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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
MAY 31, 1996
RAC FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-27550 75-2561052
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
1250 W. MOCKINGBIRD LANE, DALLAS TEXAS 75247
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 630-6006
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 31, 1996, RAC Financial Group, Inc. (the "Company"), through its
wholly owned subsidiary, FirstPlus Financial West, Inc. ( the "Merger Sub"),
acquired all of the stock of Mortgage Plus, Inc., a Colorado corporation
("MPI"), in exchange for 800,000 shares of the Company's stock. MPI merged with
the Merger Sub and shall continue as a wholly owned subsidiary of the Company.
Bear Stearns & Co. provided the Company with an opinion regarding the "fairness"
of the consideration paid to the former MPI shareholders.
The primary selling stockholders of MPI are: chairman of the board of directors
James S. Frank; board member and managing director Garrett O. White; board
member Robert L. Knisely; Steven A. Rubin, president of MPI and Richard R.
Holsclaw, vice president of MPI. Steven A. Rubin, Richard R. Holsclaw and other
existing management will remain with Mortgage Plus Incorporated.
Prior to and subsequent to the merger, MPI was and will remain engaged in the
business of originating conventional mortgages and Title I home improvement
loans. Founded in 1984 and headquartered in Denver, MPI is comprised of two
primary operating divisions: retail and wholesale lending. On a retail basis,
conventional first and second mortgage loans are originated through offices in
Seattle, Denver and Atlanta and an 80-person telebanking division located in
Denver. On a wholesale basis, Title I and conventional second lien loans are
originated through offices in Denver, Chicago, Atlanta, Houston and Newport
Beach.
MPI currently operates as a loan correspondent for various lenders, including
the Company. MPI originated approximately $37.9 million in loans during May
1996, including $17.4 million of first lien loans and $20.5 million of
conventional and Title I second lien loans. MPI sold $11.6 million of its
second lien loans to the Company in May 1996.
Through this acquisition, the Company obtained total assets of $26.8 million.
Total assets included cash of $1.7 million, accounts receivable of $8.5 million,
loans held for sale of $14.9 million and other assets totaling $1.6 million.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following exhibits are furnished in accordance with Item 601 of
Regulation S-K.
(a) Financial statements of business acquired
It is impracticable to provide the required financial statements for the
acquired business at this time. The registrant will file such financial
statements as soon as practicable, but not later than 60 days following
the date of this report.
(b) Pro forma financial information
It is impracticable to provide the required Pro forma financial statements
for the acquired business at this time. The registrant will file such
Pro forma financial statements as soon as practicable, but not later than
60 days following the date of this report.
(c) Exhibits
10.1 Agreement and Plan of Merger, dated May 31, 1996, among RAC Financial
Group, Inc., FirstPlus Financial West, Inc. and Mortgage Plus
Incorporated and the shareholders.
10.2 Registration Rights Agreement, dated March 31, 1996, by and among
RAC Financial Group, Inc. and the shareholders of Mortgage Plus
Incorporated.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
RAC Financial Group. Inc.
(Registrant)
Date: June 14, 1996 By: /s/ Eric C. Green
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Print Name: Eric C. Green
Title: Chief Financial Officer
(Principal Financial Officer and Duly
Authorized Officer)
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THIS CONTRACT IS SUBJECT TO ARBITRATION
UNDER THE TEXAS GENERAL ARBITRATION
ACT, TEXAS REVISED CIVIL STATUTES
ARTICLE 224 ET. SEQ.
AGREEMENT AND PLAN OF MERGER
dated as of May 22, 1996,
among
RAC Financial Group, Inc.
FirstPlus Financial West, Inc.
Mortgage Plus Incorporated
and the Shareholders
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TABLE OF CONTENTS
Page
AGREEMENT AND PLAN OF MERGER. . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 THE MERGER, EFFECTIVE TIME, PRICE . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Consummation of the Merger . . . . . . . . . . . . . . . . . . . . 2
1.4 Certificate of Incorporation; Bylaws; Directors and Officers . . . 2
1.5 Conversion of Securities . . . . . . . . . . . . . . . . . . . . . 2
1.6 No Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . 3
1.8 Taking of Necessary Action; Further Action . . . . . . . . . . . . 3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES RACF AND MERGER SUB . . . . . . . . 4
2.1 Organization and Qualification . . . . . . . . . . . . . . . . . . 4
2.2 Authority Relative to Agreement. . . . . . . . . . . . . . . . . . 4
2.3 No Prior Activities. . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Effect of Agreement. . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Organization, Good Standing, Power, etc. . . . . . . . . . . . . . 5
3.2 Authorized Capitalization of the Company . . . . . . . . . . . . . 5
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Effect of Agreement. . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Financial Statements and Net Worth . . . . . . . . . . . . . . . . 7
3.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . . 8
3.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Personal Property. . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.13 Patents, Trademarks, Franchises, etc.. . . . . . . . . . . . . . . 14
3.14 Loans, Notes, Accounts Receivable and Accounts Payable . . . . . . 14
3.15 Corporate Documents, Books and Records . . . . . . . . . . . . . . 14
3.16 Absence of Sensitive Payment . . . . . . . . . . . . . . . . . . . 14
3.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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3.18 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.20 Transactions with Related Parties. . . . . . . . . . . . . . . . . 17
3.21 Directors and Officers; Banks. . . . . . . . . . . . . . . . . . . 18
3.22 Ownership, Quality and Location of Material Assets . . . . . . . . 18
3.23 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . 18
3.24 Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.25 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.26 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.1 Title to Shares. . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.2 Effect of Agreement on Shareholders. . . . . . . . . . . . . . . . 19
4.3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Investor Status. . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Absence of Market. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 20
4.8 No Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Investment Purposes. . . . . . . . . . . . . . . . . . . . . . . . 21
4.10 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . 21
5.1 Conduct of Business by the Company Pending the Merger. . . . . . . 21
5.2 Conduct of Business by Belleview Pending the Merger. . . . . . . . 23
ARTICLE 6 COVENANTS OF RACF. . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 23
6.3 Capital Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Information to Lender. . . . . . . . . . . . . . . . . . . . . . . 24
6.5 Warehouse Credit Line. . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 7 COVENANTS OF THE COMPANY AND THE SHAREHOLDERS. . . . . . . . . . . 24
7.1 No Shopping. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2 Approval of Merger . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3 Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 General Prohibition on Transfer. . . . . . . . . . . . . . . . . . 24
7.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Confidential Information . . . . . . . . . . . . . . . . . . . . . 25
7.7 Agreement Not to Compete . . . . . . . . . . . . . . . . . . . . . 26
7.8 Agreement Not to Solicit Customers and Employees . . . . . . . . . 26
7.9 Independent Covenants. . . . . . . . . . . . . . . . . . . . . . . 26
7.10 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . 26
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7.11 Repayment of Shareholder Loans . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 26
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Additional Agreements. . . . . . . . . . . . . . . . . . . . . . . 27
8.3 Notification of Certain Matters. . . . . . . . . . . . . . . . . . 27
8.4 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 27
8.5 Information for Other Filings. . . . . . . . . . . . . . . . . . . 28
8.6 Actions by Shareholders. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.1 Conditions to Obligation of Each Party to Effect the Merger. . . . 29
9.2 Additional Conditions to the Obligation of the Company . . . . . . 29
9.3 Additional Conditions to the Obligations of RACF and Merger Sub. . 30
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . 32
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . 32
10.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 11 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.1 Indemnification by Shareholders. . . . . . . . . . . . . . . . . . 33
11.2 Indemnification by RACF and Merger Sub . . . . . . . . . . . . . . 33
11.3 Procedures for Resolution and Payment of Claims for
Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 33
11.4 Minimum Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 12 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 35
12.1 Public Statements. . . . . . . . . . . . . . . . . . . . . . . . . 35
12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
12.3 Representations and Warranties . . . . . . . . . . . . . . . . . . 36
12.4 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.5 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.6 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE . . . . . . . . . . . . . . . . . 38
Schedules
Schedule A - Directors and Officers
Schedule B - Shareholders of the Company
Exhibits
Exhibit A - Registration Rights Agreement
Exhibit B - Form of Opinion for RACF
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Exhibit C - Form of Opinion for Company
Exhibit D - Shareholder Release
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May
22, 1996, is among RAC Financial Group, Inc., a Nevada corporation ("RACF"),
FirstPlus Financial West, Inc., a Delaware corporation and a subsidiary of
RACF ("Merger Sub"), Mortgage Plus Incorporated, a Delaware corporation (the
"Company"), and the shareholders of the Company set forth on the signature
page hereto which execute this Agreement (the "Shareholders"). The Company
and Merger Sub are hereinafter collectively referred to as the "Constituent
Corporations".
Whereas, RACF, as the sole shareholder of Merger Sub, and the respective
Boards of Directors of Merger Sub and the Company, have each approved the
merger of Merger Sub into the Company in accordance with the Delaware General
Corporation Law (the "Delaware Law") and the provisions of this Agreement;
the Board of Directors of the Company has directed that the Merger, as
hereinafter defined, be submitted for approval by the Shareholders of the
Company; and
Whereas, the parties hereto intend that the merger of Merger Sub into
the Company qualify as a tax free reorganization under Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, RACF, Merger Sub, the Company and the
Shareholders hereby agree as follows:
ARTICLE 1
THE MERGER, EFFECTIVE TIME, PRICE
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3 hereof),
in accordance with this Agreement and the Delaware Law, Merger Sub shall be
merged (such merger being herein referred to as the "Merger") with and into the
Company, the separate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation. The Company hereinafter sometimes is
referred to as the "Surviving Corporation."
1.2 EFFECT OF THE MERGER. When the Merger has been effected, the
Surviving Corporation shall thereupon and thereafter possess all the rights,
privileges, powers and franchises as well of a public as of a private nature,
and be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular, the rights, privileges, powers
and franchises of each of the Constituent Corporations and all property, real,
personal and mixed, and all debts due to either of the Constituent Corporations
on whatever account, as well for stock subscriptions as all other things in
action or belonging to each of such corporations shall be vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in any of such Constituent Corporations, shall not revert or be in
any way
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impaired by reason of the Merger; but all rights of creditors and all liens
upon any property of any of said Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it.
1.3 CONSUMMATION OF THE MERGER. As soon as is practicable after the
satisfaction or waiver of the conditions set forth in Article 9 hereof, the
parties hereto will cause the Merger to be consummated by filing with the
Secretary of State of Delaware a certificate of merger in such form as
required by, and executed in accordance with, the relevant provisions of the
Delaware Law (the time of such filing being the "Effective Time" and the date
of such filing being the "Effective Date").
1.4 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS. The
Certificate of Incorporation and bylaws of the Surviving Corporation shall be
amended and restated to be identical with the Certificate of Incorporation and
bylaws of the Merger Sub as in effect immediately prior to the Effective Time
until thereafter amended as provided therein and under the Delaware Law. The
name of the Surviving Corporation shall be FirstPlus Financial West, Inc. The
initial directors of the Surviving Corporation shall be the persons listed as
directors on Schedule A hereto. At the Effective Time, the officers of the
Surviving Corporation shall be the officers of the Company immediately prior to
the Effective Time. Such directors and officers shall serve in such capacities
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and bylaws and the Delaware
Law.
1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of RACF, Merger Sub, the Company or
the holder of any of the shares (the "Shares") of common stock, no par value
(the "Common Stock") of the Company:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares which are owned by any direct or indirect
subsidiary of the Company, and Shares held in the treasury of the Company)
shall be canceled and retired and be converted into and become a right to
receive 131.73061 shares of common stock, par value $0.01 per share, of
RACF (the "RACF Shares"), subject to the provisions of Section 1.5(e)
hereof. Each certificate which, immediately prior to the Effective Date,
represented any Share of Common Stock of the Company shall at the Effective
Date and thereafter be deemed for all purposes to represent the right to
receive the number of RACF Shares into which the Shares of the Company
represented by such certificate have been or may be converted pursuant to
this Section 1.5(a).
(b) Each Share which is held in the treasury of the Company or which
is owned by any direct or indirect subsidiary of the Company shall be
canceled and retired, and shall cease to exist, without any conversion
thereof into RACF Shares, or the right to receive RACF Shares.
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(c) Each share of Common Stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
Common Stock, par value $.01 per share, of the Surviving Corporation.
(d) Any options, warrants or rights to acquire Shares of the Company,
or to acquire securities convertible into Shares of the Company,
outstanding immediately prior to the Effective Date, shall by virtue of the
Merger be cancelled and retired and shall cease to exist, without
conversion thereof into the right to receive RACF Shares.
(e) No fractional RACF Shares, and no certificates or scrip
representing such fractional RACF Shares, shall be issued; no dividend or
distribution of RACF Shares shall relate to any fractional RACF Share, and
such fractional RACF Share interests will not entitle the holder thereof to
vote or to any rights of a shareholder. In lieu of any fractional RACF
Share, RACF shall pay to each holder of Shares who otherwise would be
entitled to receive a fractional RACF Share an amount of cash (without
interest) determined by multiplying (A) $30.00 times (B) the fractional
RACF Share interest to which such holder would otherwise be entitled.
1.6 NO TRANSFERS. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of any
Shares that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, certificates for Shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for the RACF
Shares issuable under this Agreement.
1.7 EXCHANGE OF CERTIFICATES. Upon surrender to RACF of a certificate
for Shares of the Company, duly executed by the holder thereof, the holder of
such certificate shall be entitled to receive as soon as practical in
exchange therefor certificates representing the number of RACF Shares into
which the Share represented by the certificate so surrendered shall have been
converted pursuant to Section 1.5(a), and the certificate so surrendered
shall be cancelled.
1.8 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of RACF, Merger
Sub, the Shareholders and the Company shall use all reasonable efforts to
take all such actions as may be necessary or appropriate in order to
effectuate the Merger under the Delaware Law or federal law as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of either of the
Constituent Corporations, the officers and directors of the Surviving
Corporation are fully authorized in the name of their corporation or
otherwise to take, and shall take, all such lawful and necessary action.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES
RACF AND MERGER SUB
RACF and Merger Sub jointly and severally represent and warrant the
following:
2.1 ORGANIZATION AND QUALIFICATION. Each of RACF and Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite corporate power
to carry on its business as now conducted. Copies of the charter documents
and bylaws of Merger Sub heretofore delivered to the Company are accurate and
complete as of the date hereof.
