
the provision of the financial information concerning Purchaser specifically
identified on Schedule 4.08 hereto.
4.09 CERTAIN NOTIFICATIONS. Each party shall promptly notify the others in
writing of the occurrence of any event which will or could reasonably be
expected to result in the failure
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to satisfy any of the conditions to the obligations of such other parties
specified in Article V, VI or VII, as the case may be, of this Agreement.
4.10 ANTITRUST MATTERS. The Capstead Companies and Purchaser shall prepare
and file, and shall in all respects cooperate with each other in the preparation
and filing of, any documents required in connection with providing notification
to the Federal Trade Commission and the Antitrust Division of the Department of
Justice of the transactions contemplated hereunder, and shall respond, or
cooperate in responding, to any inquiry made by either with respect to such
transactions.
4.11 EMPLOYEE BENEFITS.
(a) Except to the extent otherwise provided in Subsection (c) of this
Section 4.11, each of the Capstead Companies shall retain all Liabilities and
obligations resulting from or arising out of the Plans (and defined in Section
2.21(b)) and Purchaser shall not assume any such Liability or obligation and the
Capstead Companies shall, jointly and severally, indemnify and hold Purchaser
harmless with respect thereto. The indemnification set forth in the preceding
sentence shall be in addition to and shall not limit the indemnification set
forth in Section 9.01, but shall be subject to the provisions of Article IX.
(b) Purchaser shall offer "at will" employment to no fewer than 95%
of the full-time employees of the Business as of the Closing Date (the
"Offerees") with job responsibilities reasonably comparable to those performed
by such Offerees with respect to the Business prior to the Closing, and such
offer of employment shall give each such Offeree, as a New Hire, the opportunity
to participate in each of the benefit plans of Purchaser under the same terms
and conditions as similarly situated employees of Purchaser and Purchaser shall
give credit for such Offeree's years of service as an employee of any one or
more of the Capstead Companies with respect to nonwage-related terms of
employment such as vacation days and eligibility for participation and vesting
in Purchaser's employee benefit plans but not for the purpose of benefit
accrual. Such Offerees shall be offered base salary and wage levels of no less
than, and bonus structures (but excluding any Christmas/Holiday bonus)
comparable to, those provided by the applicable Capstead Company to such
employees immediately prior to the Closing. Any such Offerees hired by Purchaser
shall be deemed "new hires" of Purchaser ("New Hires") and Purchaser shall have
no Liability on account of the previous employment of such New Hires by any of
the Capstead Companies.
(c) To the extent permitted under Applicable Tax Law, each Capstead
Company shall take such steps as may be necessary to enable employees of any of
the Capstead Companies who become New Hires to receive a distribution of amounts
credited to their accounts under any of the Capstead Company Pension Plans which
are intended to qualify under Section 401(k) of the Code ("Sellers' 401(k)
Plan"). To the extent permitted under
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Applicable Tax Law, Purchaser agrees to make available a plan which is intended
to qualify under Section 401(k) of the Code ("Purchaser's 401(k) Plan") for the
benefit of employees of the Capstead Companies who become employees of Purchaser
after the Closing and to provide such employees the opportunity under such plan
to transfer thereto the amounts distributed from Capstead Companies' 401(k)
Plan. Each Capstead Company shall take such action as is necessary to cause the
New Hires to become 100% vested as of the Closing Date in their benefits under
Sellers' 401(k) Plan, any other Pension Plan intended to meet the qualification
requirements of Section 401(a) of the Code, and any nonqualified deferred
compensation plan or arrangement. Furthermore, each Capstead Company shall take
whatever action is necessary to cause the New Hires to become 100% vested as of
the Closing Date in all stock options, restricted stock grants, and all other
equity based awards and be entitled to exercise and continue to exercise all
stock options and all other equity based awards having an exercise schedule and
to retain such grants and awards to the same extent as if they were vested upon
termination of employment in accordance with their terms. Each Capstead Company
will cause, to the extent permitted under Applicable Tax Law without causing a
loan to become a taxable distribution or to violate the provisions of ERISA,
Sellers' 401(k) Plan to provide that loans do not become due and will not be
deemed to be in default until at least sixty (60) days after the Closing Date.
Within sixty (60) days after the Closing Date, Purchaser will loan to each
Company employee who (i) becomes an employee of Purchaser immediately after the
Closing Date and remains an employee of Purchaser on the date of the loan and
(ii) signs and delivers to Purchaser a promissory note in the form specified by
the Purchaser in the amount of the employee's outstanding loan balance in
Sellers' 401(k) Plan in order to allow the employee to repay that loan prior to
making a direct rollover from the Seller's 401(k) Plan to Purchaser's 401(k)
Plan.
(d) Each Seller shall continue to provide health care continuation
coverage required to be provided under the provisions of Sections 601 through
608 of ERISA, including, without limitation, the regulations promulgated
thereunder, for all employees (and their dependents and beneficiaries), for
qualifying events occurring at or before the Closing Date, including, without
limitation, any obligations arising as a result of any termination of employment
of employees in connection with this Agreement. Purchaser shall be responsible
for providing health care continuation coverage required to be provided under
the provisions of Section 601 through 608 of ERISA for the New Hires (and their
dependents and beneficiaries) for qualifying events occurring after the Closing
Date; provided that, if requested by Purchaser, and with respect to any New
Hires (and their dependents and beneficiaries) that are not eligible for
coverage under the Purchaser's health plans, each Seller shall provide such
continuation coverage for the New Hires (and their dependents and beneficiaries)
until the earlier of (i) the expiration of a period of 18 months following the
Closing Date, and (ii) the date on which such New Hires (and their dependents
and beneficiaries) are covered under Purchaser's health care plans. Purchaser
shall reimburse such Seller for the Seller's actual out-of-pocket costs and
expenses in providing such requested coverage.
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(e) Each Seller shall comply with all applicable Legal Requirements
of any Governmental Body relating to employees in connection with the
transactions contemplated herein, including, without limitation, New Hires, and
any notice or other requirements under WARN, or any similar Legal Requirements,
and the Capstead Companies shall, jointly and severally, indemnify and hold
Purchaser harmless with respect thereto. The indemnification set forth in the
preceding sentence shall be in addition to and shall not limit the
indemnification set forth in Section 9.01, but shall be subject to the
provisions of Article IX, other than the time limitations contained in Section
9.04.
(f) Each Capstead Company shall retain the Liability for all claims
which are incurred under any Pension Plan, Welfare Plan or other plan or
arrangement maintained by any of them prior to the Closing Date, and neither
Purchaser nor any of its Affiliates shall have any responsibility or Liability
for the payment of such benefits. More specifically, but not expanding or
limiting such retained Liability, each Capstead Company shall retain Liability
for (i) incurred but unpaid life insurance claims; (ii) workers' compensation,
long term disability and short term disability claims incurred before the
Closing Date and not yet reported or claims made and not paid; (iii) life
insurance waiver of premium claims incurred before the Closing Date and not yet
reported or claims made and not yet paid; (iv) medical coverage (to the extent
provided) for individuals disabled as of the Closing Date; (v) benefits to all
individuals entitled to benefits required to be provided by the continuation
health care coverage requirements of Section 4980B of the Code and Sections 601
through 607 of ERISA as of the Closing Date; (vi) continuation of benefit
coverage for surviving spouses and other dependents and beneficiaries of
employees (to the extent provided) who die prior to the Closing Date; and (vii)
all benefits of any kind for (A) all former or current employees of each Seller
(and their spouses and dependents and beneficiaries) who are (1) on a leave of
absence, workers' compensation, long-term disability or short-term disability as
of the Closing Date or (2) not New Hires and (B) all spouses, dependents and
beneficiaries of New Hires who are, as of the Closing Date, receiving disability
benefits of any kind. In addition, neither Purchaser nor any of its Affiliates
shall have any obligation to establish or continue in effect any benefit
program, plan or arrangement available to New Hires prior to the Closing Date.
