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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
BNC MORTGAGE, INC.
(Name of Issuer)
COMMON STOCK , PAR VALUE $0.001 PER SHARE
(Title of class of securities)
05561Y10
(CUSIP number)
KAREN C. MANSON, ESQ.
SECRETARY
MORTGAGE INVESTCO LLC
3 WORLD FINANCIAL CENTER, 24TH FLOOR
NEW YORK, NY 10285
(212) 526-1936
(Name, address and telephone number of person authorized to
receive notices and communications)
- with copies to -
W. MICHAEL BOND, ESQ.
WEIL, GOTSHAL & MANGES LLP
1615 L. STREET, N.W., SUITE 700
WASHINGTON, DC 20036
JANUARY 25, 2000
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[_].
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities
of that Section of the Exchange Act but shall be subject to all other provisions
of the Exchange Act.
(Continued on following pages)
(Page 1 of 18 Pages)
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NY2:\868853\05\$m#t05!.DOC\73683.0298
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 2 of 18
- -------------------------------------------------------------------- -------------------------------------
- -------------- ----------------------------------------------------- -----------------------------------------------------
<S> <C>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
BNCM Acquisition Co.
- -------------- ---------------------------------------------------------------------------------------------- ------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- -------------- -----------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -------------- ------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
OO, WC
- -------------- ---------------------------------------------------------------------------------------------- ------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- -------------- -------------------------------------------------------------------- --------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
- --------------------- -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 370,930
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 370,930
- -------------- -----------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 370,930
- -------------- ---------------------------------------------------------------------------------------------- ------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_]
- -------------- ---------------------------------------------------------------------------------------------- ------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 7.27%
- -------------- -------------------------------------------------------------------- --------------------------------------
14 TYPE OF REPORTING PERSON:
CO
- -------------- -------------------------------------------------------------------- --------------------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 3 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Mortgage Investco LLC
13-4074912
- ----------------- --------------------------------------------------------------------------------------------- -------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
WC
- ----------------- --------------------------------------------------------------------------------------------- -------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- -------------------------------------------------------------------------- --------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
Delaware
- ------------------------------ -------- -------------------------------------------------------------------- ----------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------- ----------------------
BENEFICIALLY 8 SHARED VOTING POWER: 0
OWNED BY
-------- -------------------------------------------------------------------- ----------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------- ----------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 0
- ----------------- ------------------------------------------------------------------------------------------ ----------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 0
- ----------------- --------------------------------------------------------------------------------------------- -------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- --------------------------------------------------------------------------------------------- -------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0
- ----------------- -------------------------------------------------------------------------- --------------------------------------
14 TYPE OF REPORTING PERSON:
OO
- ----------------- -------------------------------------------------------------------------- --------------------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 4 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Kelly W. Monahan
- ----------------- --------------------------------------------------------------------------------------------------- -------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
PF
- ----------------- --------------------------------------------------------------------------------------------------- -------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ---------------------------------------------------------------------- ------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- ------------------------------ -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 222,571
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 222,571
- ----------------- -----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 222,571
- ----------------- --------------------------------------------------------------------------------------------------- -------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- --------------------------------------------------------------------------------------------------- -------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 4.40%
- ----------------- ---------------------------------------------------------------------- ------------------------------------------
14 TYPE OF REPORTING PERSON:
IN
- ----------------- ---------------------------------------------------------------------- ------------------------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 5 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Peter R. Evans
- ----------------- --------------------------------------------------------------------------------------------------- -------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
PF
- ----------------- --------------------------------------------------------------------------------------------------- -------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ----------------------------------------------------------------------- -----------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- ------------------------------ -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 16,000
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 16,000
- ----------------- -----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 16,000
- ----------------- --------------------------------------------------------------------------------------------------- -------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- --------------------------------------------------------------------------------------------------- -------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.32%
- ----------------- ----------------------------------------------------------------------- -----------------------------------------
14 TYPE OF REPORTING PERSON:
IN