2.2 AUTHORITY RELATIVE TO AGREEMENT. Each of RACF and Merger Sub has
the requisite corporate power and authority to enter into this Agreement and
to perform its obligations hereunder. The execution and delivery of this
Agreement by RACF and Merger Sub and the consummation by RACF and Merger Sub
of the transactions contemplated hereby have been duly authorized by the
Boards of Directors of RACF and Merger Sub and by RACF as the sole
shareholder of Merger Sub as of the date of this Agreement, and no other
corporate proceedings on the part of RACF or Merger Sub are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly executed and delivered by RACF and Merger Sub and
(assuming that it has been duly executed and delivered by the Company)
constitutes a legal, valid and binding obligation of each such company,
enforceable against each such company in accordance with its terms except as
enforcement thereof may be limited by liquidation, conservatorship,
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditor's rights generally from time to time in effect
and except that equitable remedies are subject to judicial discretion. Other
than in connection with or in compliance with the provisions of the Delaware
Law, and the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"Hart-Scott-Rodino Act"), no notice to, filing with, or authorization,
consent or approval of, any public body or authority is necessary for the
consummation by RACF or Merger Sub of the transactions contemplated by this
Agreement except where failures to give such notices, make such filings, or
obtain authorizations, consents or approvals would, in the aggregate, not
have a materially adverse effect on the condition (financial or other),
business or operations of RACF and Merger Sub or the transactions
contemplated by this Agreement.
2.3 NO PRIOR ACTIVITIES. Merger Sub has not incurred, directly or
indirectly, any material liabilities or obligations, except those incurred in
connection with its organization or with the negotiation of this Agreement
and the performance hereof and the consummation of the transactions
contemplated hereby. Except as contemplated by this Agreement, Merger Sub
has not engaged, directly or indirectly, in any material business activities
or entered into any material agreements or arrangements with any person or
entity.
2.4 BROKERS. RACF and Merger Sub represent and warrant that no broker,
finder or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made
by or on behalf of RACF or the Merger Sub other than the fees of Bear,
Stearns & Co. Inc. payable by RACF.
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2.5 EFFECT OF AGREEMENT. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
conflict with, violate or result in a breach of any provision of the charter
documents or bylaws of RACF or Merger Sub or any law, rule, regulation or
ordinance applicable to RACF or Merger Sub.
2.6 LEGAL PROCEEDINGS. There are no outstanding or unsatisfied
judgments, orders, decrees or stipulations to which RACF or Merger Sub is a
party which involve the transactions contemplated herein.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SHAREHOLDERS
The Company and each of the Shareholders jointly and severally represent
and warrant to RACF and Merger Sub as follows in Section 3.1 through
Section 3.26, inclusive:
3.1 ORGANIZATION, GOOD STANDING, POWER, ETC.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. The
Company is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its
properties owned or leased or the nature of its activities make such
qualification necessary. Copies of the Certificate of Incorporation and
bylaws of the Company heretofore delivered to RACF and Merger Sub or their
representatives by the Company are true and complete as of the date hereof.
Each of such Certificate of Incorporation and bylaws is in full-force and
effect, and the Company is not in violation or breach of any of the
provisions of its Certificate of Incorporation or bylaws.
(b) The Company has the requisite corporate and other power and
authority to enter into this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
have been duly authorized by the Board of Directors and shareholders of the
Company and no other corporate proceedings on the part of the Company is
necessary for the execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company
and the Shareholders and (assuming that it has been duly executed and
delivered by RACF and Merger Sub), constitutes a legal, valid and binding
obligation of the Company and the Shareholders, enforceable against the
Company and the Shareholders in accordance with its terms except as
enforcement thereof may be limited by liquidation, conservatorship,
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditor's rights generally from time to time
in effect and except that equitable remedies are subject to judicial
discretion.
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3.2 AUTHORIZED CAPITALIZATION OF THE COMPANY. The authorized capital
stock of the Company consists solely of 10,000 shares of common stock, no par
value, of which 6,073 shares are validly issued and outstanding, fully paid and
non-assessable. There are no outstanding or authorized subscriptions, options,
warrants, calls, rights (including any preemptive rights), commitments, or other
agreements of any character whatsoever which obligate or may obligate the
Company to issue or sell any additional shares of its capital stock or any
securities convertible into or evidencing the right to subscribe for any shares
of its capital stock or securities convertible into or exchangeable for such
shares. There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any outstanding shares of capital stock
of, or other ownership interests in, the Company or to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
other entity.
3.3 SUBSIDIARIES. (a) Other than the ownership of membership interests in
Belleview Appraisal LLC, a Colorado limited liability company ("Belleview"), the
Company does not own any direct or indirect interest in any corporation or
business activity and the Company is not a participant in any partnership or any
joint venture with any third party.
(b) Belleview is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Colorado, and has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as now being conducted. Belleview is
duly qualified as a foreign limited liability company to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or leased or the nature of its activities make such qualification necessary.
Copies of the Articles of Organization of Belleview heretofore delivered to RACF
and Merger Sub or their representatives by the Company are true and complete as
of the date hereof. Such Articles of Organization are in full-force and effect,
and Belleview is not in violation or breach of any of the provisions of its
Articles of Organization or the Colorado limited liability Company Act.
Belleview has not adopted, nor is Belleview required to adopt, a written
Operating Agreement. No proceedings or consent on the part of Belleview is
necessary for the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby.
(c) The Company owns 100% of the outstanding membership interests in
Belleview. The Company's membership interest in Belleview is validly issued and
outstanding, fully paid and non-assessable. Except as disclosed on Schedule
3.3(b), there are no other membership interests in Belleview outstanding nor any
outstanding or authorized subscriptions, options, warrants, calls, rights
(including any preemptive rights), commitments, or other agreements of any
character whatsoever which obligate or may obligate Belleview to issue or sell
any additional interests or any securities convertible into or evidencing the
right to subscribe for any interests or securities convertible into or
exchangeable for such interests. There are no outstanding contractual
obligations of the Company or Belleview to repurchase, redeem or otherwise
acquire any outstanding ownership interests in Belleview or to provide funds to
or make any investment (in the form of a loan, capital contribution or
otherwise) in any other entity.
3.4 EFFECT OF AGREEMENT. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby
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will not require any notice to, filing with, or the consent, approval or
authorization of any person or governmental authority, except as set forth in
Schedule 3.4 hereto. Except as set forth in Schedule 3.4, neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in the acceleration or
termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability to which the Company or
Belleview is a party or is bound or to which any of their assets are subject,
(ii) conflict with, violate or result in a breach of any provision of the
charter documents or bylaws of the Company or Belleview, (iii) conflict with
or violate any law, rule, regulation, ordinance, order, writ, injunction or
decree applicable to the Company or Belleview or by which any of their
properties or assets are bound or affected or (iv) conflict with or result in
any breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or result in the creation of
any lien, charge or encumbrance on any of the properties or assets of the
Company or Belleview pursuant to any of the terms, conditions or provisions
of any indenture, contract, lease, sublease, loan agreement, note, permit,
license, franchise, agreement or other instrument, obligation or liability to
which the Company or Belleview is a party or by which the Company or
Belleview or any of their assets is bound or affected.
3.5 FINANCIAL STATEMENTS AND NET WORTH.
(a) The Company has delivered to RACF and Merger Sub or their
representatives audited financial statements of the Company as at April 30,
1995, and for the year then ended, including, without limitation, a
statement of consolidated operations and retained earnings, balance sheet,
statement of changes in financial position, and all notes relating thereto
(the "1995 Financial Statements") which have been certified by KPMG Peat
Marwick, the independent public accountants of the Company.
(b) The Company has also delivered to RACF and Merger Sub or their
representatives unaudited consolidated financial statements of the Company
as of March 31, 1996, and for the 11-months period then ended, consisting
of a balance sheet, statement of operations, and statement of cash flow
certified by the chief financial officer of the Company (the "Interim
Financial Statements").
(c) The Company has also delivered to RACF and Merger Sub or their
representatives unaudited financial statements of Belleview as of March 31,
1996, and for the period inception through March 31, 1996 then ended,
consisting of a balance sheet, statement of operations, and statements of
cash flow certified by the chief financial officer of Belleview (the
"Belleview Financial Statements").
(d) The 1995 Financial Statements, the Interim Financial Statements
and the Belleview Financial Statements (collectively, the "Financial
Statements") (i) are in accordance with the books and records of the
Company or Belleview, as the case may be, (ii) except as set forth therein
(including the notes thereto), have been prepared in accordance with
generally accepted accounting principles (including adequate provisions
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for reserves for all loans), consistently applied throughout the periods
involved; and (iii) fairly represent both the financial condition of the
Company and Belleview and the results of operations as at the dates and for
the periods therein specified.
(e) There are no liabilities of the kind required by generally
accepted accounting principles to be reflected, noted or reserved against
on the balance sheets of the Company or Belleview as of December 31, 1995
and March 31, 1996, except those which have been reflected, noted or
reserved against in the Financial Statements. All loan reserves
established by the Company are adequate. Neither the Company nor Belleview
is directly or indirectly liable to or obligated to provide funds in
respect of or to guarantee or assume any obligation of any person except to
the extent reflected and fully reserved against in the Financial
Statements. All liabilities of the Company and Belleview can be prepaid
without penalty at any time.
(f) Except for the reserves applicable thereto, the notes and
accounts receivable of the Company included on the Interim Financial
Statements, other than those collected prior to the Effective Time, will,
as of the Effective Time, constitute valid and collectible receivables and
are not subject to any defense or setoff. As to the notes and accounts
receivable set forth on the Interim Financial Statements, the applicable
reserve shall be the reserve set forth on said statements. As to the notes
and accounts receivable arising between March 31, 1996 and the Effective
Time, the applicable reserves shall be in accordance with the current
practice of the Company, but in no event less than at March 31, 1996. In
determining whether an account has been paid, any payments received on the
account shall be applied to the oldest unpaid entry in the account. The
amount of uncollectible receivables of the Company as of the Effective Time
shall not exceed the reserves of the Company applicable thereto as of the
Effective Time and all receivables and payments on notes of the Company as
of the Effective Time less an amount equal to the reserves of the Company
applicable thereto shall be collected within six months after the Effective
Time.
(g) The net worth of the Company as of April 30, 1996 and as of the
Effective Time shall be not less than $1,600,000.
(h) The fair market value of all assets of the Company excluding
promissory notes and mortgages does not equal or exceed $15,000,000 on or
after April 30, 1996 through the Effective Time.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Schedule 3.6, since March 31, 1996:
(a) neither the Company nor Belleview has incurred any obligation or
liability in excess of ten thousand dollars ($10,000) (contingent or
otherwise), except current liabilities incurred in the ordinary course of
business;
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(b) neither the Company nor Belleview has discharged or satisfied any
lien or encumbrance or paid any obligation or liability (contingent or
otherwise) in excess of ten thousand dollars ($10,000), except current
liabilities outstanding on the applicable date set forth above, current
liabilities incurred since such date in the ordinary course of business and
obligations and liabilities under contracts listed in Schedule 3.10 hereto;
(c) neither the Company nor Belleview has mortgaged, pledged or
subjected to lien, charge, security interest or other encumbrance any of
its assets or properties, except in the ordinary course of business;
(d) neither the Company nor Belleview has sold, transferred, leased
or otherwise disposed of any of its assets or properties, except in the
ordinary course of business and for a fair consideration;
(e) neither the Company nor Belleview has canceled or compromised any
debt owed to it or claim by it, except in the ordinary course of business;
(f) neither the Company nor Belleview has knowingly and expressly
waived or released any rights of substantial value;
(g) neither the Company nor Belleview has sold, assigned, transferred
or granted any rights under any licenses, franchises, patents, inventions,
trademarks, service marks, trade names, or copyrights or rights with
respect to any know-how or other intangible assets, which sale, assignment,
transfer or grant would have an adverse effect on it;
(h) neither the Company nor Belleview has amended or terminated any
contract, franchise, agreement or license to which it is a party, which
amendment or termination would have an adverse effect on it;
(i) neither the Company nor Belleview has knowingly disposed of or
permitted to lapse any rights for the use of any patent, trademark, service
mark, trade name or copyright or knowingly disposed of or disclosed to any
person not an employee, supplier, broker, distributor or customer any trade
secret, process or know-how not theretofore a matter of public knowledge,
which dispositions or disclosures would have an adverse effect on it;
(j) neither the Company nor Belleview has terminated the employment
of any department head or officer of either the Company or entered into
(i) any written employment agreement or (ii) any oral employment agreement
not terminable without penalty by any party thereto upon 60 days notice;
(k) neither the Company nor Belleview has increased the rate of
compensation or bonus payments payable or to become payable to any of its
officers or directors
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(including, without limitation, any payment of or promise to pay any
bonus or special compensation);
(l) neither the Company nor Belleview has declared any dividend or
made any payment or distribution to its shareholders;
(m) neither the Company nor Belleview has purchased, redeemed,
issued, sold or otherwise acquired or disposed of any of its shares of
capital stock or other equity securities, or agreed to do so, or granted
any options, warrants or other rights to purchase or convert any obligation
into any shares of its capital stock or any evidence of indebtedness or
other securities
(n) neither the Company nor Belleview has entered into any other
transaction, contract or commitment other than in the ordinary course of
business;
(o) neither the Company nor Belleview has agreed to do any of the
things described in the preceding clauses (a) through (n);
(p) there has not been any material adverse change in the financial
condition, business or results of operations of the Company or Belleview;
(q) there has not been any damage, destruction or loss, whether or
not covered by insurance, materially and adversely affecting the property
or business of the Company or Belleview; and
(r) there has not been any material change in the operation of the
business of the Company or Belleview or any material transactions entered
into, except such changes and transactions occurring in the ordinary course
of business and not otherwise required to be disclosed pursuant to this
Section 3.6.