4.12 POST-CLOSING INFORMATION. From time to time after the Closing, the
parties shall deliver to each other and shall furnish access to and copies of
any books and records and other information and data as any party may reasonably
request, including, without limitation, that required in order to enable such
party to complete and file all Federal, state and local Tax Returns which may be
required to be filed by it and to complete all customary Tax and accounting
procedures, to make any disclosures required under any applicable securities
laws or other local regulations and otherwise to enable such party to satisfy
its internal accounting, Tax, and other requirements.
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4.13 ADMINISTRATION OF ACCOUNTS.
(a) In Trust for Purchaser. All payments and reimbursements made by
any third party in the name of or to any Capstead Company in connection with or
arising out of the Purchased Assets and Assumed Obligations in respect of any
period on or after the Closing Date shall be held by such Capstead Company in
trust for the benefit of Purchaser and, promptly upon receipt by such Capstead
Company of any such payment or reimbursements, such Capstead Company shall pay
over to Purchaser the amount of such payment or reimbursement without right of
set off.
(b) In Trust for Capstead Companies. All payments and reimbursements
made by any third party in the name of or to Purchaser in connection with or
arising out of (i) the Excluded Assets (other than those assets listed on
Schedule 1.05(e) which assets are to be for the benefit of GMACMC as provided in
the Servicing Purchase Agreement), (ii) Retained Liabilities, or (iii) in
respect of any period prior to the Closing Date, the Purchased Assets and
Assumed Obligations, shall be held by Purchaser in trust for the benefit of such
Capstead Company and, promptly upon receipt by Purchaser of any such payment or
reimbursement, Purchaser shall pay over to such Capstead Company the amount of
such payment or reimbursement without right of set off.
4.14 ASSUMPTION OF QUALIFICATION. Purchaser agrees that, solely for
purposes of the Capstead Companies' representations and warranties contained in
this Agreement, the Capstead Companies may assume that Purchaser is duly
qualified and has all material approvals as a lender, servicer of mortgage loans
and seller of mortgage loans in order to permit it to acquire the Purchased
Assets and undertake the Assumed Obligations; provided, however, that in no
event shall Purchaser be deemed to have made any representation or warranty
whatsoever with respect to the foregoing.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to consummate the transactions contemplated by
this Agreement shall be subject to the following conditions, except as Sellers
may waive the same in writing in accordance with Section 10.01 of this
Agreement.
5.01 PERFORMANCE. Purchaser shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or satisfied by it on or prior to the Closing Date.
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5.02 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser set forth in Article III hereof shall be true and complete in all
material respects on the date hereof and on the Closing Date, as if made again
at and as of such time, subject to any transactions which are expressly
contemplated or permitted by this Agreement.
5.03 LEGAL OPINION. Lorna Gleason, General Counsel of Residential Funding
Corporation, shall, immediately prior to the Closing Date, have delivered to
Sellers an opinion, dated the Closing Date and addressed to Sellers, in form and
substance reasonably satisfactory to counsel for Sellers, to the following
effect: (a) Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of its state of incorporation; and (b) this
Agreement and the Related Agreements to which Purchaser is a party and the
transactions contemplated hereby and thereby have been duly authorized on behalf
of Purchaser by all requisite corporate action and this Agreement and the
Related Agreements to which Purchaser is a party constitutes the legal, valid
and binding obligation of Purchaser.
5.04 OFFICERS' CERTIFICATE. Purchaser shall furnish to Sellers such
certificates of its officers, to evidence compliance with the conditions set
forth in this Article V, as may be reasonably requested by Sellers.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions contemplated by
this Agreement shall be subject to the following conditions, except as Purchaser
may waive the same in writing in accordance with Section 10.01 of this
Agreement.
6.01 PERFORMANCE. Each Capstead Company shall have performed and complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or satisfied by it on or prior to the Closing Date
(considered collectively) and each of such agreements and covenants (considered
individually), shall have been performed and complied with in all material
respects.
6.02 REPRESENTATIONS AND WARRANTIES. (i) All of the representations and
warranties of each of the Capstead Companies in this Agreement (considered
collectively), and each of those representations and warranties (considered
individually), must have been true and complete in all material respects as of
the date of this Agreement, and (ii) all of the representations and warranties
of the Capstead Companies in this Agreement (considered collectively), and each
of those representations and warranties (considered individually), must be true
and complete in all material respects as of the Closing Date as if made again at
and as
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of such time, without giving effect to any supplement to the Schedules permitted
by Section 4.04 except Permitted Supplements, and (iii) each representation and
warranty of any of the Capstead Companies in this Agreement, to the extent there
appears therein any qualifiers, modifiers or limitations with respect to (A)
"Knowledge" or (B) "material," "Material," "materiality," "in all material
respects" or words of similar import or meaning, must also have been true and
complete in all respects as of the date of this Agreement, and (iv) each
representation and warranty of any of the Capstead Companies in this Agreement,
to the extent there appears therein any qualifiers, modifiers or limitations
with respect to (A) "Knowledge" or (B) "material," "Material," "materiality,"
"in all material respects" or words of similar import or meaning, must also have
been true and complete in all respects as of the Closing Date as if made again
at and as of such time, without giving effect to any supplement to the Schedules
permitted by Section 4.04 except Permitted Supplements.
6.03 MATERIAL ADVERSE EFFECT. From September 30, 1998 to the Closing Date,
there shall have been no Material Adverse Effect with respect to the Business,
and there shall be no condition or conditions existing with respect to the
markets, products, facilities or personnel of the Company or the operation of
the Business which, either individually or in the aggregate, could have a
Material Adverse Effect with respect to the Business.
6.04 LEGAL OPINION. Andrews & Kurth L.L.P., as counsel to the Capstead
Companies, shall, immediately prior to the Closing, have delivered to Purchaser
its opinion, dated the Closing Date and addressed to Purchaser, in substantially
the form attached hereto as Appendix IV.
6.05 THIRD PARTY CONSENTS.
(a) The Capstead Companies shall have obtained each of the Consents
referred to in Schedule 6.05 of this Agreement (the "Material Consents") in form
and substance reasonably satisfactory to Purchaser.
(b) The Capstead Companies shall also have obtained all Consents
(other than the Material Consents) referred to on Schedule 2.30 of this
Agreement in form and substance reasonably satisfactory to Purchaser (other than
Consents, the failure of which to obtain, in the aggregate, would not have a
Material Adverse Effect with respect to the Business). Purchaser shall have
received evidence reasonably satisfactory to it of the receipt of all such
Consents.
6.06 DELIVERY OF BUSINESS RECORDS. The Capstead Companies shall, on or
immediately prior to the Closing Date, have delivered to Purchaser, or caused to
be delivered (or otherwise surrendered possession to Purchaser of) all material
documents and records related to the Purchased Assets and the Assumed
Obligations.
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6.07 EMPLOYMENT OF NEW HIRES. On or prior to the Closing Date, at least 75%
of the Offerees referred to in Section 4.11(b) and at least eight (8) of the
Offerees specified in Schedule 6.07 shall have agreed to accept employment with
Purchaser, on terms and conditions reasonably satisfactory to Purchaser.