- ----------------- ----------------------------------------------------------------------- -----------------------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 6 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Al Lapena
- ----------------- ----------------------------------------------------------------------------------------------- -----------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
PF
- ----------------- ----------------------------------------------------------------------------------------------- -----------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ---------------------------------------------------------------------------- ------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- ------------------------------ -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 34,552
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 34,552
- ----------------- -----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 34,552
- ----------------- ----------------------------------------------------------------------------------------------- -----------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- ----------------------------------------------------------------------------------------------- -----------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.68%
- ----------------- ---------------------------------------------------------------------------- ------------------------------------
14 TYPE OF REPORTING PERSON:
IN
- ----------------- ---------------------------------------------------------------------------- ------------------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 7 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Gary Vander-Haeghen
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
PF
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ------------------------------------------------------------------------------------- ---------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- ------------------------------ -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 48,569
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 48,569
- ----------------- -----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 48,569
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.96%
- ----------------- ------------------------------------------------------------------------------------- ---------------------------
14 TYPE OF REPORTING PERSON:
IN
- ----------------- ------------------------------------------------------------------------------------- ---------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 8 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Marles M. Crow
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
PF
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ----------------------------------------------------------------------------------- -----------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- ------------------------------ -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 24,619
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 24,619
- ----------------- -----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 24,619
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.49%
- ----------------- ----------------------------------------------------------------------------------- -----------------------------
14 TYPE OF REPORTING PERSON:
IN
- ----------------- ----------------------------------------------------------------------------------- -----------------------------
<PAGE>
- -------------------------------------------------------------------- -------------------------------------
CUSIP No. 05561Y10 13D Page 9 of 18
- -------------------------------------------------------------------- -------------------------------------
- ----------------- -----------------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY):
Jamie Langford
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [X]
(B) [_]
- ----------------- -----------------------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- ----------------- ------------------------------------- ---------------------------------------------------------------------------
4 SOURCE OF FUNDS:
PF
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): [_]
- ----------------- ------------------------------------------------------------------------------- ---------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
United States
- ------------------------------ -------- -------------------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER: 0
SHARES
-------- -------------------------------------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER: 24,619
OWNED BY
-------- -------------------------------------------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER: 0
REPORTING
-------- -------------------------------------------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER: 24,619
- ----------------- -----------------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON: 24,619
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [X]
- ----------------- ------------------------------------------------------------------------------------------------- ---------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.49%
- ----------------- ------------------------------------------------------------------------------- ---------------------------------
14 TYPE OF REPORTING PERSON:
IN
- ----------------- ------------------------------------------------------------------------------- ---------------------------------
</TABLE>
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to shares of common
stock, par value $0.001 per share (the "Common Stock") of BNC Mortgage, Inc., a
Delaware corporation (the "Company"). The principal executive offices of the
Company are located at 1063 McGaw Avenue, Irvine, California 92614-5532.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed jointly by BNCM Acquisition Co.
("Acquisition Co."), Mortgage Investco LLC ("MI LLC"), Kelly W. Monahan, Peter
R. Evans, Al Lapena, Gary Vander-Haeghen, Marles Crow, and Jamie Langford (such
individuals, collectively, the "Management Group Investors" and together with
Acquisition Co., and MI LLC, the "Reporting Parties").
Acquisition Co. is a Delaware corporation with no business
operations. It was organized for the sole purpose of effecting a merger with and
into the Company, with the Company as the surviving corporation of such merger.
Acquisition Co.'s principal offices are located at c/o BNC Mortgage, Inc., 1063
McGaw Avenue, Irvine, California 92614-5532.
MI LLC is a Delaware limited liability company and is
currently the sole stockholder of Acquisition Co. MI LLC is a holding company
for mortgage-related investments and its principal offices are located at 3
World Financial Center, 200 Vesey Street, New York, New York 10285. The sole
member of MI LLC is Lehman Brothers Holdings Inc., a Delaware corporation (the
"Control Person"). The Control Person through its domestic and foreign
subsidiaries is a full-line securities firm and its principal offices are
located at 3 World Financial Center, 200 Vesey Street, New York, New York 10285.
The names, business address, citizenship and present
principal occupation or employment of the senior executive officers and
directors of Acquisition Co., MI LLC and the Control Person are set forth in
Appendix A hereto.
Kelly W. Monahan is a United States citizen whose principal
occupation is acting as the Company's President. Mr. Monahan also serves as a
director of the Company. His business address is BNC Mortgage, Inc., 1063 McGaw
Avenue, Irvine, California 92614-5532.