3.7 TAXES. Except as disclosed in Schedule 3.7 hereto, the Company and
Belleview have timely filed or caused to be timely filed (including allowable
extensions) all federal, state, local foreign and other tax returns for income
taxes, sales taxes, withholding taxes, employment taxes, property taxes,
franchise taxes and all other taxes of every kind whatsoever which are required
by law to have been filed. The Company and Belleview have paid or caused to be
paid all taxes, assessments, fees, penalties and other governmental charges
which have become due pursuant to said returns and all other taxes, assessments,
fees, penalties and other governmental charges which have become due and
payable. Neither the Company nor Belleview has filed or entered into any
election, consent or extension agreement that extends the applicable statute of
limitations with respect to its liability for taxes, except as set forth in
Schedule 3.7 hereto. The provisions for income and other taxes reflected in the
balance sheet included in the 1995 Financial Statements and the Interim
Financial Statements make adequate provision for all accrued and unpaid taxes of
the Company, whether or not disputed, and the Company has made and will continue
to make adequate provision for such taxes on its books and records until the
Effective Time, including any taxes arising from the transactions contemplated
by this Agreement; provided
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however, no provision has been made or will be made in the Financial
Statements for any taxes resulting from any tax election made by the
Surviving Corporation subsequent to the Effective Time. Except as set forth
in Schedule 3.7 hereto, neither the oCmpany nor Belleview is a party to any
action or proceeding pending or threatened by any governmental authority for
assessment or collection of taxes; no unresolved claim for assessment or
collection of such taxes has been asserted against the Company or Belleview,
and no audit or investigation by state or local government authorities is
under way. Except for liabilities asserted, or which may be asserted, in
actions or proceedings or as a result of audits or investigations listed in
Schedule 3.7 hereto, there is and will be no further liability for any such
taxes, whether by future deficiency assessments or otherwise, and no interest
or penalties accrued or accruing with respect thereto. The Company has
delivered to RACF and Merger Sub or their representatives copies of the
federal income and state franchise tax returns of the Company and Belleview
for the taxable years ended in 1993, 1994 and 1995 and all state sales tax
reports and returns of the Company and Belleview for the period between
January 1, 1993 and the date of this Agreement, and the taxes paid and
payable, as reflected in all such returns and reports, state accurately the
total tax payable for the periods designated.
3.8 REAL PROPERTY.
(a) Schedule 3.8 contains a complete and accurate list of all real
property leased by the Company or Belleview (the "Schedule 3.8 property").
Neither the Company nor Belleview own any real property. All improvements
on the Schedule 3.8 property are in good condition and repair, reasonable
wear and tear excepted.
(b) Except as disclosed in Schedule 3.8, there are no existing
leases, subleases, tenancies, licenses, contracts or other agreements
relating to the Schedule 3.8 property to which the Company or Belleview is
a party (the "Leases"), and the Company has delivered to RACF and Merger
Sub or their representatives true and complete copies of all of the Leases
of the Schedule 3.8 property.
(c) Except as disclosed in Schedule 3.8, (i) each of the Leases to
the Company or Belleview of the Schedule 3.8 property is valid, and neither
the Company nor Belleview, nor to the knowledge of the Company, any other
party thereto, is in default thereunder, nor is there any event which with
notice or lapse of time, or both, would constitute a default thereunder by
the Company or Belleview or, to the knowledge of the Company, any other
party thereto and (ii) the Company has not received notice that any party
to any Lease intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder.
(d) None of the Schedule 3.8 property has ever been used by the
Company or Belleview or, to the knowledge of the Company, by any previous
owners and/or operators to generate, manufacture, refine, produce, store,
handle, transfer, process or transport any hazardous wastes or substances
and neither the Company nor Belleview has not used in the past any of the
Schedule 3.8 property for the principal or primary purpose of generating,
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manufacturing, refining, producing, storing, handling, transferring,
processing or transporting of hazardous wastes or substances.
(e) The Company and Belleview have all easements of ingress and
egress necessary for all operations conducted by it from the real
properties referred to in Schedule 3.8; and none of such properties has
been condemned, requisitioned or otherwise taken by any public authority,
and no such action is threatened or, to the knowledge of the Company,
contemplated.
3.9 PERSONAL PROPERTY.
(a) Schedule 3.9 contains a complete and accurate list as of March
31, 1996, of all personal property owned by the Company or Belleview (other
than any nonmaterial personal property having a value less than $500.00)
and all personal property whether owned or not subject to any (i) lease,
(ii) license, (iii) rental agreement, (iv) contract of sale or (v) other
agreement to which the Company or Belleview is a party. The personal
property set forth on Schedule 3.9, other than personal property disposed
of in the ordinary course of business since March 31, 1996, all other
personal property acquired by the Company or Belleview since March 31, 1996
and all personal property subjected, subsequent to March 31, 1996, to any
of the agreements described in (i) through (v) of the preceding sentence is
hereafter referred to as the "Schedule 3.9 property".
(b) Except as otherwise described in Schedule 3.9, the Schedule 3.9
property is (i) free and clear of all liens, other than liens for taxes not
yet due and payable, mortgages, pledges, security interests, conditional
sales agreements, charges, encumbrances and other adverse claims or
interests of any nature whatsoever, and (ii) is in good operating condition
and repair, reasonable wear and tear excepted. The Schedule 3.9 property,
taken as a whole, is reasonably fit and usable for the purposes for which
it is being used, reasonably sufficient for all current operations and
business of the Company, and conforms with all applicable ordinances,
regulations and laws. Each lease, license, rental agreement, contract of
sale or other agreement to which any Schedule 3.9 property is subject is
valid and neither the Company nor Belleview nor, to the knowledge of the
Company, any other party thereto is in default thereunder, nor is there any
event which with notice or lapse of time, or both, would constitute a
default thereunder by the Company or Belleview or, to the knowledge of the
Company, any other party thereto. The Company has not received notice that
any party to any such lease, license, rental agreement, contract of sale or
other agreement intends to cancel, terminate or refuse to renew the same or
to exercise or decline to exercise any option or other right thereunder.
No Schedule 3.9 property is subject to any lease, license, contract of sale
or other agreement that is adverse to the business, properties or financial
condition of the Company.
3.10 CONTRACTS. Schedule 3.10 contains a complete and accurate list of (i)
all oral contracts the performance of which is required by any party thereto as
a result of the consummation of the transactions contemplated by this Agreement,
(ii) all oral contracts not
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terminable without penalty by any party thereto upon 60 days notice and (iii)
all written contracts involving a present or future obligation by any party
of an amount in excess of $5,000 individually or in the aggregate with
respect to multiple contracts of the same type (except as otherwise specified
below), to which the Company or Belleview is a party, true and complete
copies or summaries of each of which have been delivered to RACF and Merger
Sub or their representatives by the Company, including, without limitation,
any:
(a) mortgage, security agreement, chattel mortgage or conditional
sales agreement or any similar instrument or agreement, involving a present
or future obligation of an amount in excess of $5,000;
(b) agreement, commitment, note, indenture or other instrument
relating to the borrowing of money, or the guaranty of any such obligation
for the borrowing of money;
(c) joint venture or other agreement with any person, firm,
corporation or unincorporated association doing business either within or
outside the United States relating to sharing of present or future
commissions, fees or other income or profits, excluding vending machine
revenue sharing agreements with the site operator;
(d) lease of personal property to the Company involving a present or
future obligation of an amount in excess of $5,000;
(e) franchise agreements;
(f) non-competition agreements;
(g) broker or distributorship contracts;
(h) advertising, marketing and promotional agreements (including, but
not limited to, any agreements providing for discounts and/or rebates),
involving a present or future obligation of an amount in excess of $5,000;
or
(i) agreements with suppliers, involving a present or future
obligation of an amount in excess of $5,000.
Except as disclosed in Schedule 3.10, all contracts and leases
referred to in Schedule 3.10 are valid and enforceable, each of the Company
and Belleview has performed all obligations imposed upon it thereunder, and
neither the Company nor Belleview, nor, to the knowledge of the Company,
any other party thereto is in default thereunder, nor is there any event
which with notice or lapse of time, or both, would constitute a default
thereunder by the Company or Belleview, or, to the knowledge of the
Company, any other party thereto.
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3.11 LEGAL PROCEEDINGS. Except as set forth in Schedule 3.11, there are no
claims, actions, suits, arbitrations, grievances, proceedings or investigations
pending or, to the best knowledge of the Company, threatened against the Company
or Belleview, at law, in equity, or before any federal, state, municipal or
other governmental or nongovernmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, and there are no outstanding or
unsatisfied judgments, orders, decrees or stipulations to which the Company or
Belleview is a party, which involve the transactions contemplated herein or
which would have an adverse effect upon the business, business prospects, assets
or financial condition of the Company. Except as set forth in Schedule 3.11,
neither the Company nor Belleview is presently engaged in or contemplating any
legal action to recover moneys due to it or damages sustained by it. Neither
the Company nor Belleview is in violation of or in default with respect to any
applicable judgment, order, writ, injunction or decree, the effect of which may
be adverse to the Company or Belleview.
3.12 LABOR MATTERS. There are no controversies pending or, to the best
knowledge of the Company, threatened between the Company or Belleview and any of
their employees. The Company and Belleview have complied with all laws relating
to the employment of labor, including any provisions thereof relating to wages,
hours, collective bargaining, safety and the payment of withholding and social
security and similar taxes, and neither the Company nor Belleview have any
liability for any arrears of wages or taxes or penalties for failure to comply
with any of the foregoing.
3.13 PATENTS, TRADEMARKS, FRANCHISES, ETC. A true and complete list of
(i) all patents, patent applications, patent agreements, license arrangements
relating to patents, consulting agreements relating to patents, trademark
registrations and applications therefor, trade names, service marks and
copyright registrations and applications therefor, and franchises and franchise
agreements to which the Company or Belleview is a party or which are used in
their businesses and are owned by or licensed to the Company or Belleview and
(ii) any interference actions or adverse claims made or, to the best knowledge
of the Company threatened in respect thereof and any claims made or, to the best
knowledge of the Company, threatened for alleged infringement thereof, is set
forth in Schedule 3.13. All patents and trademarks listed on Schedule 3.13 as
being owned by the Company or Belleview and registered in the U.S. Patent Office
have been duly issued or registered therein, all such registrations have been
validly issued and all are in full force and effect. Neither the Company nor
Belleview in their operations infringes any valid patent, trademark, trade name,
service mark or copyright of any other person or entity. All agreements listed
in Schedule 3.13 are valid and enforceable, each of the Company and Belleview
have performed all obligations imposed upon it thereunder, and neither the
Company nor Belleview nor, to the knowledge of the Company, any other party
thereto is in default thereunder, nor is there any event which with notice or
lapse of time, or both, would constitute a default thereunder by the Company or
Belleview, or, to the knowledge of the Company, any other party thereto.
Neither the Company nor Belleview has received notice that any party to any such
agreement intends to cancel, terminate or refuse to renew the same or to
exercise or decline to exercise any option or other right thereunder.
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3.14 LOANS, NOTES, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. The loans,
notes and accounts receivable reflected in the Financial Statements and all such
loans, notes and accounts receivable arising after the applicable dates of such
Financial Statements arose, and have arisen, from bona fide transactions of the
Company and Belleview, and the bad debt reserves established in connection with
such loans, notes, and accounts receivable are in conformity with generally
accepted accounting principles. Accounts payable of the Company and Belleview
reflected in such Financial Statements and all accounts payable arising after
the applicable dates of such Financial Statements arose, and have arisen, from
bona fide transactions.
3.15 CORPORATE DOCUMENTS, BOOKS AND RECORDS. The Company has furnished or
made available to RACF and Merger Sub or their representatives for their
examination true, correct and complete copies of (i) the Certificate of
Incorporation and bylaws of the Company, including all amendments thereto;
(ii) the minute book of the Company; (iii) the stock transfer book of the
Company; and (iv) the Articles of Organization and Operating Agreement of
Belleview.
3.16 ABSENCE OF SENSITIVE PAYMENT. Neither the Company nor Belleview has
made or maintained (i) any contributions, payments or gifts of its funds or
property to any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift was or is illegal
under the laws of the United States or any state thereof, or any other
jurisdiction (foreign or domestic); or (ii) any contribution, or reimbursement
of any political gift or contribution made by any other person, to candidates
for public office, whether federal, state, local or foreign, where such
contributions by the Company were or would be a violation of applicable law.
3.17 INSURANCE. All of the policies of insurance and bonds presently in
force with respect to either the Company or Belleview including, without
limitation, fire, liability and other insurance, are listed in Schedule 3.17,
and valid policies for such insurance as are shown to be in effect on the date
of this Agreement will be outstanding and duly in force at the Effective Time.
The insurance policies maintained by the Company or Belleview (i) are in such
amounts and provide for such premiums and deductibles as ordinarily maintained
by other companies in businesses similar to the Company and Belleview and
(ii) insure the Company and Belleview against losses and damages ordinarily
insured against by other companies in businesses similar to the Company and
Belleview. The Company has delivered or made available to RACF and Merger Sub
or their representatives true and complete copies of each insurance policy
listed in Schedule 3.17.
3.18 EMPLOYEES.
(a) Schedule 3.18 includes (i) a detailed payroll register for each
of the Company and Belleview for the payroll period ended March 31, 1996,
together with a listing of department and job codes and (ii) an
organization chart of the Company.
(b) Except as disclosed in Schedule 3.18, neither the Company nor
Belleview is a party to any:
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(i) management, employment or other contract providing for the
employment or rendition of executive services;
(ii) contract for the employment of any employee which is not
terminable by either the Company or Belleview on 30 days' notice;
(iii) bonus, incentive, deferred compensation, severance pay,
pension, profit-sharing, retirement, stock purchase, stock option, employee
benefit or similar plan, agreement or arrangement (including without
limitation Christmas bonuses and similar year end bonuses);
(iv) collective bargaining agreement or other agreement with any labor
union or other employee organization and no such agreement is currently
being requested by, or is under discussion by management with, any group of
employees or others; or
(v) any other employment contract or other compensation agreement or
arrangement affecting or relating to current or former employees of the
Company or Belleview.