6.08 TERMINATION OF CONTRACTUAL ARRANGEMENTS. Prior to the Closing Date,
the Sellers shall have delivered to Purchaser evidence, satisfactory to
Purchaser in its discretion, that each of the Contracts described on the
attached Schedule 6.08 have been terminated and have no further force or effect,
and such termination shall result in no Liability or expense on the part of the
Capstead Companies or the Purchaser.
6.09 OFFICERS' CERTIFICATES. Each Capstead Company shall have furnished to
Purchaser (a) a certification executed by its senior officers that the
conditions set forth in Sections 6.01, 6.02, and 6.03 have been fulfilled, and
(b) such other certificates of its officers, to evidence its compliance with the
conditions set forth in this Article VI, as may be reasonably requested by
Purchaser.
6.10 RESERVED.
6.11 ADDITIONAL DOCUMENTS. The Capstead Companies shall have delivered to
Purchaser such other documents as Purchaser may reasonably request for the
purpose of evidencing the satisfaction of any condition referred to in this
Article VI.
6.12 ENVIRONMENTAL. Purchaser shall have received prior to the Closing Date
an acceptable Phase I environmental report relating to Cityplace Center East,
2711 North Haskell Avenue, Dallas, Texas 75204-2915.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF EACH OF THE PARTIES
The obligations of each of the parties to consummate the transactions
contemplated by this Agreement shall be subject to the following conditions,
except as any of them may waive the same in writing in accordance with Section
10.01 of this Agreement.
7.01 NO PROCEEDINGS. Immediately prior to the Closing Date, there shall (a)
have been no Order issued or any other action taken by any Governmental Body,
restraining, enjoining, otherwise prohibiting the transactions contemplated
under this Agreement or the Servicing Purchase Agreement, or that would prevent,
delay, make illegal or otherwise materially interfere with or materially affect
the ability of the Capstead Companies to perform their obligations under this
Agreement (including, without limitation, paying claims made
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under Article IX); and (b) be no Proceeding pending or Threatened with respect
to any Capstead Company or Purchaser, which, if decided adversely to such party
would have a Material Adverse Effect with respect to any of the Capstead
Companies, the Business, any of the Purchased Assets or the right of Purchaser
to purchase or retain the Purchased Assets or to continue the operations of the
Business and which, in the judgment of Purchaser would make the consummation of
this Agreement inadvisable; provided, however, that the foregoing condition
shall not apply to the Capstead Litigation pending on the date of this Agreement
so long as no further event shall have occurred with respect to such litigation
after the date of this Agreement that would fall within the matters described in
the preceding clauses (a) and (b).
7.02 HART-SCOTT-RODINO ACT. Each of the Capstead Companies, Purchaser and
any other Person (as defined in the HSR Act and the rules and regulations
thereunder) required in connection with the transactions contemplated by this
Agreement to file a Notification and Report Form for Certain Mergers and
Acquisitions with the Department of Justice and the FTC pursuant to Title II of
the HSR Act shall have made such filing and the applicable waiting period with
respect to each such filing (including any extension thereof by reason of a
request for additional information) shall have expired or been terminated.
7.03 SERVICING PURCHASE AGREEMENT. On or prior to the Closing Date, the
Company and GMACMC shall have closed the transactions contemplated pursuant to
the Servicing Purchase Agreement.
7.04 TRANSITION SERVICES AGREEMENT. Purchaser and the Capstead Companies
shall have executed and delivered an agreement (the "Transition Services
Agreement") substantially in the form attached hereto as Exhibit IV hereto.
ARTICLE VIII
TERMINATION OF AGREEMENT
8.01 TERMINATION. This Agreement may be terminated as follows:
(a) By mutual written consent of each Capstead Company and of
Purchaser;
(b) At the election of all the Capstead Companies (and not less than
all of them), by written notice to Purchaser, if any one or more of the
conditions to the obligations of the Capstead Companies to consummate the
transactions hereunder, as specified in Article V or VII of this Agreement, has
not been fulfilled as of the Closing Date or has at any time become impossible
of being fulfilled by the Closing Date or if Purchaser fails or refuses to
perform its obligations, or execute and deliver the documents, required under
this Agreement (provided that no Capstead Company shall have failed or refused
to perform its respective obligations under this Agreement);
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(c) At the election of Purchaser by written notice from it to the
Capstead Companies, if any one or more of the conditions to the obligations of
Purchaser to consummate the transactions hereunder, as specified in Article VI
or VII of this Agreement, has not been fulfilled as of the Closing Date or has
at any time become impossible of being fulfilled by the Closing Date or if any
Capstead Company fails or refuses to perform its obligations, or execute and
deliver the documents, required under this Agreement (provided that Purchaser
shall not have failed or refused to perform its obligations under this
Agreement); or
(d) By either Purchaser or the Capstead Companies if the Closing has
not occurred (other than through the failure of any party seeking to terminate
this Agreement pursuant to this Section 8.01(d) to comply fully with its
obligations under this Agreement) on or before March 31, 1999 or such later date
as the parties may agree upon.
8.02 EFFECT OF TERMINATION. Each party's right of termination under Section
8.01 is in addition to any other rights it may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 8.01, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 10.04 and 10.05 will survive; provided, however, that if
this Agreement is terminated by Purchaser because of the Breach of the Agreement
by a Capstead Company or by the Capstead Companies because of the Breach of this
Agreement by the Purchaser, or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of such other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE IX
INDEMNIFICATION
9.01 INDEMNIFIABLE CLAIMS.
(a) Regardless of any investigation made at any time by or on behalf
of Purchaser or any information Purchaser or any of its representatives or
Affiliates may have, each Capstead Company will and hereby does, jointly and
severally, indemnify and hold Purchaser and any Affiliate of Purchaser, and
their respective officers, directors, employees and agents harmless from and
against any and all Liability, claim, loss, cost, damage or expense whatsoever
(including, without limitation, costs of investigation and defense and
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attorneys' fees and expenses) or diminution of value, whether or not involving a
third party claim (collectively, "Damages") resulting or arising, directly or
indirectly, from or in conjunction with: (i) any Breach of any representation or
warranty made by the Capstead Companies in this Agreement at the date of
execution and delivery of this Agreement (without taking into account or giving
effect to any qualifiers, modifiers or limitations contained therein using (A)
"Knowledge" or (B) "material," "materiality," "in all material respects" or
words of similar import or meaning, and without taking into account or giving
effect to any supplement to the Schedules, including any Permitted Supplement),
the Schedules, the supplements to the Schedules, any Related Agreement or any
other certificate or document delivered by the Capstead Companies pursuant to
this Agreement; (ii) any Breach of any representation or warranty made by the
Capstead Companies in this Agreement as if such representation or warranty were
made on and as of the Closing Date (without taking into account or giving effect
to any qualifiers, modifiers or limitations contained therein using (A)
"Knowledge" or (B) "material," "materiality," "in all material respects" or
words of similar import or meaning, and without taking into account or giving
effect to any supplement to the Schedules other than a Permitted Supplement);
(iii) any Breach of any covenant or obligation of any of the Capstead Companies
contained herein or in any Related Agreement; (iv) in whole or in part, any
Liability arising from or out of the conduct of the Business or any Capstead
Company's ownership or use of any of the Purchased Assets prior to the Closing
Date, whether such claims are asserted before or after the Closing Date (except
for any Liability under any Assumed Contract or under any Assumed Obligation,
the performance or payment of which was not due or owing on or prior to the
Closing Date), including, without limitation, any and all Liability for (A) fees
and expenses (including, without limitation, termination fees) owed by any
Capstead Company to any provider of professional services, including, without
limitation, legal, accounting or investment banking services, for services
rendered in connection with the transactions contemplated hereunder, (B) all
Taxes (including, without limitation, interest and penalties thereon) relating
to the Business or to any of the Capstead Companies for periods prior to the
Closing Date, (C) payments or penalties or Taxes arising out of or relating to
any of the employee benefit plans or other pension plans of the Company, and (D)
the Retained Liabilities; (v) or out of any Contract described on Schedule 6.08
of this Agreement; (vi) any claim by any Person for brokerage or finder's fees
or commissions or similar payments based upon any Contract alleged to have been
made by any such Person with any of the Capstead Companies (or any Person acting
on its behalf) in connection with any of the transactions contemplated hereby;
or (vii) the Capstead Litigation.