Peter R. Evans is a United States citizen whose principal
occupation is acting as the Company's Chief Financial Officer. His business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532.
Al Lapena is a United States citizen whose principal
occupation is acting as the Company's Vice President of Operations. His business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532.
Gary Vander-Haeghen is a United States citizen whose
principal occupation is acting as the Company's Vice President of Sales. His
business address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California
92614-5532.
10
<PAGE>
Marles M. Crow is a United States citizen whose principal
occupation is acting as the Company's Director of Human Resources. Her business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532.
Jamie Langford is a United States citizen whose principal
occupation is acting as the Company's Vice President of Funding. Her business
address is BNC Mortgage, Inc., 1063 McGaw Avenue, Irvine, California 92614-5532.
During the last five years, none of the Reporting Persons,
and to their knowledge, none of the persons listed in Appendix A hereto (i) has
been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors), or (ii) has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction resulting in a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The aggregate purchase price for the proposed acquisition
of the Company will be funded with a combination of debt and equity financing.
It is currently anticipated that the debt financing will consist of a
$25,500,000 acquisition loan and a $14,000,000 term loan, each to be provided by
Lehman Commercial Paper Inc. (an affiliate of MI LLC)("LCPI") upon satisfaction
(or waiver by MI LLC if appropriate and with LCPI's consent) of the conditions
to the Merger contained in the definitive merger agreement entered into by the
Company and Acquisition Co. The term debt will include detachable ten year
maturity warrants which will be exercisable by MI LLC after two years (in whole
or in part for $0.01 per share) into the number of Acquisition Co. common shares
sufficient to produce for MI LLC a 50% ownership of the aggregate post
conversion common shares of the surviving corporation of the merger (the
"Surviving Corporation") on a fully diluted basis.
MI LLC has also committed to purchase Non-Voting 8%
Cumulative Convertible Preferred Stock of Acquisition Co., subject to the
execution of mutually acceptable documentation and the conditions set forth in
the Proposal Letter referred to in Item 4 below. MI LLC's preferred stock will
be convertible at any time after two years (in whole or in part) into 25% of the
fully diluted common stock of the Surviving Corporation. In addition, the
Management Group Investors have committed to contribute to Acquisition Co.
shares of Common Stock representing an aggregate value of $2,500,000 in exchange
for shares of common stock of Acquisition Co. Further, it is a condition to
Acquisition Co.'s proposal to acquire the Company that Mr. Evan Buckley, the
Company's current Chief Executive Officer and Chairman, commit to contribute to
Acquisition Co. shares of Common Stock representing an aggregate value of
$2,500,000 in exchange for shares of Non-Voting, 8% Cumulative Preferred Stock
of Acquisition Co. which are redeemable over a three year period. The
arrangements with Mr. Buckley are further described in Item 6 below.
11
<PAGE>
ITEM 4. PURPOSE OF TRANSACTION.
Pursuant to a letter delivered to the Special Committee of
the Board of Directors of the Company on January 25, 2000 (the "Proposal
Letter"), Acquisition Co. proposed to acquire all of the capital stock of the
Company at a price per share of Common Stock of $9.50 in cash (the "Cash
Price"). This price, represented a premium in excess of 52% over the average
closing price of the Common Stock over the thirty days immediately prior to the
Proposal Letter. As contemplated in the Proposal Letter, the acquisition of the
Company would take the form of a merger (the "Merger") pursuant to which
Acquisition Co. would be merged with and into the Company, with the Company as
the Surviving Corporation. Pursuant to the Merger, holders of Common Stock would
receive, in exchange for their stock, an amount of cash per share equal to the
Cash Price (the transactions set forth in this paragraph collectively, the
"Proposed Transactions").
On February 3, 2000, the Company and Acquisition Co.
executed an Agreement and Plan of Merger (the "Merger Agreement") providing for
the Merger. The Merger Agreement contains customary "no-shop," "break up fee"
and expense reimbursement provisions. The consummation of the Merger is subject
to the approval of the Merger by holders of a majority of the Company's Common
Stock and to other customary closing conditions. A copy of the Merger Agreement
is attached hereto as Exhibit 1.