3.19 EMPLOYEE PLANS.
(a) Schedule 3.19 sets forth all employee pension benefit plans (as
such term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974 ("ERISA")) which are maintained by the Company or
Belleview and designed to be qualified under Section 401(a) of the Internal
Revenue Code (the "Code").
(b) neither the Company nor Belleview has maintained an employee
pension benefit plan other than the plans described in Schedule 3.19 which
is designed to be qualified under Section 401(a) of the Code. To the best
knowledge of the Company, each of the Company and Belleview is and has at
all times been in compliance with all applicable provisions of ERISA, all
regulations promulgated under ERISA or the Code and other federal and state
statutes and regulations relating to such employee pension benefit plans.
No event has occurred or, to the knowledge of the Company, is threatened or
about to occur that would constitute a reportable event within the meaning
of Section 4043(b) of ERISA, and no notice of termination has been filed by
a plan administrator pursuant to Section 4041 or 4041A of ERISA or issued
by the Pension Benefit Guaranty Corporation ("PBGC") pursuant to
Section 4042 of ERISA with respect to any employee pension benefit plan of
the Company subject to ERISA. The plans identified in Schedule 3.19 have
been determined by the Internal Revenue Service to constitute plans
qualified under Section 401(a) of the Code, and nothing has occurred since
the date of any such determination that has adversely affected such
qualification.
(c) Full payment has been made of all amounts that each of the
Company and Belleview is required under the terms of all employee pension
benefit plans to have paid as contributions to such plans, and no
accumulated funding deficiency (as defined in
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Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any such plan. Each of the Company and
Belleview has paid all premiums (and interest charges and penalties for
late payment, if applicable) due the PBGC with respect to each employee
pension benefit plan and each plan year thereof for which such premiums
are required.
(d) As of the Effective Date all employee pension benefit plans which
are designed to meet the requirements of Section 401(a) of the Code will be
sufficiently funded so that no funding liability would result if such plans
were terminated as of such date. The funding method used in connection
with each employee pension benefit plan is acceptable under ERISA, the
actuarial assumptions used in connection with funding such employee pension
benefit plan in the aggregate are reasonable (taking into account the
experience of such employee pension benefit plan and reasonable
expectations).
(e) The Company and Belleview maintain employee pension benefit plans
which are not designed to be qualified under Section 401(a) of the Code as
listed on Schedule 3.19. The participants in such plans, the actuarially
determined present value at the date set forth on Schedule 3.19 of then
vested benefits, and the actuarial assumptions and calculations used to
determine such present value are listed on Schedule 3.19 hereto. The
Company is not delinquent in any payments under any of such plans. The
Company is and has at all times been in compliance with all applicable
provisions of ERISA, the Code, and all regulations promulgated under ERISA
or the Code and other federal and state statutes relating to such employee
pension benefit plans.]
(f) The Company and Belleview maintain employee welfare benefit plans
(as such term is defined in Section 3(1) of ERISA as listed on Schedule
3.19). The name of each plan, participants or class of participants and
description of benefits are listed on Schedule 3.19 hereto. Each of the
Company and Belleview is and at all times has been in compliance with all
applicable provisions of ERISA, the Code, and all regulations promulgated
under ERISA or the Code, and other federal and state statutes and
regulations relating to such employee welfare benefit plans. Full payment
has been made of all amounts that the Company and Belleview is required
under the terms of such employee welfare benefit plans to have paid as
contributions to such plans or as benefits under such plans except claims
for benefits which are currently under administrative review pursuant to
reasonable and consistent administrative procedures established for the
operation of such plans.
(g) Schedule 3.19 lists all other fringe benefits or payment
practices maintained by the Company or Belleview and not otherwise
identified in this section.
(h) Copies of all documents constituting the plans or written
agreement describing any employee benefit plan, letter agreement,
compensation arrangement or other program maintained by each of the Company
and Belleview have been previously furnished to RACF and Merger Sub or
their representatives including any filings with any government office
relating thereto, any contracts relating to assets of any such plans, and
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any actuarial or other calculations relating to the amount of benefits
payable under such plans.
(i) No event has occurred and no condition exists relating to any
employee benefit plan (i) that could result in the imposition of an excise
tax on the Company or Belleview, (ii) that would justify the attachment of
a lien on the assets of the Company or Belleview, or (iii) that could
result in fiduciary liability being imposed on the Company or Belleview
under Section 404 of ERISA.
(j) There are no pending or, to the knowledge the Company, threatened
claims, suits, or other proceedings involving any employee benefit plan or
compensation arrangement other than ordinary and usual claims for
participants and beneficiaries.
(k) The transactions contemplated by this Agreement will not result
in any employee, former employee, or other person being entitled to any
severance benefit other than the severance benefits described on
Schedule 3.19 hereto.
3.20 TRANSACTIONS WITH RELATED PARTIES. Except for transactions disclosed
in Schedule 3.20, there have been no loans or other transactions between either
of the Company or Belleview and any officer, director, shareholder or affiliate
of the Company or Belleview. Except as disclosed in Schedule 3.20, neither the
Company, Belleview, any officer or director of the Company or Belleview nor any
spouse or child of any such person owns or has any interest in, directly or
indirectly, any real or personal property owned by or leased to the Company or
Belleview. Not later than the Effective Time, all loans between the Company and
its affiliates, directors and officers, shall have been paid, and each
affiliate, director and officer of the Company or Belleview shall have released
the Company and Belleview from any and all claims and such releases shall have
been delivered to RACF.
3.21 DIRECTORS AND OFFICERS; BANKS. Schedule 3.21 contains a true and
complete list showing (i) the names of all the officers and directors of the
Company; (ii) the names of all officers, managers and interest owners of
Belleview; (iii) the name of each bank in which either the Company or Belleview
has an account or a safety deposit box and the names of the persons authorized
to draw thereon or having access thereto; and (iv) the name of each person
holding a general or limited power of attorney from the Company or Belleview and
the extent of such power.
3.22 OWNERSHIP, QUALITY AND LOCATION OF MATERIAL ASSETS. Neither the
Company nor Belleview utilizes in its business any assets not reflected in the
Financial Statements except for assets which have been fully amortized or
depreciated and which are owned or leased by the Company or Belleview, and
franchises, licenses, trademarks and tradenames. All properties and assets of
the Company or Belleview are in the possession and control of the Company and
Belleview, as the case may be. As of the date hereof, no physical assets of any
value (other than employee personal effects) are on the premises at the
locations operated by the Company which do not belong to or are not leased by
the Company.
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3.23 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor Belleview
have liabilities of any nature, whether accrued, absolute, contingent or
otherwise, not disclosed elsewhere herein or in the Schedules hereto or
adequately reflected or reserved against in the Financial Statements, other than
current liabilities incurred in the ordinary course of business since March 31,
1996.
3.24 BROKERAGE. Neither the Company nor the Shareholders have retained any
broker or finder in connection with the transactions contemplated by this
Agreement. If any broker or finder asserts a claim for a fee as a result of
such transactions, based upon a contract, written or oral, with either the
Company and/or any of the Shareholders, such claim shall be payable by the
Shareholders.
3.25 PERMITS. Except as set forth on Schedule 3.25, (a) each of the
Company and Belleview has all licenses, clearances, permits, franchises, grants,
authorizations, easements, consents, certificates and orders necessary to
conduct its business and to operate its properties and assets, and such
licenses, clearances, permits, franchises, grants, authorizations, easements,
consents, certificates and orders are in full force and effect and are set forth
in Schedule 3.25; (b) no violations exist in respect of any license, clearance,
permit, franchise, grant, authorization, easement, consent, certificate or order
of the Company or Belleview; (c) no proceeding is pending or threatened looking
toward the revocation or limitation of any such license, clearance, permit,
franchise, grant, authorization, easement, consent, certificate or order and
there is no basis or ground for any such revocation or limitation. Each of the
Company and Belleview has complied with all laws, rules, regulations,
ordinances, codes, licenses, clearances, permits, franchises, grants,
authorizations, easements, consents, certificates and orders relating to any of
its properties or applicable to its business, including, but not limited to,
labor, equal employment opportunity, occupational safety and health, consumer
protection, environmental, securities and antitrust laws and regulations.
Neither the Company nor Belleview is in violation of any applicable zoning,
building or environmental regulation, ordinance or other law, order, regulation,
restriction or requirement relating to its operations or properties, whether
such properties are owned or leased, and no governmental body or other person
has claimed that any such violation exists, or called attention to the need for
any work, repairs, construction, alterations or installation on or in connection
with the properties of the Company and Belleview. The Company has no knowledge
of any pending or threatened action or proceeding which could result in a
modification or termination of the zoning laws which modification or termination
would adversely affect the Company or Belleview or any of their property.
3.26 FULL DISCLOSURE. No information furnished, or to be furnished, by
either the Company or any of the Shareholders to RACF or Merger Sub or their
representatives in connection with this Agreement (including, but not limited
to, the Financial Statements and all information in the Schedules hereto) is, or
will be, false or misleading and such information includes all facts required to
be stated therein or necessary to make the statements therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
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OF THE SHAREHOLDERS
Each of the Shareholders hereby represents and warrants to RACF and Merger
Sub with respect to itself, and not with respect to any other Shareholder, as
follows:
4.1 TITLE TO SHARES. Each Shareholder owns the Shares set forth opposite
his name in Schedule B hereto free and clear of any lien, encumbrance, adverse
claim, restriction on sale or transfer (other than restrictions imposed by
applicable securities laws), preemptive right, limitations on voting rights or
option, and has the authority to dispose of such Shares pursuant to this
Agreement.
4.2 EFFECT OF AGREEMENT ON SHAREHOLDERS. The execution, delivery and
performance of this Agreement by each Shareholder and the consummation by each
Shareholder of the transactions contemplated hereby has been duly authorized by
such Shareholder and will not require any notice to, filing with, or the
consent, approval or authorization of any person or governmental authority.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in the acceleration or
termination of, or the creation in any party of the right to accelerate,
terminate, modify or cancel, any indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability to which any Shareholder is a
party or is bound or to which any of the Shareholder's assets are subject,
(ii) conflict with, violate or result in a breach of any provision of the
charter documents or trust agreement of any Shareholder which is not a natural
person or (iii) conflict with or violate any law, rule, regulation, ordinance,
order, writ, injunction or decree applicable to any Shareholder or by which any
of their respective properties or assets is bound or affected.
4.3 LEGAL PROCEEDINGS. There are no claims, actions, suits, arbitrations,
grievances, proceedings or investigations pending or, to the best knowledge of
each Shareholder threatened, against such Shareholder, at law, in equity, or
before any federal, state, municipal or other governmental or nongovernmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, involving the transactions contemplated hereby.
4.4 CONSENTS. No consent of, or order of or filing with, any court or
governmental body or other person is required in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated herein by each Shareholder.
4.5 INVESTOR STATUS. Each Shareholder hereby acknowledges that the
acquisition of the RACF Shares pursuant to this Agreement is suitable only for
sophisticated investors and is being offered and issued under an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended,
(the "Securities Act") and the Rules and Regulations promulgated thereunder and
the applicable state securities laws and that this Agreement has not been
submitted to or reviewed by the Securities and Exchange Commission ("SEC") or
the securities regulation agency of any state or any other governmental agency.
Each Shareholder has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks incident to the
acquisition of the RACF Shares. Each Shareholder has adequate means of
providing for his current needs and possible contingencies and has no need for
immediate liquidity
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for the RACF Shares. Each Shareholder has made his own examination of RACF
and has depended on the advice of such Shareholder's own counsel and advisors
and acknowledges that the terms of this Agreement were the subject of
arms-length negotiations between the Shareholders and RACF.
4.6 ABSENCE OF MARKET. Each Shareholder acknowledges that he must bear
the economic risk of his investment in the RACF Shares for an indefinite period
of time since the RACF Shares have not been registered under the Securities Act,
nor any state securities laws, and therefore cannot be sold unless the RACF
Shares are subsequently registered under the Securities Act and applicable state
laws or an exemption from registration is available.
4.7 ACCESS TO INFORMATION. Each Shareholder represents that he has
received and reviewed to his satisfaction all documents and information that he
considers material to his acquisition of the RACF Shares. Each Shareholder
acknowledges that all documents, records, and books (including books and records
of RACF and all SEC filings and disclosures made by RACF) have been made
available for inspection by his attorney and/or accountant and appropriate
representatives of the Shareholder, and that Shareholder has received copies of
all documents requested by such Shareholder in connection with his evaluation of
this investment. Each Shareholder represents that such Shareholder and his
representatives have had an opportunity to ask questions of and receive answers
from RACF regarding RACF and all questions and inquiries made by such
Shareholder have been responded to satisfactorily.
4.8 NO ASSURANCES. Each Shareholder represents that none of the following
has been represented, guaranteed, or warranted to such Shareholder by RACF,
Merger Sub or their agents or employees, or any other person, expressly or by
implication:
(i) subject to the obligations of the RACF under the Registration
Rights Agreement, the length of time that the Shareholder will be required
to remain as the owner of the RACF Shares;
(ii) the profit to be realized, if any, as a result of the acquisition
of the RACF Shares;
(iii) that the past performance or experience on the part of RACF,
or any officer, director or affiliate, their partners, salesmen,
associates, agents, or employees, or of any other person, will in any way
guarantee the actual results of the ownership of the RACF Shares; or
(iv) that any projections, forecasts or other forward looking
information ("Objectives") constitute a guarantee, representation or
warranty that such Objectives can, or will, be achieved.
4.9 INVESTMENT PURPOSES. Each Shareholder hereby represents and warrants
to RACF that he is acquiring the RACF Shares for investment purposes only, for
his own account, and not as nominee or agent for any other person or entity, and
not with a view to, or for resale in
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connection with, any distribution thereof within the meaning of the
Securities Act. No Shareholder has any agreement or other arrangement with
any person or entity to sell, transfer or pledge any part of the RACF Shares
and such Shareholder has no plans to enter into any such agreement or
arrangement, except to extent permitted under Section 6.3 hereof or a pledge
of the RACF Shares pursuant to a bona fide institutional loan to such
Shareholder.