(b) Regardless of any investigation made at any time by or on behalf
of the Capstead Companies or any information the Capstead Companies or any of
their representatives or Affiliates may have, Purchaser will and hereby does
indemnify and hold each Capstead Company harmless from and against any and all
Liability, claim, loss, cost, damage or expense whatsoever (including, without
limitation, attorneys' fees and expenses) (i) resulting from or arising out of
any Breach of any representation or warranty of Purchaser
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contained herein or in any Related Agreement, (ii) resulting from or arising out
of any Breach of any covenant or obligation of Purchaser contained herein or in
any Related Agreement, (iii) resulting or arising directly or indirectly from or
out of the conduct of the Business or operation of the Purchased Assets after
the Closing Date, (iv) resulting or arising directly or indirectly from or out
of any Assumed Obligation; provided, however that Purchaser shall not be
obligated to so indemnify any of the Capstead Companies to the extent that such
payments are attributable to a Breach by any Capstead Company of any
representation, warranty or covenant made by any Capstead Company contained in
this Agreement, or (v) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any Contract alleged to have been
made by any such Person with Purchaser (or any Person acting on its behalf) in
connection with any of the transactions contemplated hereby.
(c) Notwithstanding the provisions set forth in Sections 9.01(a)(i)
and (a)(ii) that eliminate the effect of any qualifiers, modifiers or
limitations contained in the Capstead Companies' representations and warranties
using "Knowledge" or "material," "Material," "materiality," "in all material
respects" or words of similar import or meaning, for purposes of this Article
IX, the representations and warranties set forth in: (i) Section 2.07, to the
extent there appears therein any qualifiers, modifiers or limitations with
respect to "Knowledge" and "material," "Material," "materiality," and "in all
material respects" , such words shall be taken into account and given effect;
(ii) Section 2.08(b) and Section 2.33, to the extent there appears therein any
qualifiers, modifiers, or limitations with respect to "material," "Material,"
materiality," and "in all material respects," such words shall be taken into
account and given effect; and (iii) Section 2.13, "Knowledge" shall be taken
into account and given effect to the extent such word appears therein.
9.02 NOTICE OF CLAIM. If any Proceeding is brought against any Person
entitled to indemnification pursuant to Section 9.01 or Section 9.05 (a
"Claimant") in respect of a claim under Section 9.01 above (an "Indemnifiable
Claim"), the Claimant shall promptly notify Purchaser or Andrew F. Jacobs, as
the representative of the Capstead Companies (the "Representative"), as the case
may be, in writing of the institution of such Proceeding (but the failure so to
notify shall not relieve any Capstead Company or Purchaser, as the case may be
(the "Indemnifying Parties"), from any liability the Indemnifying Parties may
have except to the extent such failure materially prejudices the Indemnifying
Party). Unless otherwise agreed to by the Purchaser or Representative, as the
case may be, the Indemnifying Parties shall assume and direct the defense of
such Proceeding, including the employment of counsel, and all fees, costs and
expenses incurred in connection with defending or settling the Indemnifiable
Claim shall be borne solely by the Indemnifying Parties; provided, however, that
such counsel shall be satisfactory to the Claimant in the exercise of its
reasonable judgment. If the Indemnifying Parties shall elect to compromise or
defend any such asserted Liability, it shall promptly notify the Claimant of its
intention to do so, and the Claimant agrees to cooperate fully with the
Indemnifying Parties and their counsel in the compromise of, or defense against,
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any such asserted Liability; provided, however, that after notice from the
Indemnifying Parties to the Claimant of its election to assume the defense of
such Proceeding, the Indemnifying Parties will not, as long as they diligently
conduct such defense, be liable to the Claimant under this Article IX for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the Claimant in connection
with the defense of such Proceeding, other than reasonable costs of
investigation. Notwithstanding an election by the Indemnifying Parties to assume
the defense of such Proceeding, the Claimant shall have the right to employ
separate counsel and to participate in the defense of such action or proceeding,
and the Indemnifying Parties shall bear the reasonable fees, costs and expenses
of such separate counsel (and shall pay such fees, costs and expenses at least
quarterly), if (a) the use of counsel chosen by the Indemnifying Parties to
represent the Claimant would present such counsel with a conflict of interest;
(b) the defendants in, or targets of, any such Proceeding include both a
Claimant and an Indemnifying Party, and the Claimant shall have reasonably
concluded that there may be legal defenses available to it or to other Claimants
which are different from or additional to those available to the Indemnifying
Parties (in which case the Indemnifying Parties shall not have the right to
direct the defense of such Proceeding on behalf of the Claimant); (c) the
Indemnifying Parties fail to provide reasonable assurance to the Claimant of
their financial capacity to defend such Proceeding and to provide
indemnification with respect to such Proceeding; or (d) the Representative or
the Purchaser, as the case may be, shall authorize the Claimant to employ
separate counsel at the expense of the Indemnifying Parties. All costs and
expenses incurred in connection with a Claimant's cooperation shall be borne by
the Indemnifying Parties. If the Indemnifying Parties assume the defense of a
Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the Indemnifying Parties without the Claimant's consent unless
(A) there is no finding or admission of any violation of Legal Requirements or
any violation of the rights of any Person and no effect on any other claims that
may be made against the indemnified party, (B) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party and (C) the
compromise or settlement includes as an unconditional term thereof the giving by
the plaintiff or other claimant to the indemnified parties of an unconditional
release, in form and substance satisfactory to such indemnified parties, from
all Liability in respect of any such claim; and (iii) the Claimant will have no
Liability with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to an Indemnifying Party of the
commencement of any Proceeding and the Indemnifying Parties do not, within ten
(10) days after the Claimant's notice is given, give notice to the Claimant of
their election to assume the defense of such Proceeding, the Indemnifying
Parties will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the Claimant. Notwithstanding the
foregoing, if Claimant determines in good faith that there is a reasonable
probability that a Proceeding may adversely affect it or its Affiliates other
than as a result of monetary damages for which it would be entitled to
indemnification under this
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Agreement, the Claimant may, by notice to the Indemnifying Parties, assume the
exclusive right to defend, compromise, or settle such Proceeding, but the
Indemnifying Parties will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld). A claim for indemnification for any matter not
involving a third-party claim may be asserted by notice to the party from whom
indemnification is sought. In any event, the Claimant shall have the right at
its own expense to participate in the defense of such asserted Liability.
9.03 RIGHT OF OFFSET. In the event an Indemnifying Party is required to
indemnify or make payments to any Claimant under any provision of this Agreement
(including Section 9.01 above) or any document, instrument or agreement referred
to herein or executed in connection with the consummation of the transactions
contemplated hereby, in addition to any other right available to the Claimant
hereunder, at law or in equity, the Claimant shall be entitled to offset the
amount of such required indemnity or any claim for any and all amounts owed by
any Claimant, or any Affiliate of a Claimant, to any Indemnifying Party or any
Affiliate of any Indemnifying Party, hereunder or otherwise, including, where
the Claimant is the Purchaser, any amount held in escrow pursuant to the Escrow
Agreement.
9.04 SURVIVAL. The rights of indemnification provided in Section 9.01(a)(i)
and (ii) of this Agreement shall survive the consummation of the transactions
contemplated hereunder for a period of 819 calendar days following the Closing
Date; the rights of indemnification provided by Section 9.01(a)(iv) of this
Agreement with respect to third-party claims shall survive the consummation of
the transactions contemplated hereunder for a period of 819 calendar days after
the Closing Date; and the rights of indemnification provided in Sections
9.01(a)(iii), (iv) (other than with respect to third-party claims), (v), (vi)
and (vii) and Sections 4.11 and 4.12 of this Agreement shall survive the
consummation of the transactions contemplated hereunder and shall remain in full
force and effect at all times thereafter. With respect to a claim for
indemnification that may fall under more than one provision of Section 9.01, the
expiration of the survival period for a claim under one applicable provision
shall not impact in any way a party's right to bring a claim under another
applicable provision, the survival period of which has not yet expired.
Notwithstanding the foregoing time limitation, a claim under Section 9.01(a)(i)
or 9.01(a)(ii) for a Breach of the representations and warranties contained in
(i) Section 2.11 shall survive the consummation of the transactions contemplated
hereunder and shall remain in full force and effect at all times thereafter; and
(ii) Section 2.21 with respect to violations of ERISA shall survive the
consummation of the transactions contemplated hereunder and shall remain in full
force and effect for the full period of all applicable statutes of limitations.
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9.05 TAX INDEMNIFICATION PAYMENTS.
(a) Scope of Tax Indemnity Provisions/Relationship of this Article to
General Indemnity Provisions.
(i) In the case of any indemnity claim for Taxes for a
Pre-Closing Period, the indemnity obligations of the Capstead Companies,
and the rights of the Purchaser with respect to indemnification, will be
governed by this Section 9.05 and not by the general indemnity provisions
contained in Section 9.01(a) of this Agreement.
(ii) Despite any other provision in this Agreement, the
indemnities provided for in this Section will survive for the full period
of all applicable statutes of limitation, including extensions.
(iii) Any Person entitled to indemnification for Taxes under this
Section shall also be entitled to indemnification for all reasonable fees
and costs (including professional fees and costs and expenses) associated
with enforcing its rights under this Section.
(b) Allocation of Liability for Taxes.
(i) General. Subject to Section (b)(ii) below:
(A) The Capstead Companies will be jointly and severally
liable for, and will indemnify, defend and hold harmless the Purchaser
and the Purchaser's Affiliates from and against, any and all Taxes
imposed on or due with respect to the operation of the Business, the
Capstead Companies or their assets, operations or activities for any
Pre-Closing Period, to the extent such Taxes have not been
specifically disclosed in the Schedules. For purposes of the preceding
sentence, the Capstead Companies' Liability will include, without
limitation, the following:
(1) any Liability for Taxes arising from the inclusion
(or termination of the inclusion) of the Capstead Companies in a
consolidated, combined, unitary or separate company Tax Return filed
by any of the Capstead Companies or their Tax Affiliates,
(2) any Liability for Taxes relating to the merger,
reorganization or other transactions by which the business,
operations, properties or stock of the Capstead Companies were
incorporated or acquired by Affiliates or former Affiliates of the
Capstead Companies,
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(3) any Liability for Taxes arising out of the
transactions contemplated by this Agreement,
(4) any amounts due from the Capstead Companies under
any Tax sharing or Tax allocation agreement or arrangement, whether
imposed by law or otherwise, and
(5) any Liability for Taxes arising from the
disallowance or adjustment of deductions taken for periods prior to
the Closing Date (regardless of the year in which such disallowance or
adjustment occurs); and
(B) The Purchaser will be liable for, and will indemnify,
defend and hold the Capstead Companies harmless from and against, any
and all Taxes imposed on or with respect to the Capstead Companies or
their assets, operations, or activities related to the Purchased
Assets for any Post-Closing Period.
(ii) Certain Transaction Costs. Notwithstanding anything to the
contrary in this Section, the Purchaser will be liable for and pay any and
all transfer Taxes arising in connection with the transfer of the Purchased
Assets under this Agreement, and the Purchaser will indemnify, defend and
hold the Sellers harmless against any and all such transfer taxes.
(c) Right of Offset. Notwithstanding any other provision of this
Agreement or any Related Agreement, in the event an Indemnifying Party
under this Section 9.05 is required to indemnify the Claimant hereunder,
the Claimant shall be entitled to offset the amount of such required
indemnity or any claim from any and all amounts owed by any Claimant, or
any Affiliate of Claimant, to any Indemnifying Party under this Section
9.05. In the event that the Claimant is the Purchaser, it may also make a
claim against any amount held in Escrow pursuant to the Escrow Agreement.
9.06 LIMITATION ON INDEMNITY. The provisions for indemnity provided in
Sections 9.01(a)(i) and (ii) of this Agreement shall be effective against the
Capstead Companies only if the aggregate amount of all Damages for which the
Capstead Companies are liable thereunder exceeds $1,000,000, but if the
aggregate amount of such Damages exceeds $1,000,000 the Purchaser shall be
entitled to recover all such Damages without giving effect to such $1,000,000
threshold amount. For purposes of determining and calculating Damages under this
Article IX, the representations and warranties of the Capstead Companies shall
be read without taking into account or giving effect to any qualifiers,
modifiers or limitations contained therein using (i) "Knowledge" or (ii)
"material," "Material," "materiality," "in all material
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respects" or words of similar import or meaning, except only to the extent
specifically set forth in Section 9.01(c). In no event shall any recovery under
this Article IX exceed the aggregate cash proceeds received by the Capstead
Companies pursuant to this Agreement (including, for this purpose, the
$1,500,000 deposited with the Escrow Agent pursuant to Section 1.04(b)(ii) and
1.05(c)).
ARTICLE X
MISCELLANEOUS
10.01 NOTICES. Any notice or other communication required or which may be
given hereunder shall be in writing and either delivered personally to the
addressee, telegraphed or telexed to the addressee or mailed, certified or
registered mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed or telexed, or if mailed, two days after the date of
mailing as follows:
(a) if to Sellers, to:
Capstead Mortgage Corporation Capstead Holdings, Inc.
2711 North Haskell Avenue 2711 North Haskell Avenue
Suite 1000 Suite 900
Dallas, Texas 75204 Dallas, Texas 75204
Attention: Treasurer Attention: Treasurer
Capstead Inc.
2711 North Haskell Avenue
Suite 1000
Dallas, Texas 75204
Attention: Treasurer
with a copy to:
Andrews & Kurth L.L.P.
1717 Main Street
Suite 3700
Dallas, Texas 75201
Attention: David Barbour, Esquire
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(b) if to Purchaser, to:
HomeComings Financial Network, Inc.
8400 Normandale Lake Blvd., Suite 600
Minneapolis, Minnesota 55437
Attention: President
with a copy to:
GMAC Mortgage Group, Inc. Residential Funding Corporation
c/o GM Legal Staff 8400 Normandale Lake Blvd., Suite 600
3031 West Grand Blvd. Minneapolis, Minnesota 55437
Detroit, Michigan 48202 Attention: Office of the General Counsel
Attention: General Counsel
10.02 ENTIRE AGREEMENT. This Agreement and the Servicing Purchase Agreement
(including the Exhibits and the Schedules hereto and thereto) contain the entire
agreement among the parties with respect to the transactions contemplated hereby
and supersedes all prior agreements, written or oral, with respect thereto
(including, without limitation, any bid letters or written expressions of
interest of Purchaser or any information contained in the related Confidential
Descriptive Memorandum dated August 1998).