4.10 LEGEND. The Shareholders acknowledge that the certificates
representing the RACF shares to be delivered by RACF will bear the following
restrictive legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT COVERING SUCH SECURITIES OR SUCH SALE OR TRANSFER IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY
SIMILAR REQUIREMENTS OF ANY APPLICABLE STATE SECURITIES LAW."
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company
covenants and agrees that, prior to the Effective Time, unless RACF and Merger
Sub shall otherwise agree in writing or as otherwise expressly contemplated by
this Agreement:
(a) The businesses of the Company shall be conducted only in, and the
Company shall not take any action except in the ordinary course of business
and consistent with past practices, and the Company shall use its best
efforts to maintain and preserve its business organization, assets,
prospects, employees and advantageous business relationships;
(b) The Company shall not, directly or indirectly, do any of the
following: (i) authorize for issuance, issue, sell, pledge, deliver, or
agree or commit to issue, sell, pledge or deliver (whether through the
issuance or grant of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any capital stock of the Company or securities or
rights convertible into or exchangeable for, shares of capital stock or
securities convertible into or exchangeable for such shares or (ii) pledge,
dispose of or encumber, except in the ordinary course of business, any
assets of the Company (including any indebtedness owed to it or any claims
held by it); (iii) amend or propose to amend its charter or bylaws or
similar organizational documents; (iv) split, combine or reclassify any
shares of its capital stock or declare, set aside or pay any dividend or
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock; (v) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any capital stock of the
Company; (vi) transfer any assets or liabilities to any subsidiary;
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(c) The Company shall not, directly or indirectly, (i) acquire (by
merger, consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof or make any
investment either by purchase of stock or securities, contributions to
capital, property transfer or purchase of any amount of property or assets
of any other individual or entity; (ii) acquire any assets for a value in
excess of $10,000 other than in the ordinary course of business;
(iii) dispose of any assets with a value in excess of $10,000 other than in
the ordinary course of business; (iv) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee, endorse or
otherwise as an accommodation become responsible for, the obligations of
any other individual or entity, make any loans or advances or enter into
any other transaction, except in the ordinary course of business and
consistent with past practice; (v) authorize, recommend or propose any
change in its capitalization or any release or relinquishment of any
contract right; or (vi) authorize or propose any of the foregoing or enter
into or modify any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) The Company shall not enter into or adopt any new, or amend any
existing, severance or termination benefit arrangements, consulting
agreements, any employment benefit plans, or arrangement;
(e) Except for arrangements existing prior to March 31, 1996 or as
noted in 3.19, the Company (except for salary increases or other employee
benefit arrangements in the ordinary course of business) shall not adopt or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
plan, agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any employee or increase or pay any benefit not required by any
existing plan and arrangement;
(f) The Company shall not, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the Company's Financial
Statements or incurred in the ordinary course of business and consistent
with past practice;
(g) The Company shall not, waive, release, grant or transfer any
franchises, franchise agreements, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, copyrights or know-how or
modify or change in any respect any existing license, lease, contract
franchise, franchise agreement or other document, other than in the
ordinary course of business and consistent with past practice;
(h) The Company shall use its best efforts to preserve its business
organization intact, to keep available the services of its current officers
and key employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and
others having significant business relationships with the Company;
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(i) The Company shall not make capital expenditures in the aggregate
in excess of $50,000; or
(j) The Company shall not authorize or propose any of the foregoing
or enter into any contract, agreement, commitment or arrangement to do any
of the foregoing.
5.2 CONDUCT OF BUSINESS BY BELLEVIEW PENDING THE MERGER. The Company
covenants and agrees that, prior to the Effective Time, unless RACF and Merger
Sub shall otherwise agree in writing or as otherwise expressly contemplated by
this Agreement:
(a) The businesses of Belleview shall be conducted only in, and
Belleview shall not take any action except in the ordinary course of
business and consistent with past practices, and the Company shall use its
best efforts to cause Belleview to maintain and preserve its business
organization, assets, prospects, employees and advantageous business
relationships; and
(b) Belleview shall not directly or indirectly take any action which
the Company is prohibited from taking pursuant to Section 5.1 hereof.
ARTICLE 6
COVENANTS OF RACF
6.1 EMPLOYMENT AGREEMENTS. RACF agrees to cause the Surviving Corporation
to enter into the employment agreements listed on Schedule 6.1 with certain
officers of the Company effective as of the Effective Time.
6.2 REGISTRATION RIGHTS. RACF agrees to enter into a Registration Rights
Agreement in the form of Exhibit A hereto at the Closing setting forth the terms
and conditions applicable to the registration of a portion of the RACF Shares
received by the Shareholders under this Agreement.
6.3 CAPITAL LOAN. On the Effective Date, RACF shall loan an amount (on
terms determined by RACF) not exceeding $675,000 to the Surviving Corporation
for use of the Surviving Corporation in repaying all outstanding loans to the
Surviving Corporation from the Shareholders in the amounts set forth on Schedule
3.20.
6.4 INFORMATION TO LENDER. RACF shall cooperate with the Shareholders to
provide such information as is reasonably required by any lender providing loans
to the Shareholders secured by a pledge of the RACF Shares.
6.5 WAREHOUSE CREDIT LINE. RACF shall use its best efforts to cause the
Shareholders to be released as guarantors of the Company's existing warehouse
credit line.
ARTICLE 7
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
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7.1 NO SHOPPING. Neither the Company nor the Shareholders will, directly
or indirectly, through any officer, director, agent, representative or
otherwise, (i) solicit, initiate or encourage submission of proposals or offers
from any person (other than RACF and Merger Sub), relating to any acquisition or
purchase of all or substantially all of the assets of, or any equity interest
in, the Company or any merger, consolidation, or business combination with the
Company, or (ii) participate in any discussions or negotiations regarding, or
furnish to any person (other than RACF and Merger Sub) any information with
respect to, any of the foregoing, or (iii) otherwise cooperate in any way with,
or assist or participate in, facilitate or encourage, any effort or attempt by
any other person to do or seek any of the foregoing. The Company shall promptly
notify RACF and Merger Sub if it receives any such proposal or offer or any
inquiry or contact with respect thereto.
7.2 APPROVAL OF MERGER. Each of the Shareholders agrees that in
accordance with Section 228 of the Delaware Law, by execution and delivery of
this Agreement such Shareholder consents to and approves the Merger to the same
extent and with the same force and effect as if such Shareholder had consented
to, approved and voted for the Merger at a formal meeting of the Company's
shareholders duly called and held for the purpose of acting upon the proposal to
approve the Merger.
7.3 RELEASE. Each of the Shareholders, in the capacity as shareholders of
the Company, hereby agrees to execute and deliver on the Effective Date a
release of the Company in the form of Exhibit D hereto from any and all claims
resulting from or related to any matter arising prior to the Effective Date.
7.4 GENERAL PROHIBITION ON TRANSFER. For a period of 180 days following
the Effective Date, no Shareholder shall, directly or indirectly, sell, assign,
transfer, grant a participation in, pledge, encumber or in any way dispose of
any RACF Shares (or solicit any offers to buy or otherwise acquire, or to take a
pledge of any RACF Shares), other than a sale of such RACF Shares pursuant to a
registered public offering to the extent permitted pursuant to the terms of
Section 6.3 hereof or a bona fide pledge of such RACF Shares.
7.5 CONSENTS. The Company and the Shareholders hereby covenant and agree
to obtain all material consents, waivers, authorizations and approvals as may be
required with respect to the consummation of the transactions contemplated
hereby, including the change of control of the Company, under (i) any indenture,
contract, lease, sublease, loan agreement, note or other agreement of which the
Company is a party or pursuant to which the assets of the Company are subject or
(ii) any law, rule, regulation, ordinance, order, writ, injunction, decree,
license or permit applicable to the Company or by which any of its assets or
properties are bound or affected.
7.6 CONFIDENTIAL INFORMATION.
(a) For purposes of this Agreement, "Confidential Information" shall mean
any proprietary information, and any information which the Surviving Corporation
reasonably considers to be proprietary, pertaining to the Surviving
Corporation's past, present or prospective
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business secrets, methods or policies, earnings, finances, security holders,
lenders, key employees, nature of services performed by the Surviving
Corporation's sales and maintenance personnel, quality control procedures or
standards, procedures and methods of cost or installation of the Surviving
Corporation's products or components, information relating to arrangements
with suppliers, the identity and requirements of arrangements with customers,
and the type, volume or profitability of work for such customers, drawings,
records, reports, documents, manuals, techniques, procedures, formulae,
ratings, design information, data, statistics, trade secrets and all other
information of any kind or character relating to the Surviving Corporation,
whether or not reduced to writing.
(b) Each Shareholder acknowledges that such Shareholder has and may have
access to Confidential Information and that such Confidential Information
constitutes valuable, special and unique property of the Surviving Corporation.
At no time shall such Shareholder (i) use any Confidential Information in any
manner adverse to the business interests of the Surviving Corporation, or (ii)
disclose any such Confidential Information to any person or entity for any
reason or purpose whatsoever. Upon the request of the Surviving Corporation,
each Shareholder shall deliver to the Surviving Corporation all letters, notes,
computer disks, software, notebooks, reports and other materials which contain
Confidential Information and which are in the possession or under the control of
such Shareholder, whether or not prepared by such Shareholder.
(c) All records and documents embodying any Confidential Information or
pertaining to the existing or contemplated scope of the Surviving Corporation's
business, which have been conceived, prepared or developed by a Shareholder in
connection with his ownership interest in the Company, employment by the Company
or otherwise, either alone or with others (herein called "WORK PRODUCT"), shall
be the sole property of the Surviving Corporation. Upon request of the
Surviving Corporation, such Shareholder shall deliver all Work Product to the
Surviving Corporation.
7.7 AGREEMENT NOT TO COMPETE. As a material inducement to RACF and Merger
Sub to enter into this Agreement, each Shareholder agrees not to compete in any
geographic region where the Surviving Corporation conducts business for a period
equal to the later of (i) 36 months after the Effective Date or (ii) the
expiration of any noncompete period applicable to such Shareholder pursuant to
any written employment agreement between such Shareholder and the Surviving
Corporation. "COMPETE" means direct participation and/or indirect participation
as a partner, officer, director, employee, contractor, agent or shareholder
(other than as a holder of less than ten percent (10%) of the outstanding
capital stock of any corporation or other entity whose equity securities are
traded on a national securities exchange) in any business engaged in the
origination, purchase, sale and/or securitization of mortgage loans.
7.8 AGREEMENT NOT TO SOLICIT CUSTOMERS AND EMPLOYEES. Each Shareholder
agrees that for a period equal to the later of (i) 36 months after the Effective
Date or (ii) the expiration of any nonsolicitation period applicable to such
Shareholder pursuant to any written employment agreement between such
Shareholder and the Surviving Corporation, he shall not, either alone or on
behalf of any business competing with the Surviving Corporation, directly or
indirectly (i) solicit or induce, or in any manner attempt to solicit or induce
any person employed by, or an
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agent of, the Surviving Corporation to terminate his employment or agency, as
the case may be, with the Surviving Corporation, or (ii) solicit, divert, or
attempt to solicit or divert, or otherwise accept as a loan source, supplier
or customer, any person, concern or entity which sells the Surviving
Corporation's products and services, furnishes products or services to, or
receives products and services from, the Surviving Corporation, nor will he
attempt to induce any such loan source, supplier or customer to cease being
(or any prospective loan source, supplier or customer not to become) a loan
source, supplier or customer of the Surviving Corporation.
7.9 INDEPENDENT COVENANTS. The covenants contained herein are independent
and separate, and in the event that any provision contained herein is declared
invalid or illegal, the other provisions hereof shall not be affected or
impaired thereby and shall remain valid and enforceable.
7.10 INJUNCTIVE RELIEF. In the event of a breach or threatened breach by a
Shareholder of the provisions of this Article 7, the Surviving Corporation shall
be entitled to an injunction to prevent irreparable injury to the Surviving
Corporation. Nothing herein shall be construed as prohibiting the Surviving
Corporation from pursuing any other remedies available to the Surviving
Corporation for such breach or threatened breach, including the recovery of
damages from the Shareholder.
7.11 REPAYMENT OF SHAREHOLDER LOANS. At the Closing, the Shareholders
shall repay all outstanding loans owed by the Shareholders to the Company.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 EXPENSES. All expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated. Schedule 8.1 sets forth all
expenses of whatever kind and nature, including without limitation, legal fees,
accounting fees, and brokerage fees incurred by the Company in connection with
this Agreement and the transactions contemplated hereby (the "Shareholders
Expenses"). The Shareholders agree that the total amount of Shareholder
Expenses shall not exceed $100,000. The lesser of (i) 25% of such Shareholder
Expenses or (ii) $25,000 of Shareholder Expenses shall be borne by the Company
and the remaining amount of the Shareholders Expenses will be borne and paid by
the Shareholders on the Effective Date. On the Effective Date, the Company
shall provide to RACF and Merger Sub, evidence reasonably satisfactory to each
of them of the amount of Shareholder Expenses known as of the Effective Date
listing the total of such expenses incurred by the Company and the date when the
Company last incurred such expenses (a date no later than the Effective Date).
8.2 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees (i) to use all reasonable efforts to
take, or cause to be taken, all action and (ii) to use all reasonable efforts to
do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement and to cooperate with each other in connection with the
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foregoing, (iii) to use all reasonable efforts to obtain all necessary waivers,
consents and approvals from other parties to material loan agreements, leases
and other contracts and to notify each of the other parties hereto of any
request for prepayment with respect thereto; provided however, all reasonable
efforts with respect to obtaining waivers, consents and approvals under loan
agreements does not obligate the parties hereto to make any prepayment on any
such loan, (iv) to use all reasonable efforts to obtain all necessary consents,
approvals and authorizations as are required to be obtained under any federal,
state, local or foreign law or regulations, (v) to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, (vi) to use all reasonable efforts to lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and (vii) to use all reasonable efforts to effect all necessary registrations
and filings and submissions of information required or requested by governmental
authorities.