10.03 WAIVERS AND AMENDMENTS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
10.04 CONFIDENTIALITY. All information which is not public knowledge
disclosed heretofore or hereafter by any party to any other party (including its
attorneys, accountants or other representatives) in connection with this
Agreement or any Related Agreement (including, without limitation, the existence
of this Agreement or any Related Agreement and the terms hereof and thereof)
shall be kept confidential by such other party, and shall not be used by such
other party otherwise than for use as herein contemplated, except to the extent
(a) it is or hereafter becomes public knowledge or becomes lawfully obtainable
from other sources, including a third party who is under no obligation of
confidentiality to the party disclosing such information or to whom information
was released without restriction, or (b) such other party is compelled to
disclose such information by judicial or administrative process or, in the
opinion
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of its counsel, by other Legal Requirements, or (c) such duty as to
confidentiality and non-use is waived by such disclosing party. In the event of
termination of this Agreement, each party shall exercise all reasonable efforts
to return, upon request, to the other parties all documents and reproductions
thereof received from such other parties (and, in the case of reproductions, all
such reproductions made by the receiving party) that include information not
within the exceptions contained in the first sentence of this Section 10.04.
10.05 EXPENSES. Except as otherwise provided in Section 8.02 of this
Agreement, each party shall bear the respective legal, accounting and other
costs and expenses of any nature, relating to or in connection with the
negotiation of this Agreement and the Related Agreements and the consummation of
the transactions contemplated by this Agreement and such Related Agreement,
incurred by each of them, whether or not this Agreement is consummated or
terminated.
10.06 FURTHER ACTIONS. At any time and from time to time, each party
agrees, without further consideration, to take such actions and to execute and
deliver such documents as may be reasonably necessary to effectuate the purposes
of this Agreement.
10.07 SURVIVAL. Except as otherwise provided herein, the covenants,
agreements, representations and warranties contained in or made pursuant to this
Agreement shall survive the Closing Date, irrespective of any review,
examination or investigation made by or on behalf of any party.
10.08 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of Texas applicable to agreements made and to be
performed entirely within such state.
10.09 ASSIGNMENT. This Agreement is not assignable, except that Purchaser
may assign its rights or obligations under this Agreement to any Affiliate of
Purchaser provided that Purchaser shall continue to be bound by this Agreement.
10.10 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
10.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.12 SCHEDULES. The Schedules to this Agreement are a part of this
Agreement as if set forth in full herein.
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10.13 HEADINGS. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
10.14 EXCLUSIVITY. Between the date hereof and the Closing Date (or the
earlier termination of this Agreement) each of the Capstead Companies shall not,
and shall not permit any Affiliate or representative to the extent within its
control to, directly or indirectly, encourage, initiate or engage in discussions
or negotiations with, or provide any information to, any Person or group of
Persons, other than Purchaser, concerning any proposal for an acquisition or
other business combination involving all or any part of the Business or
Purchased Assets or any interest therein (other than sales of mortgage loans and
hedging activities in the ordinary and usual course of business).
10.15 CONFIDENTIALITY AND NONCOMPETITION. For purposes of this Section
10.15, the term "Capstead Companies" or "Capstead Company" shall also include
each Person (other than an individual) who is an Affiliate thereof.
(a) The Capstead Companies jointly and severally agree that none of
the Capstead Companies will, at any time, disclose any Confidential Information
to any unauthorized Persons, without Purchaser's prior written consent.
(b) The Capstead Companies further agree that:
(i) For a period of 912 calendar days after the Closing:
(A) None of the Capstead Companies will, directly or
indirectly, engage or invest in, own, manage, operate, finance,
control, or participate in the ownership, management, operation,
financing, or control of, or render services or advice to
(including, without limitation, by way of consulting or similar
services) the Restricted Business. The Capstead Companies may, in
the aggregate, purchase or otherwise acquire up to (but not more
than) four and one half percent (4.5%) of any class of securities
of any Person (but without otherwise participating in the
activities of such Person) involved in the Restricted Business;
provided, further, that a Capstead Company shall not be deemed to
be engaged in the Restricted Business or in violation of this
subparagraph (A) as a result of (1) the bona fide acquisition on
an arm's length basis of the Capstead Companies or any Capstead
Company by a Person (which is not an Affiliate of any of the
Capstead Companies) engaged in whole or in part in the Restricted
Business (it being understood and acknowledged, however, that
none of the Capstead Companies shall thereby be released from the
application of this subparagraph (A) to the
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activities of any of the Capstead Companies), or (2) the
acquisition by the Capstead Companies or any Capstead Company of
one or more Persons engaged partly in the Restricted Business
(but only in any instance where (i) no more than thirty percent
(30%) of any such Person's gross revenues are derived from the
Restricted Business during the twelve (12) full calendar months
immediately preceding such acquisition and (ii) the outstanding
principal balance of all 1-to-4 family "A" to "A-" conventional
residential mortgage loans being serviced by such Person (when
taken together with the outstanding principal balance of all
mortgage loans then being serviced by any of the Capstead
Companies) does not exceed $5 Billion; but provided further,
however, that at no time during the 912 calendar day period
referred to above shall the aggregate outstanding principal
balance of all mortgage loans being serviced by the Capstead
Companies, whether through acquisitions or otherwise, exceed $5
Billion in the aggregate) or (3) as a result of providing solely
debt financing to (without any right or contingent rights to
acquire any equity or other interest in) a Restricted Business
without in any other way violating any of the other provisions of
this subparagraph (A).
(B) None of the Capstead Companies will, directly or
indirectly, either for themselves or any other Person, solicit
the business, whether or not related in any way to the Restricted
Business specifically or residential mortgage lending generally,
of any Person known to the Capstead Companies to be a mortgagor
of a mortgage loan serviced or subserviced by the Business (other
than any loan serviced or subserviced on behalf of any Capstead
Company as investor or master servicer; provided that, as of the
Closing Date, a Capstead Company either owns, or has a recourse
obligation with respect to, such exempted loan), whether or not
any of the employees of the Capstead Companies had personal
contact with such Person (each a "Customer Mortgagor").
(ii) None of the Capstead Companies will, at any time during or
after the 912 calendar-day period, directly or indirectly disparage
Purchaser or the Business (outside of Proceedings, if any, in
connection with any Capstead Company's enforcement of its rights
against Purchaser under any Contract between one or more of the
Capstead Companies and Purchaser), or any of their shareholders,
directors, officers, employees, or agents;
(iii) None of the Capstead Companies will, for a period of 912
calendar days after the Closing, directly or indirectly, either for
themselves or
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any other Person, (A) induce or attempt to induce any individual
listed on Schedule 2.22 or any employee of the Purchaser who was an
employee of the Business immediately prior to the Closing to leave the
employ of the Business or the Purchaser, (B) in any way interfere with
the relationship between the Business and any such individual or
employee of the Business or the Purchaser, or (C) employ, or otherwise
engage as an employee, independent contractor, or otherwise, any such
individual or employee of the Business or the Purchaser (except any
employee who has not been employed by Purchaser for a period exceeding
twelve (12) consecutive months following the Closing Date);
(iv) None of the Capstead Companies will, for a period of 912
calendar days after the Closing, (A) induce or attempt to induce any
Customer Mortgagor, supplier, licensee, or business relation of the
Business to cease doing business with the Business, or (B) in any way
interfere with the relationship between any customer, supplier,
licensee, or business relation of the Business; and
(v) In the event of a Breach by any of the Capstead Companies
of any covenant set forth in Subsections (b)(i), (b)(iii) and (b)(iv),
the term of such covenant will be extended by the period of the
duration of such breach;
(c) Without in any way limiting any other provisions of this
Agreement, if any Capstead Company Breaches any of the covenants set forth in
Section 10.15(a) or 10.15(b), the Purchaser will be entitled to the following
remedies:
(i) Damages from the Capstead Companies; and/or
(ii) injunctive or other equitable relief to restrain any Breach
or Threatened Breach or otherwise to enforce specifically the
provisions of Subsections (a) and (b) of this Section 10.15, it being
agreed that money damages alone cannot adequately compensate the
Purchaser and the Business, and would be an inadequate remedy for such
breach.
(d) Each of the Capstead Companies acknowledges and agrees that the
payment of the Purchase Price by Purchaser was expressly in recognition of the
value that the current employees of any of the Capstead Companies involved in
the Business had to the Purchaser in respect of its anticipated continuation of
the Business following the Closing. Each of the parties hereto expressly
covenants, agrees and acknowledges that the provisions of this Section 10.15 are
reasonable with respect to limitations as to time, geographical area, and scope
of the activity to be restrained and do not impose upon the Capstead Companies
or any of the Capstead Companies a greater restraint than is necessary to
protect the goodwill or other
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business interests of the Purchaser. Each of the Capstead Companies expressly
acknowledges and agrees that the Purchaser would not have entered into this
Agreement nor any of the Related Agreements without having each of the Capstead
Companies make each and every covenant and agreement contained in this Section
10.15.
10.16 SEVERABILITY. Any portion or provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be reformed to the extent necessary to avoid such invalidity,
illegality or unenforceability, without affecting in any way the remaining
portions or provisions hereof in such jurisdiction or, to the extent permitted
by law, rendering that or any other portion or provision hereof invalid, illegal
or unenforceable in any other jurisdiction.
10.17 NO THIRD PARTY BENEFICIARIES. No employee of any of the Capstead
Companies or former employee thereof (or his/her spouse or beneficiary), or any
other Person not a party to this Agreement, shall be entitled to assert any
claim hereunder. In no event shall this Agreement constitute a third party
beneficiary Contract.
10.18 REMEDIES EXCLUSIVE. Except for remedies based on fraud, intentional
misrepresentation, willful misconduct or deliberate Breach and except for
equitable remedies (including, but not limited to, specific performance) and the
remedies provided for in Section 1.05(e) of this Agreement, the remedies
provided in Article IX and in the Escrow Agreement constitute the sole and
exclusive remedies for recovery against the Capstead Companies based upon the
Breach of any representation or warranty of any of the Capstead Companies
contained in this Agreement or in any certificate, schedule or exhibit furnished
by any of the Capstead Companies hereunder or in any Contract or instrument
delivered in connection with the transactions contemplated hereby, or based upon
the failure of any of the Capstead Companies to perform any covenant, agreement
or undertaking required by the terms of this Agreement to be performed by any of
the Capstead Companies.
10.19 EQUITABLE REMEDIES. The obligations of Purchaser and the Capstead
Companies under this Agreement are unique. The parties acknowledge that it would
be extremely impracticable to measure damages resulting from any default under
this Agreement. Accordingly, it is agreed that a party not in default under this
Agreement may sue in equity for specific performance or injunctive relief.
10.20 JOINT PREPARATION. This Agreement has been jointly prepared by the
parties and the provisions of this Agreement shall not be construed more
strictly against any party hereto as a result of its participation in such
preparation.
10.21 ATTORNEYS' FEES. Except as and to the extent specifically provided in
Section 1.05(e), if any party to this Agreement initiates any legal action
against any other party
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relating to this Agreement or any agreement executed pursuant hereto, the
prevailing party in such action shall be entitled to receive reimbursement from
the other party for all reasonable attorneys' fees, expert fees and other costs
and expenses incurred by the prevailing party in respect of such proceeding.
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IN WITNESS WHEREOF, the parties have executed this Agreement the date first
above written.
CAPSTEAD MORTGAGE CORPORATION
By: /s/ RONN K. LYTLE
---------------------------------
Name: RONN K. LYTLE
-------------------------------
Its: Chairman
CAPSTEAD HOLDINGS, INC.
By: /s/ RONN K. LYTLE
---------------------------------
Name: RONN K. LYTLE
-------------------------------
Its: Chairman
CAPSTEAD INC.
By: /s/ RONN K. LYTLE
---------------------------------
Name: RONN K. LYTLE
-------------------------------
Its: Chairman
HOMECOMINGS FINANCIAL NETWORK, INC.
By: /s/ DAVEE OLSON
---------------------------------
Name: DAVEE OLSON
-------------------------------
Its: CFO
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APPENDIX I
"AFFILIATE" --with respect to any Person, (i) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or
other fiduciary, five percent (5%) or more of the stock having ordinary voting
power in the election of directors of such person, (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person, (iii) each of such Person's officers, directors, joint
venturers and partners, (iv) any trust or beneficiary of a trust of which such
Person is the sole trustee, or (v) any lineal descendants, ancestors, spouse or
former spouses (as part of a marital dissolution) of such Person (or any trust
for the benefit of such Person). For the purpose of this definition, "control"
of a Person shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
"BREACH" --a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence or circumstance.
"BUSINESS" --is the Company's residential mortgage loan servicing, subservicing
and origination operations and all assets, whether owned by the Company,
Holdings, CMC, or any other affiliate of CMC, which are used or held for use in,
related to, or associated with, directly or indirectly (in whole or in part),
such operations.
"BUSINESS DAY" --any day of the week other than a Saturday, Sunday, or a legal
holiday, or a bank holiday in the State of Texas or the Commonwealth of
Pennsylvania.
"CAPSTEAD LITIGATION" --the class action lawsuit styled Marvin J. Netsky, et al.
v. Capstead Mortgage Corporation, et al. pending in the U.S. District Court of
the Northern District of Texas, Civil Action No. 3-98CV1716-R (the "Netsky
action") and any other lawsuits naming CMC and/or certain of its officers and
directors as defendants, whether or not consolidated with other such actions,
which (i) relate to or arise out of such lawsuits, (ii) relate to or arise out
of the facts or allegations which are, in whole or in part, the subject of the
Netsky action, or (iii) relate to or arise out of federal or state securities
laws or other state law, common law, or equity actions or claims, including,
without limitation, stockholder derivative actions. This definition shall be
deemed to include any action to which the Company and/or Holdings may be named
or joined.
Appendix I - page 1
71
"COMMERCIALLY REASONABLE EFFORTS" --the efforts that a prudent Person desirous
of achieving a result would use in similar circumstances to ensure that such
result is achieved in the required timeframe.
"CONFIDENTIAL INFORMATION" --means (i) all information concerning the specific
operations, methods of doing business and affairs of the Business, including the
following: product specifications, data, know-how, formulae, compositions,
processes, inventions and ideas, past, current and planned research and
development, current and planned residential mortgage servicing and origination
manufacturing and distribution methods and processes, customer lists, current
and anticipated customer requirements, price lists, market studies, business
plans, computer software and programs (including object code and source code),
computer software and database technologies, systems, structures and
architectures (and related processes, formulae, compositions, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information) of the Business and any other information, however documented,
of the Business that is a trade secret within the meaning of Texas trade secret
law; (ii) any and all information concerning the Business (which includes
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, the names and addresses
of key personnel, and personnel training and techniques and materials), however
documented; and (iii) any and all notes, analysis, compilations, studies,
summaries, and other material prepared by or for the Business to the extent
containing or based, in whole or in part, on any information included in the
foregoing; provided, however, that Confidential Information shall not include
information which (a) relates to the business of residential mortgage servicing
and origination generally known to other operators of mortgage companies, (b) is
or becomes generally available to the public other than as a result of a
disclosure by any of the Capstead Companies or any of their Representatives (as
defined below), or (c) becomes available to any of the Capstead Companies on a
nonconfidential basis from a Person who is not bound by a duty of
confidentiality to Purchaser, or is otherwise not known to the Capstead
Companies to be under an obligation to Purchaser not to transmit such
information to the Capstead Companies or its Representatives.