8.3 NOTIFICATION OF CERTAIN MATTERS. Each party will promptly give
written notice to the other parties upon becoming aware of the occurrence or
failure to occur, or impending or threatened occurrence or failure to occur, of
any event that would cause or constitute, or would be likely to cause or
constitute, a breach of any of its representations, warranties or covenants
contained in this Agreement and will use all reasonable efforts to prevent or
promptly remedy the occurrence or failure. No such notification shall limit or
affect the representations, warranties, covenants or conditions or remedies of
the parties hereunder.
8.4 ACCESS TO INFORMATION.
(a) The Company shall, and shall cause Belleview and the Company's
officers, directors, employees and agents to, afford the officers,
employees and agents of RACF and Merger Sub complete access at all
reasonable times to its officers, employees, agents, properties,
facilities, books, records and contracts and shall furnish RACF and Merger
Sub all financial, operating and other data and information as RACF and
Merger Sub through their officers, employees or agents, may reasonably
request. RACF and Merger Sub will hold and will cause their respective
representatives to hold in strict confidence all documents and information
concerning the Company furnished to RACF or Merger Sub in connection with
the transactions contemplated by this Agreement (except to the extent that
such information can be shown to have been (i) previously known by RACF or
Merger Sub (or their respective affiliates) prior to its disclosure to RACF
or Merger Sub by the Company, (ii) in the public domain through no fault of
RACF or Merger Sub or (iii) later lawfully acquired by RACF or Merger Sub
(or their respective affiliates) from other sources and will not release or
disclose such information to any other person, except in connection with
this Agreement to (i) their respective auditors, attorneys, financial
advisors and other consultants or advisors, (ii) responsible financial
institutions, partnerships and individuals after RACF or Merger Sub, as the
case may be, has made reasonable efforts to cause such financial
institutions, partnerships and individuals to agree to be bound by the
provisions of this Section 8.4 as if the reference to RACF or Merger Sub
herein were to them (it being understood that such persons shall be
informed by RACF or Merger Sub of the confidential nature of such
information and shall be directed by RACF
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or Merger Sub to treat such information confidentially) and (iii) Bear,
Stearns and Co. Inc. and its representatives; provided that RACF, Merger
Sub and their respective representatives may provide such documents and
information in response to judicial or administrative process or
applicable governmental laws, rules, regulations, orders or ordinances,
but only that portion of the documents or information which, on the
advice of counsel, is legally required to be furnished, and provided
that RACF or Merger Sub, as the case may be, notifies the Company of its
obligation to provide such information prior to such disclosure and
fully cooperates with the Company to protect the confidentiality of such
documents and information under applicable law. If the transactions
contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information can be shown
to have been (i) previously known by RACF, Merger Sub or their
respective affiliates, prior to its disclosure to RACF or Merger Sub by
the Company, (ii) in the public domain through no fault of RACF or
Merger Sub, or (iii) later lawfully acquired by RACF, Merger Sub or
their respective affiliates, from other sources, and, if requested by
the Company, RACF or Merger Sub will destroy or return to the Company
all copies of written information furnished by the Company to RACF,
Merger Sub or their respective affiliates, agents, representatives or
advisers.
(b) No investigation pursuant to this Section 8.4 shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
(c) Schedules may be prepared and submitted by the Company after the
date of this Agreement; provided however, that any schedule which is not
attached hereto at the time that RACF and Merger Sub execute this Agreement
shall not be subsequently attached hereto or incorporated herein unless the
form and substance of such schedule is acceptable to RACF and Merger Sub.
8.5 INFORMATION FOR OTHER FILINGS. The parties represent to each other
that the information provided and to be provided by RACF, Merger Sub and the
Company, respectively, for use in any document to be filed with any other
governmental agency or authority in connection with the transactions
contemplated hereby shall, at the respective times such documents are filed with
the governmental agency or authority and on the Effective Date be true and
correct in all material respects and shall not omit to state any material fact
required to be stated therein or necessary in order to make such information not
false or misleading, and the Company, RACF and Merger Sub each agree to so
correct any such information provided by it for use in such documents that shall
have become false or misleading.
8.6 ACTIONS BY SHAREHOLDERS. All collective decisions of the Shareholders
regarding any matter related to this Agreement, including, but not limited to,
the granting of any consent or waiver hereunder, any action taken under Article
10 hereof or any action taken under the Registration Rights Agreement shall be
made by the vote of the holders of a majority of the Shares of the Company (with
respect to any action taken prior to the Effective Time) or by the holders of a
majority of the RACF Shares issued pursuant to this Agreement (with respect to
any action taken after the Effective Time).
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ARTICLE 9
CONDITIONS
9.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE MERGER.
The obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the condition that
no preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission nor any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority shall be in effect that would make the acquisition or holding
directly or indirectly by RACF of the shares of Common Stock of the
Surviving Corporation illegal or otherwise prevent the consummation of
the Merger.
9.2 ADDITIONAL CONDITIONS TO THE OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger is also subject to the
fulfillment at or prior to the Effective Time of the following conditions
(unless waived):
(a) each of RACF and Merger Sub shall in all material respects have
performed each obligation and agreement and complied with each covenant to
be performed and complied with by it hereunder on or prior to the Effective
Time;
(b) the representations and warranties of RACF and Merger Sub in this
Agreement shall be true and correct in all material respects when made and
at the Effective Time with the same force and effect as though made at such
time, except as affected by the transactions contemplated hereby;
(c) RACF and Merger Sub shall have furnished to the Company a
certificate, dated the Effective Date, signed by a responsible officer of
each of RACF and Merger Sub, to the effect that all conditions set forth in
Section 9.2(a) and (b) have been satisfied; and
(d) the Company and the Shareholders shall have received an opinion
dated the Effective Date of counsel to RACF and Merger Sub, in the form of
Exhibit B hereto, which opinion shall be satisfactory to counsel for the
Company.
9.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF RACF AND MERGER SUB. The
obligations of RACF and Merger Sub to effect the Merger are also subject to the
fulfillment at or prior to the Effective Time of the following conditions
(unless waived):
(a) the Company shall in all respects have performed each obligation
and agreement and complied with each covenant to be performed and complied
with by it hereunder on or prior to the Effective Time;
(b) the representations and warranties of the Company and the
Shareholders in this Agreement shall be true and correct in all respects
when made and at the Effective Time with the same force and effect as
though made at such time, except as affected by the transactions
contemplated hereby;
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(c) the Company shall have furnished to RACF and Merger Sub a
certificate, dated the Effective Date, signed by a responsible officer of
the Company, to the effect that all conditions set forth in Section 9.3(a)
and (b) have been satisfied;
(d) if so requested by RACF, any members of the Company's Board of
Directors shall have irrevocably tendered their resignations effective as
of the Effective Time and the Company shall have accepted such
resignations;
(e) RACF and Merger Sub shall have received an opinion dated the
Effective Date of Ducker, Seawell & Montgomery, P.C., counsel to the
Company and the Shareholders, in the form of Exhibit C hereto, which
opinion shall be satisfactory to counsel for RACF and Merger Sub;
(f) all outstanding loans owed by any Shareholder, officer or
director of the Company shall have been repaid in full to the Company and
the releases described in Section 3.20 shall have been delivered to RACF;
(g) RACF and Merger Sub shall have received a copy of the resolutions
of the Board of Directors of the Company authorizing the execution,
delivery and performance of the Agreement and the consummation of the
transactions contemplated hereby and a copy of the resolutions or other
consent of the shareholders of the Company approving the Merger, all
certified by the Secretary of the Company on the Effective Date. Such
certificates shall state that the resolutions set forth therein have not
been amended, modified, revoked or rescinded as of the date of such
certificates;
(h) RACF and Merger Sub shall have received a certificate of the
Secretary of the Company dated the Effective Date, as to the incumbency and
signature of the officers of the Company executing this Agreement and any
certificate, agreement or other documents to be delivered pursuant hereto,
together with evidence of the incumbency of such Secretary;
(i) RACF and Merger Sub shall have received (i) a copy, certified as
of a date reasonably close to the Effective Date by the Secretary of State
of Delaware, of the Certificate of Incorporation, together with all
amendments thereto, of the Company, (ii) a copy, certified as of the
Effective Date by the Secretary or an Assistant Secretary of the Company,
of the bylaws of the Company in effect on the Effective Date, (iii) a
certificate or telex confirmation as of the Effective Date from the
Secretary of State of Delaware as to the existence of the Company as a
Delaware corporation, (iv) a certificate or telex confirmation as of not
more than five business days prior to the Effective Date from the office of
the Comptroller or other appropriate public official in each state in which
the Company is qualified to conduct business certifying that the Company is
in good standing in each such state, (v) a certificate dated the Effective
Date from the Secretary or Assistant Secretary of the Company to the effect
that the documents delivered pursuant to (i) are true and correct copies of
such documents as on file with the Secretary of State of Delaware
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and no action has been taken to amend, modify or repeal such documents,
the same being in full force and effect in such form on the Effective Date;
(j) The Company shall have delivered to RACF and Merger Sub a copy,
certified as of a date reasonably close to the Effective Date by the
Secretary of State of Colorado, of the Articles of Association, together
with all amendments thereto, of Belleview, (ii) a copy, certified as of the
Effective Date by the Secretary or an Assistant Secretary of Belleview, of
the operating agreement of Belleview in effect on the Effective Date, (iii)
a certificate or telex confirmation as of the Effective Date from the
Secretary of State of Colorado as to the existence of the Company as a
Colorado limited liability company, (iv) a certificate dated the Effective
Date from the manager of Belleview to the effect that the documents
delivered pursuant to (i) are true and correct copies of such documents as
on file with the Secretary of State of Colorado and no action has been
taken to amend, modify or repeal such documents, the same being in full
force and effect in such form on the Effective Date;
(k) The Company shall have delivered to RACF and Merger Sub all
necessary consents, waivers, authorizations and approvals so that neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby (including the change of control of the
Company) will (i) result in the acceleration or termination of, or the
creation in any party of the right to accelerate, terminate, modify or
cancel, any indenture, contract, lease, sublease, loan agreement, note or
other obligation or liability to which the Company, Belleview or any
Shareholder is a party or is bound or to which any of their assets are
subject, (ii) conflict with, violate or result in a breach of any provision
of the charter documents or bylaws of the Company or Belleview,
(iii) conflict with or violate any law, rule, regulation, ordinance, order,
writ, injunction, decree, license or permit applicable to the Company or
Belleview or by which any of its properties or assets is bound or affected
or (iv) conflict with or result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or result in the creation of any lien, charge or
encumbrance on any of the properties or assets of the Company or Belleview
pursuant to any of the terms, conditions or provisions of any indenture,
contract, lease, sublease, loan agreement, note, permit, license,
franchise, agreement or other instrument, obligation or liability to which
the Company, Belleview or any Shareholder is a party or by which the
Company, any of the Shareholders or any of their assets is bound or
affected;
(l) RACF shall have received an opinion from Ernst & Young, LLP to
the effect that the Merger shall be treated as a pooling under applicable
accounting standards, including Sections B50.104, .105 and .106 of
Accounting Standards, June 1, 1994;
(m) Each Shareholder shall have executed and delivered to RACF a
Release of the Company in the form of Exhibit D hereto; and
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(n) All schedules to be prepared and provided by the Company shall
have been delivered to RACF and Merger Sub prior to the Closing in form and
substance acceptable to RACF and Merger Sub in their sole discretion.
ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual written consent of the Boards of Directors of RACF,
Merger Sub and the Company;
(b) by either of the Boards of Directors of Merger Sub or the Company
if the Effective Time shall not have occurred on or before May 31, 1996;
provided, however, that the right to terminate under this Section 10.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date;
(c) if a court of competent jurisdiction or governmental, regulatory
or administrative agency or commission shall have issued an order, decree
or ruling or taken any other action (which order, decree or ruling the
parties hereto shall use all reasonable efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable; or
(d) by RACF and Merger Sub if, subsequent to the date hereof and
prior to the Effective Date, there is any material change in the condition
(financial or otherwise), business, operations, liquidity, property,
assets, liabilities, obligations or prospects of the Company.
The date on which this Agreement is terminated pursuant to any of the
foregoing subsections of this Section 10.1 is herein referred to as the
"Termination Date."
10.2 EFFECT OF TERMINATION. Except as set forth in Sections 7.1 and
8.4(a), upon the termination of this Agreement pursuant to Section 10.1, this
Agreement shall forthwith become null and void, except that nothing herein shall
relieve any party from liability for any breach of this Agreement prior to such
termination.
10.3 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
10.4 WAIVER. At any time prior to the Effective Time, any term, provision
or condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations
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or other acts of the parties hereto may be extended) by the party that
is entitled to the benefits thereof.
ARTICLE 11
INDEMNIFICATION
11.1 INDEMNIFICATION BY SHAREHOLDERS. The Shareholders shall indemnify and
hold harmless RACF and the Surviving Corporation, their officers, directors,
employees and controlling persons from any liability, damage, deficiency, loss,
penalty, cost or expense, including attorneys fees and costs of investigating
and defending against lawsuits, complaints, actions or other pending or
threatened litigation (being hereafter referred to in this Article 11 as
"Costs"), arising from or attributable to any breach of any representation,
warranty or agreement made by the Company or the Shareholders whether jointly
and severally or severally herein or in any certificate delivered in connection
with the transaction contemplated herein.
11.2 INDEMNIFICATION BY RACF AND MERGER SUB. RACF and Merger Sub shall
indemnify and hold harmless the Company, its officers, directors, employees and
controlling persons and the Shareholders from Costs arising from or attributable
to any breach of any representation, warranty or agreement made by RACF or
Merger Sub herein or in any certificate delivered in connection with the
transaction contemplated herein.