"CONSENT" --any approval, consent, ratification, waiver, Authorization or other
authorization (including any Governmental Authorization).
"CONTRACT" --any agreement, contract, commitment, obligation, promise,
arrangement, understanding, or undertaking (whether written or oral and whether
express or implied) that is legally binding.
"GOVERNMENTAL AUTHORIZATION" --any approval, consent, license, permit, waiver or
other authorization issued, granted, given or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.
Appendix I - page 2
72
"GOVERNMENTAL BODY" --any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official or entity and any
court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory or taxing authority or
power of any nature.
"GUARANTY" --means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
(whether by reason of being a general partner of a partnership or otherwise) any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any property
constituting security therefor; and
(b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such indebtedness or obligation.
"IRS" --the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE" --an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual with responsibility with respect to a specific
subject matter could be expected to discover or otherwise become aware of
such fact or other matter in the ordinary and usual course of business.
Appendix I - page 3
73
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time during the past two years served, as a director or officer of such
Person (or in any similar capacity), or as an individual with primary
responsibility for such Person with respect to a specific subject matter, has,
or at any time had, Knowledge of such fact or other matter (but in any event,
including the individuals listed on Schedule A-1 hereto). Without limiting the
foregoing, when used in reference to the Capstead Companies or any of the
Capstead Companies, if one Capstead Company or any of the individuals referred
to above has "Knowledge" of a particular fact or other matter, then each
Capstead Company will be deemed to have such Knowledge.
"LEGAL REQUIREMENT" --any federal, state, local, municipal, foreign,
international, multinational or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute or treaty.
"LIABILITY" --with respect to any Person means any and all liabilities, debts or
other obligations, contingent or otherwise, however imposed or incurred, at any
time, including, without limitation:
(a) its liabilities for borrowed money or any other indebtedness;
(b) its liabilities for the deferred purchase price of property acquired by
such Person, including accounts payable arising in the ordinary and usual
course of business or otherwise; and including all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property;
(c) all liabilities required to be included on its balance sheet in
accordance with GAAP (in respect of capital leases or otherwise);
(d) all liabilities for borrowed money secured by any Lien with respect to
any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); and
(e) all liabilities in respect of any Guaranty.
"LIEN" --any charge, claim, community property interest, condition, equitable
interest, lien, option, pledge, security interest, right of first refusal or
restriction of any kind, including any restriction on use, voting, transfer,
receipt of income or exercise of any other attribute of ownership.
"MATERIAL ADVERSE EFFECT" --with respect to any Person or the Business, means
any event, change, occurrence or effect, direct or indirect, (other than as a
result of changes as may affect
Appendix I - page 4
74
the mortgage industry generally and other than financial changes directly
associated with hedging activities) on the business, operations, properties
(including tangible properties), condition (financial or otherwise), assets,
obligations or Liabilities (whether absolute, accrued or contingent) of such
Person or the Business and its respective subsidiaries that has had, or could
reasonably be expected to have a material adverse effect upon such Person or the
Business.
"ORDER" --any award, decision, injunction, judgment, order, ruling, subpoena or
verdict entered, issued, made or rendered by any court, administrative agency or
other Governmental Body or by any arbitrator.
"PERMITTED LIEN" --Statutory liens for amounts not yet due and payable provided
Purchaser received a credit for the same at closing and liens securing Assumed
Obligations.
"PERSON" --any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union or other entity or
Governmental Body.
"PROCEEDING" --any action, arbitration, audit, hearing, investigation, inquiry,
litigation, suit or appeal (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any Governmental Body or arbitrator.
"RESTRICTED BUSINESS" --any business involved in the servicing of 1-to-4 family
"A" or "A-" conventional residential mortgage loans anywhere within the United
States. For purposes of this definition, "servicing" means mortgage loan
servicing services including, without limitation, one or more of the following
functions (or a portion thereof): (i) the administration and collection of
payments for the reduction of principal and/or the application of interest on a
mortgage loan; (ii) the collection of payments on account of Taxes and
insurance; (iii) the remittance of appropriate portions of collected payments;
(iv) the provision of full escrow administration; (v) the pursuit of foreclosure
and alternate remedies against a related mortgaged property; and (vi) the
administration and liquidation of residential real property owned by the
servicer or the investor for whom the servicer administered the related loan as
a result of a foreclosure. Notwithstanding the foregoing, however, the reference
for purposes of this definition to "servicing" shall not include (1) the
performance of any "stand by" servicing obligations required in connection with
the performance of any master servicing duties of any of the Capstead Companies;
(2) the servicing of any loans other than 1-to-4 family "A" to "A-" conventional
residential mortgage loans; and (3) any Capstead Company retaining the servicing
rights, but not actually servicing any loan.
Appendix I - page 5
75
"THREATENED" --a claim, Proceeding, dispute, action or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute, action
or other matter is likely to be asserted, commenced, taken or otherwise pursued
in the future.
"YEAR 2000 COMPLIANT" --an internal system or a product or service that at all
times before, during and after January 1, 2000 accurately processes and handles
date and time data (including, without limitation, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries, and
the years 1999 and 2000, including, without limitation, leap year calculations,
to the extent that other information technology used in combination with such
internal systems and such products and services properly exchange date/time data
with it. To the extent any such internal systems and such products and services
must perform as a system, such internal systems and such products and services
used in combination with other such internal systems and such products and
services, respectively, must properly exchange date/time data with them.
Appendix I - page 6
76
SCHEDULES
1.01(a).....................................................Real Property Leases
1.01(e) .......................................................Assumed Contracts
1.01(h).................................................................Software
1.01(i)..................................................Non-assignable Licenses
1.02.............................................................Excluded Assets
1.03........................................................Retained Liabilities
1.04(b).............................................Sellers' Account Information
1.05(b)..........................................................Closing Payment
1.05(e).................................................Certain Purchased Assets
1.05(f)..................................................Pipeline Loan Valuation
2.03.....................................Good Standing of Company and Subsidiary
2.04....................................Consents Necessary for Due Authorization
2.06............................................Outstanding Options and Warrants
2.07(e)..............................Liabilities Not Reflected on Balance Sheets
2.08...........................................................Subsequent Events
2.09.................................................................. Contracts
2.10(a) ................................................................Defaults
2.11................................................................Fixed Assets
2.12........................................................Real Property Leased
2.17...............................................................Bank Accounts
2.18..................................................................Guarantees
2.19...................................................................Insurance
2.20(b)....................................................................Taxes
2.21...........................................................Employee Benefits
2.22......................................................Executive Compensation
2.24..................................................Related Party Transactions
2.25........................................................Licenses and Permits
2.26..........................................................Proprietary Rights
2.28..........................................................Violations of Laws
2.29..................................................................Litigation
2.30....................................................................Consents
2.36(e)........................................................Certain Transfers
4.01..........................................................Certain Activities
4.08.......................................................Financial Information
6.05...........................................................Required Consents
6.07...........................................................Certain New Hires
6.08..........................................................Canceled Contracts
A-1...........................................Certain Individuals with Knowledge
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CAPSTEAD MORTGAGE CORPORATION AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY
OMITTED SCHEDULE TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.