11.3 PROCEDURES FOR RESOLUTION AND PAYMENT OF CLAIMS FOR INDEMNIFICATION.
(a) If a party entitled to be indemnified under this Article 11 (the
"Indemnitee") shall incur any Costs or determine that it is likely to incur
any Costs, including without limitation claims by third parties, and
believes that it is entitled to be indemnified against such Costs by
another party hereunder (the "Indemnitor"), such Indemnitee shall deliver
to the Indemnitor a certificate (an "Indemnity Certificate") signed by the
Indemnitee which Indemnity Certificate shall:
(i) state that the Indemnitee has paid or properly accrued Costs, or
anticipates that it will incur liability for Costs for which such
Indemnitee is entitled to indemnification pursuant to this Agreement; and
(ii) specify in reasonable detail each individual item of Cost
included in the amount so stated, the date such item was paid or properly
accrued, the basis for any anticipated liability and the nature of the
misrepresentation, breach of warranty or breach of covenant to which each
such item is related and the computation of the amount to which such
Indemnitee claims to be entitled hereunder.
(b) In case the Indemnitor shall object to the indemnification of an
Indemnitee in respect of any claim or claims specified in any Indemnity
Certificate, the Indemnitor shall within 30 days after receipt by the
Indemnitor of such Indemnity Certificate deliver to the Indemnitee a
written notice to such effect and the Indemnitor and the Indemnitee shall,
within the 30-day period beginning on the date of receipt by the Indemnitee
of such
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written objection, attempt in good faith to agree upon the rights
of the respective parties with respect to each of such claims to which the
Indemnitor shall have so objected. If the Indemnitee and the Indemnitor
shall succeed in reaching agreement on their respective rights with respect
to any of such claims, the Indemnitee and the Indemnitor shall promptly
prepare and sign a memorandum setting forth such agreement. Should
Indemnitee and the Indemnitor be unable to agree as to any particular item
or items or amount or amounts, then Indemnitee and the Indemnitor shall
arbitrate such dispute pursuant to Section 12.5 hereof.
(c) Claims for Costs specified in any Indemnity Certificate to which
an Indemnitor shall not object in writing, claims for Costs covered by a
memorandum of agreement of the nature described in paragraph (b), claims
for Costs the validity and amount of which have been the subject of
arbitration as described in paragraph (b) and claims for Costs the validity
and amount of which shall have been the subject of a final judicial
determination are hereinafter referred to, collectively, as "Agreed
Claims".
(d) Promptly after the assertion by any third party of any claim
against any Indemnitee that, in the judgment of such Indemnitee, may result
in the incurrence by such Indemnitee of Costs for which such Indemnitee
would be entitled to indemnification pursuant to this Agreement, such
Indemnitee shall deliver to the Indemnitor a written notice describing in
reasonable detail such claim and such Indemnitor may, at its option, assume
the defense of the Indemnitee against such claim (including the employment
of counsel, who shall be satisfactory to such Indemnitee, and the payment
of expenses). Any Indemnitee shall have the right to employ separate
counsel in any such action or claim and to participate in the defense
thereto, but the fees and expenses of such counsel shall not be at the
expense of the Indemnitor unless (i) the Indemnitor shall have failed,
within a reasonable time after having been notified by the Indemnitee of
the existence of such claim as provided in the preceding sentence, to
assume the defense of such claim, (ii) the employment of such counsel has
been specifically authorized by the Indemnitor, or (iii) the named parties
to any such action (including any impleaded parties) include both such
Indemnitee and the Indemnitor and such Indemnitee shall have been advised
in writing by such counsel that there may be one or more legal defenses
available to it which are different from or additional to those available
to Indemnitor. No Indemnitor shall be liable to indemnify any Indemnitee
for any settlement of any such action or claim effected without the consent
of the Indemnitor but if settled with the written consent of the
Indemnitor, or if there be a final judgment for the plaintiff in any such
action, the Indemnitor shall jointly and severally indemnify and hold
harmless each Indemnitee from and against any loss or liability by reason
of such settlement of judgment. If an Indemnitor assumes the defense of an
Indemnitee against a claim asserted hereunder, the Indemnitee shall give
the Indemnitor access to the Surviving Corporation's books and records as
necessary to conduct such defense and cooperate in such defense.
(e) In the event that an Indemnitee subsequently recovers any or all
of the amount of an Agreed Claim from a party other than the Indemnitor,
the Indemnitee shall
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reimburse immediately to the Indemnitor, in cash, an amount equal to the
amount of such previously paid Agreed Claim which shall have been
recovered.
11.4 MINIMUM COSTS. Notwithstanding anything herein to the contrary, no
Indemnitee shall be entitled to indemnification hereunder unless the aggregate
amount of Costs incurred by such Indemnitee shall exceed $100,000; provided
however, that such minimum amount shall not apply to any Costs arising as a
result of the breach the representations set forth in Sections 3.2, 3.5(g) or
4.1 hereof or any breach of the obligations of the Shareholders to pay
Shareholder Expenses pursuant to Section 8.1 hereof.
ARTICLE 12
GENERAL PROVISIONS
12.1 PUBLIC STATEMENTS. So long as this Agreement is in effect, neither
the Company nor RACF shall, or shall permit any of its subsidiaries to, issue or
cause the publication of any press release or other announcement with respect to
the Merger or this Agreement without consulting with and obtaining the consent
of the other parties; provided, however, that such consent shall not be required
where such release or announcement is required by applicable law.
12.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by Fed Ex or other
nationally recognized overnight delivery service or facsimile transmission (if
also sent by personal delivery, certified mail or overnight delivery service) to
the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to RACF or Merger Sub:
RAC Financial Group, Inc.
1250 W. Mockingbird Lane
Dallas, Texas 75247
Attn: Eric C. Green
Facsimile No. (214) 630-4725
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue
Suite 4100
Dallas, Texas 75201-4618
Attn: Terry M. Schpok, P.C.
Facsimile No. (214) 969-4343
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(b) if to the Company or the Shareholders:
MortgagePlus, Incorporated
7000 East Belleview
Suite 100
Greenwood Village, Colorado 80111
Attn: Steven A. Rubin
Facsimile No. (303) 779-1721
with a copy to:
Ducker, Seawell & Montgomery, P.C.
One Civic Center Plaza
1560 Broadway, Suite 1500
Denver, Colorado 80202
Attn: Robert C. Montgomery
Facsimile No. (303) 861-4017
Notice so given shall (in the case of notice so given by mail) be deemed to be
given and received in the fourth calendar day after posting, in the case of
notice so given by overnight delivery service on the date of actual delivery
and, in the case of notice so given by facsimile transmissions or personal
delivery, on the date of actual transmission or, as the case may be, personal
delivery.
12.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
RACF and Merger Sub shall survive the Merger and remain in full force and effect
on and after the Effective Date notwithstanding any investigations which may
have been made by any of the parties prior thereto. The respective
representations and warranties of the Company and the Shareholders shall survive
the Merger and remain in full force and effect on and after the Effective Date
notwithstanding any investigations which may have been made by any of the
parties prior thereto.
12.4 CLOSING. The Closing of the transactions contemplated by this
Agreement shall take place at the offices of Akin, Gump, Strauss, Hauer & Feld,
L.L.P. in Dallas, Texas or such other place as the parties may agree, as soon as
practicable after the satisfaction or waiver of the conditions set forth in
Section 9.
12.5 ARBITRATION. In the event of any dispute with respect to
indemnification rights under Section 11.3(b) of this Agreement, then the parties
to such dispute shall select a mutually agreeable arbitrator to settle such
disputed item or claims and the amounts thereof and the decision of the
arbitrator shall be binding on the parties. In the event that an arbitrator
cannot be mutually agreed upon, such arbitrator shall be selected in accordance
with the rules of the American Arbitration Association. The opinion of the
arbitrator shall be made in writing and mailed to each party. The arbitrator so
selected shall proceed in accordance with the rules of the American Arbitration
Association and the costs of such arbitration, including the fees of the
arbitrator, shall be paid in accordance with the decision of the arbitrator,
provided that the arbitrator shall assess
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all costs against any party if he finds such party did not act in good
faith. Any such arbitration shall be conducted in Dallas, Texas.
12.6 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof; is not
intended to confer upon any other person any rights or remedies hereunder, shall
not be assigned; and shall, except as aspects of the Merger are governed by
Delaware Law, be governed in all respects, including validity, interpretation
and effect, by the internal laws of the State of Texas without giving effect, to
the principles of conflict of laws thereof. This Agreement may be executed in
one or more counterparts which together shall constitute a single agreement. If
any provision of this Agreement shall be held to be illegal, invalid or
unenforceable under any applicable law, then such contravention or invalidity
shall not invalidate the entire Agreement. Such provision shall be deemed to be
modified to the extent necessary to render it legal, valid and enforceable, and
if no such modification shall render it legal, valid and enforceable, then this
Agreement shall be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties shall be construed and
enforced accordingly.
********** END OF ARTICLE 12 **********
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<PAGE>
AGREEMENT AND PLAN OF MERGER SIGNATURE PAGE
IN WITNESS WHEREOF, RACF, Merger Sub, the Company and the Shareholders have
caused this Agreement to be executed as of the date first written above.
RAC FINANCIAL GROUP, INC.
By: /s/ Daniel T. Phillips
---------------------------------
Name: Daniel T. Phillips
------------------------------
Title: President/Chief Executive
Officer
-----------------------------
FIRSTPLUS FINANCIAL WEST, INC.
By: /s/ Ronald M. Mankoff
---------------------------------
Name: Ronald M. Mankoff
-----------------------------
Title: Chairman
-----------------------------
MORTGAGE PLUS INCORPORATED
By: /s/ James S. Frank
---------------------------------
Name: James S. Frank
-----------------------------
Title: Manager
-----------------------------
SHAREHOLDERS:
Frank Capital Co., LLC
/s/ James S. Frank
------------------------------------
James S. Frank, Manager
/s/ James S. Frank
------------------------------------
James S. Frank, as Trustee of
the Larsen White Trust
/s/ Garrett O. White
------------------------------------
Garrett O. White
/s/ Garrett O. White
------------------------------------
Garrett O. White, as Trustee of
the Berry Trust
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<PAGE>
Robert C. Knisely
/s/ Robert C. Knisely
-----------------------------------
Robert C. Knisely, as Trustee
of the Fairfax Trust
/s/ Steven A. Rubin
------------------------------------
Steven A. Rubin
/s/Richard R. Holsclaw
------------------------------------
Richard R. Holsclaw
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of May 12,
1996, is by and among RAC Financial Group, Inc., a Nevada corporation (the
"COMPANY"), and the Shareholders named on the signature page hereto
(collectively, the "SHAREHOLDERS" and individually, a "SHAREHOLDER").
Whereas, the parties hereto are parties to that certain Agreement and Plan
of Merger dated as of May 22, 1996, providing in part for the grant by the
Company to the Shareholders of certain registration rights as hereinafter
provided;
Now, therefore, in consideration of the premises and the mutual covenants
herein, the parties hereto agree as follows:
1. DEFINITIONS. Unless the context otherwise requires, the terms defined in
this SECTION 1 shall have the meanings herein specified for all purposes of this
Agreement.
"AFFILIATE" shall mean any Person which directly or indirectly
controls, is controlled by, or is under common control with, the indicated
Person.
"AGREEMENT" shall mean this Agreement, including all schedules and
exhibits hereto, as the Agreement may be from time to time amended, modified or
supplemented.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act.
"COMMON STOCK" shall mean the Company's common stock, par value $.01
per share.
"COMMON STOCK VALUE" shall mean (i) if the Common Stock is listed on a
national securities exchange, the closing sale price per share on the principal
exchange on which the Common Stock is listed as reported by such exchange, (ii)
if the Common Stock is quoted in the National Market System, the closing sale
price per share as reported by NASDAQ, (iii) if the Common Stock is traded in
the over-the-counter market but not quoted in the National Market System, the
average of the closing bid and asked quotations per share as reported by NASDAQ,
or any other nationally accepted reporting medium if NASDAQ quotations shall be
available or (iv) if none of the foregoing applies, the fair market value of
such stock as reasonably determined in good faith by the Board of Directors of
the Company.
"COMPANY" shall have the meaning assigned to it in the introductory
paragraph of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE>
"HOLDER" of any security shall mean the record owner of such security.
"HOLDER OF REGISTRABLE SECURITIES" shall mean a Shareholder who, at
the time of such determination, owns Registrable Securities or a transferee of
such Registrable Securities who is entitled to registration rights hereunder in
accordance with the provisions of SECTION 9.
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger, dated
as of May 22, 1996, among the Company, FirstPlus Financial West, Inc., Mortgage
Plus Incorporated and the Shareholders.
"PERSON" shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
"REGISTRABLE SECURITIES" shall mean (i) the shares of Common Stock
issued to the Shareholders pursuant to the Merger Agreement and (ii) any shares
of Common Stock issued with respect to such Common Stock by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization having an
aggregate Common Stock Value of $5,000,000 as of the trading day prior to the
date of any notice given by the Company pursuant to Section 2(a) hereof (the
"Determination Date"). The Registrable Securities held by each Shareholder
shall be the maximum number of whole shares of Common Stock having a Common
Stock Value on the Determination Date not exceeding the Common Stock Value set
forth on the signature page hereto with respect to such Shareholder. For the
purposes of this Agreement, Registrable Securities will cease to be Registrable
Securities when (a) the Company has offered to include such securities in a
registration statement filed by the Company and the Holder of such securities
has rejected such offer by the Company, (b) a registration statement relating to
such securities has been declared effective and such securities have been
disposed of pursuant to such effective registration statement, (c) such
securities are distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act or (d) such securities have
been otherwise transferred by a Shareholder other than pursuant to Section 9.
"SECURITIES ACT" shall mean the Securities Act of 1933, or any similar
Federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
"SHAREHOLDERS" shall mean the Persons named as Shareholders on the
signature page to this Agreement.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
2. REGISTRATION RIGHTS.
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<PAGE>
(a) RIGHT TO INCLUDE REGISTRABLE SECURITIES.
(i) The Company hereby agrees to file a registration statement
under the Securities Act prior to November 20, 1996, under which the
Company shall permit the Shareholders to register the Registrable
Securities for sale to the public in addition to all other securities
that may be registered under such registration statement. The Company
will, at least twenty (20) days prior to filing such registration
statement, give written notice to all Holders of Registrable
Securities of its intention to do so. Upon the written request of any
such Holder of Registrable Securities made within fifteen (15) days
after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and
the intended method of disposition thereof), the Company will, subject
to the limitations of SECTION 2(b), include in such registration under
the Securities Act all Registrable Securities which the Company has
been so requested to register by the Holders of such Registrable
Securities.
(ii) If, at any time after giving written notice of its
intention to register any such equity securities and prior to the
effective date of the registration statement filed in connection with
such registration, the Company shall determine for any reason not to
register or to delay registration of such equity securities, the
Company may, at its election, give written notice of such
determination to each Holder of Registrable Securities and, thereupon,
(x) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection
with such registration (but not from its obligation to pay expenses in
accordance with SECTION 4), and (y) in the case of a determination to
delay registering, shall be permitted to delay registering any
Registrable Securities being registered pursuant to this SECTION 2(a),
for the same period as the delay in registering such other securities;
provided however, that unless otherwise agreed by the Holders of the
Registrable Securities no decision not to register or to delay
registration of the Registrable Securities shall extend beyond
November 20, 1996.
(b) METHOD OF DISTRIBUTION. If the registration of equity securities
giving rise to the registration right hereunder is not pursuant to an
underwritten offering, the Company shall determine the method of distribution of
the Registrable Securities so included. In addition, if the Registrable
Securities have not been included in a registration statement for an
underwritten offering by November 20, 1996, the Holders of the Registrable
Securities may require the Company to file a shelf registration one time with
respect to the Registrable Securities provided that the Holders of the
Registrable Securities pay all expenses incident thereto. If the registration
of equity securities giving rise to the registration right hereunder is pursuant
to an underwritten offering, by or through one or more underwriters, the
Company, if requested by any Holder of Registrable Securities will, arrange for
such underwriters to include all the Registrable Securities to be offered and
sold by such Holder owning the securities to be distributed by such
underwriters. If any registration is an underwritten offering, the Company (by
action of the Board of Directors) will select a managing underwriter or
underwriters to administer the offering.
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<PAGE>
(c) PRIORITY IN REGISTRATIONS. If (i) a registration pursuant to
this SECTION 2 involves an underwritten offering of the equity securities being
so registered, whether or not for sale for the account of the Company, to be
distributed on a firm commitment basis by or through one or more underwriters of
recognized standing, whether or not the Registrable Securities so requested to
be registered for sale for the account of Holders of Registrable Securities are
also to be included in such underwritten offering, and (ii) the managing
underwriter of such underwritten offering shall inform the Company and the
Holders of the Registrable Securities requesting such registration by letter of
its belief that the number of securities requested to be included in such
registration exceeds the number which can be sold in (or during the time of)
such offering, then the Company shall include in such registration (1) first,
the Registrable Securities requested to be included in such registration by the
Shareholders and (2) second, the securities the Company or other holders of
securities propose to sell.
3. REGISTRATION PROCEDURES. If and whenever the Company is required to effect
the registration of any Registrable Securities under the Securities Act as
provided in SECTION 2, the Company will, subject to the limitations provided
herein, as expeditiously as possible:
(a) prepare and (as soon thereafter as practicable) file with the
Commission the requisite registration statement to effect such registration and
thereafter use reasonable efforts to cause such registration statement to become
effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement, and the prospectus used in
connection therewith, as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such registration statement
until such time as all of such securities have been disposed of in accordance
with the intended methods of disposition by the seller or sellers thereof set
forth in such registration statement; PROVIDED, HOWEVER, that the Company shall
not in any event be required to keep the registration statement effective for a
period of more than 12 months after such registration statement becomes
effective with respect to any shelf registration or 90 days after such
registration statement becomes effective with respect to any other registration
of Registrable Securities;
(c) furnish to each seller of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, and such other documents, as such seller may reasonably request
by written notice to the Company;
(d) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each seller
thereof shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect (PROVIDED,
HOWEVER, that the Company shall not in any event be required to keep such
registration or qualification in
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<PAGE>
effect for a period of more than 90 days after such registration or
qualification becomes effective), and take any other action which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction wherein
it would not but for the requirements of this subdivision (d) be obligated to
be so qualified or to consent to general service of process in any such
jurisdiction;
(e) to the extent reasonably practicable, furnish to each seller of
Registrable Securities a copy of
(i) an opinion of counsel for the Company, dated the
effective date of such registration statement (or, if such
registration includes an underwritten public offering, dated the date
of the closing under the underwriting agreement), and
(ii) a "comfort" letter, dated the effective date of such
registration statement (or, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have audited the Company's financial statements included in such
registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities;
(f) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any such seller,
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(g) make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve months
beginning with the first full fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
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<PAGE>
(h) use its best efforts to list all Registrable Securities covered
by such registration statement on any securities exchange on which any shares of
the Common Stock is then listed.
It shall be a condition precedent to the obligations of the Company to take any
action with respect to registering a Holder's Registrable Securities pursuant to
this Agreement that such seller of Registrable Securities as to which any
registration is being effected (i) furnish in writing to the Company such
information regarding such seller, the Registrable Securities and other
securities of the Company held by such seller, and the distribution of such
securities and such other information as the Company may from time to time
reasonably request in writing and (ii) execute and deliver to the Company a
Power of Attorney, Custody Agreement and such other documents as the Company or
any underwriter may request (along with delivery of the certificates evidencing
the Registrable Securities to be sold) in order to effectuate the registration
and sale of the Registrable Securities. If a Holder refuses to provide the
Company with any of such information or documents, the Company may exclude such
Holder's Registrable Securities from the registration statement. The deletion
of such Holder's Registrable Securities from a registration statement shall not
affect the registration of the other Registrable Securities to be included in
such registration statement.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (f) of this
SECTION 3, such Holder will forthwith discontinue such Holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (f) of this
SECTION 3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice.
4. EXPENSES. Except as otherwise provided in this SECTION 4, all expenses
incurred in connection with each registration pursuant to SECTION 2 (excluding
in each case underwriter's discounts and commissions applicable to Registrable
Securities), including, without limitation, in each case, all registration,
filing and National Association of Securities Dealers fees; all fees and
expenses of complying with state securities or blue sky laws; the fees and
expenses incurred in connection with the listing of such equity securities on
any securities exchanges; all word processing, duplicating and printing
expenses, messenger, delivery and shipping expenses; fees and disbursements of
the accountants and counsel for the Company including the expenses of any
special audits, "cold comfort" letters or opinions required by or incident to
such registrations; the reasonable fees and disbursements of one firm of counsel
retained by the Holders of such Registrable Securities; premiums and other costs
of policies of insurance against liabilities arising out of the public offering
of the Registrable Securities; any fees and disbursements of underwriters
customarily paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions, if any, shall be borne by the Company.
Notwithstanding the preceding sentence, the Holders of the Registrable
Securities shall pay and advance all expenses incurred by the Company to
register and maintain the effectiveness of any shelf registration statement
requested by the
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<PAGE>
Holders of the Registrable Securities. The obligation of the Holders of
Registrable Securities shall be prorata in the proportion that the number of
Registrable Securities of a Holder registered on such shelf registration
bears to the aggregate number of Registrable Securities registered under such
shelf registration statement. In all cases, each Holder of Registrable
Securities shall pay the underwriter's discounts and commissions applicable
to the securities sold by such Holder.
5. LOCK UP. After receipt of any notice pursuant to the provisions of SECTION
2 hereof, the Holders of Registrable Securities will not offer or sell any
Common Stock until the earlier of the effective date of the registration
statement in respect of which such notice was given or one hundred eighty (180)
days after such notice was given. In the case of an underwritten offering, to
the extent requested by the managing underwriter, each Holder of Registrable
Securities agrees to refrain from selling or offering to sell any shares of
Common Stock for a period of time after the effectiveness of the registration
statement equal to the period of time that the sellers of securities in such
registration have agreed not to sell their shares after the effectiveness of
such registration statement.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event any Registrable
Securities are included in a registration statement under SECTION 2, to the
extent permitted by law, the Company shall, and hereby does, indemnify and hold
harmless the seller of any Registrable Securities covered by such registration
statement, its directors and officers, and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or any such director or officer or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director, officer and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; PROVIDED that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
seller expressly for use in the preparation thereof, and PROVIDED FURTHER that
the Company shall not be liable to any Person, in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of such Person's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the
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<PAGE>
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director,
officer or controlling person and shall survive the transfer of such
securities by such seller.
(b) INDEMNIFICATION BY THE SELLERS. The Company may require, as a
condition to including any Registrable Securities in any registration statement
filed pursuant to SECTION 2, that the Company shall have received an undertaking
satisfactory to it from the prospective seller of such securities to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
SECTION 6(a)) each underwriter, each Person who controls such underwriter within
the meaning of the Securities Act, the Company, each director of the Company,
each officer of the Company and each other Person, if any, who controls the
Company within the meaning of the Securities Act, with respect to any statement
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such seller
expressly for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
PROVIDED that such prospective seller shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, to the Person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of Registrable Securities to such
Person if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of any underwriter, the Company or any such
director, officer or controlling Person and shall survive the transfer of such
securities by such seller.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this SECTION 6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this SECTION 6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice.
In case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection
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<PAGE>
with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that specified
in the preceding subdivisions of this SECTION 6 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority other than
the Securities Act.
(e) INDEMNIFICATION PAYMENTS. The indemnification required by this
SECTION 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) CONTRIBUTION. If the indemnification provided for in this
SECTION 6 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in SECTION 6(c), any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 6(f) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this SECTION 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided
herein without regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration provided for in this
SECTION 6(f).
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<PAGE>
7. SHAREHOLDER INFORMATION. The Company may require each Holder of
Registrable Securities as to which any registration is to be effected pursuant
to this SECTION 2 to furnish the Company such information in writing with
respect to such Holder and the distribution of such Registrable Securities as
the Company may from time to time reasonably request in writing and as shall be
required by law or by the Commission in connection therewith.
8. FORMS. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to include,
references to all successor forms which are intended to replace, or to apply to
similar transactions as, the forms herein referenced.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights granted to the
Shareholders under SECTION 2 may be transferred without the prior written
consent of the Company only in the event that the transferee of such rights is
an Affiliate of such Shareholder or a bona fide pledgee of the Registrable
Securities acquiring the Registrable Securities upon a foreclosure of such
pledge of the Registrable Securities. In all other cases, any transfer shall
require the prior written consent of the Company.
10. MISCELLANEOUS.
10.1 ELECTIONS, WAIVERS AND AMENDMENTS. All collective decisions of the
Holders of the Registrable Securities regarding any matter related to this
Agreement, including but not limited to, requiring the Company to file a shelf
registration statement with respect to the Registrable Securities and approving
any amendments, modifications, supplements, waivers or consents to departures
from the provisions hereof shall require the written consent of holders of at
least a majority of the Registrable Securities then outstanding, which written
consent shall be binding upon all of the Holders of the Registrable Securities.
10.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by Fed Ex or other
nationally recognized overnight delivery service, or facsimile transmission (if
also sent by personal delivery, certified mail or overnight delivery service) to
the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to the Company:
RAC Financial Group, Inc.
1250 W. Mockingbird Lane
Dallas, Texas 75247-1902
Attn: Eric C. Green
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
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<PAGE>
Dallas, Texas 75201-4675
Attn: Terry M. Schpok, P.C.
(b) if to the Shareholders, at the addresses set forth on the
signature page hereto with a copy to:
Ducker, Seawell & Montgomery, P.C.
One Civic Center Plaza
1560 Broadway, Suite 1500
Denver, Colorado 80202
Attn: Robert C. Montgomery
Facsimile No. (303) 861-4017
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by facsimile transmission or personal
delivery, on the date of actual transmission or, as the case may be, personal
delivery.
10.3 SEVERABILITY. If any provision of this Agreement shall be held to be
illegal, invalid or unenforceable under any applicable law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
10.4 HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
10.5 CHOICE OF LAW. THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW,
AND NOT THE LAW OF CONFLICTS, OF THE STATE OF TEXAS.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
10.7 TERMINATION. This Agreement shall terminate at such time as no
Registrable Securities are outstanding.
10.8 COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements
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<PAGE>
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed as of the date above first written.
RAC FINANCIAL GROUP, INC.
By: /s/ Daniel T. Phillips
------------------------------
Name: Daniel T. Phillips
Title: President/Chief Executive
Officer
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<PAGE>
Address SHAREHOLDERS: Common Stock
- ------- Value of
Registrable
Securities
Frank Capital Co., LLC $1,869,850
/s/ James S. Frank
4505 S. Yosemite #352 ---------------------------
Denver, CO 80237 James S. Frank, Manager
/s/ James S. Frank
4505 S. Yosemite #352 --------------------------- $ 113,095
Denver, CO 80237 James S. Frank, as Trustee of
the Larsen White Trust
/s/ Garrett O. White
6350 S. Geneva Circle --------------------------- $ 786,905
Englewood, CO 80111 Garrett O. White
/s/ Garrett O. White
6350 S. Geneva Circle --------------------------- $ --
Englewood, CO 80111 Garrett O. White, as Trustee of
the Berry Trust
/s/ Robert C. Knisely
9320 F. Berry Court --------------------------- $ 800,000
Greenwood Village, CO 80111 Robert C. Knisely
/s/ Robert C. Knisely
9320 F. Berry Court --------------------------- $ 430,150
Greenwood Village, CO 80111 Robert C. Knisely, as Trustee
of the Fairfax Trust
/s/ Steven A. Rubin
5443 S. Idalia Way --------------------------- $ 500,000
Aurora, CO 80015 Steven A. Rubin
/s/ Richard R. Holsclaw
21860 E. Davies Circle --------------------------- $ 500,000
Aurora, CO 80016 Richard R. Holsclaw
Total $5,000,000
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