The Merger Agreement provides that at the effective time of
the Merger (the "Effective Time"), each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Common Stock held by the Company and its wholly-owned subsidiaries as treasury
stock, shares of Common Stock held by Acquisition Co. and any dissenting shares
to the extent provided in the Merger Agreement) will be converted into the right
to receive $10.00 in cash, without interest (the "Merger Consideration") and
will no longer be outstanding. Shares of Common Stock held in the treasury of
the Company or by any wholly-owned subsidiary of the Company or owned by
Acquisition Co. will automatically be canceled, retired and cease to exist
without any conversion thereof and no payment will be made with respect thereto.
Each share of common stock and each share of preferred stock of Acquisition Co.
outstanding immediately prior to the Effective Time will be converted into and
become one share of common stock and one share of preferred stock (with the same
rights, limitations and preferences), respectively, of the Surviving Corporation
and such shares shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. It is expected that the Board of Directors of the
Surviving Corporation will consist of 4 directors, 2 of whom will be nominees of
MI LLC and two of whom will be nominees of the Management Group Investors. The
Reporting Parties intend to cause the Surviving Corporation to delist the Common
Stock from the Nasdaq National Market and to terminate the Common Stock's
registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934
upon consummation of the Merger.
Prior to the consummation of the Merger, the Reporting
Parties may acquire additional shares of Common Stock, in the open market or
otherwise, subject to any applicable limitations of the Securities Act of 1933
and the Securities Exchange Act of 1934.
12
<PAGE>
Except as disclosed in Item 3 and this Item 4, none of the
Reporting Parties has any other current plans or proposals which relate to or
would result in any of the actions specified in clauses (a) through (j) of Item
4 of Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
Set forth in the table below is the number and percentage
of shares of Common Stock beneficially owned by each Reporting Party and by the
Control Person as of February 2, 2000.
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Beneficially Owned Beneficially Owned with
with Sole Voting and Shared Voting and Aggregate Number of Percentage of Class
Name Dispositive Power (1) Dispositive Power Shares Beneficially Owned Beneficially Owned (2)
---- --------------------- ----------------- ------------------------- ----------------------
<S> <C> <C> <C> <C>
BNCM Acquisition Co.(3) 0 370,930 370,930 7.27%
Mortgage Investco LLC 0 0 0 0
Kelly W. Monahan (4) 0 222,571 222,571 4.40%
Peter R. Evans (4) 0 16,000 16,000 0.32%
Al Lapena (4) 0 34,522 34,522 0.68%
13
<PAGE>
Gary Vander-Haeghen (4) 0 48,569 48,569 0.96%
Marles M. Crow (4) 0 24,619 24,619 0.49%
Jamie Langford (4) 0 24,619 24,619 0.49%
Control Person 0 0 0 0
</TABLE>
- --------------------
(1) Pursuant to Rule 13d-3 under the Securities Exchange
Act, a person is deemed to be a "beneficial owner" of a security if that person
has or shares "voting power" (which includes the power to vote or to direct the
voting of such security) or "investment power" (which includes the power to
dispose or to direct the disposition of such security). A person is also deemed
to be a beneficial owner of any security of which that person has a right to
acquire beneficial ownership (such as by exercise of options or pursuant to a
conversion feature of a security) on or within 60 days after the date hereof. In
addition, more than one person may be deemed to be a beneficial owner of the
same securities, and a person may be deemed to be a beneficial owner of
securities as to which he or she may disclaim any beneficial interest.
(2) The percentage of Common Stock indicated in this table
are based on the 5,042,350 shares of Common Stock outstanding as of November 8,
1999, as disclosed in the Company's most recent Form 10-Q filed with the
Securities and Exchange Commission with respect to the quarter ended September
30, 1999. Any Common Stock not outstanding which is subject to options or
conversion privileges which the beneficial owner had the right to exercise on or
within 60 days after the date hereof is deemed outstanding for purposes of
computing the percentage of Common Stock owned by such beneficial owner but is
not deemed outstanding for the purpose of computing the percentage of
outstanding Common Stock owned by any other beneficial owner.
(3) Acquisition Co.'s beneficial ownership is derived
solely from the Management Letter Agreement, the Stock Purchase Agreement with
the Management Group Investors, and the Voting Agreements between Acquisition
Co. and each of the Management Group Investors, each of which is described in
Item 6.
(4) Voting and Dispositive Power is shared between the
Reporting Party and Acquisition Co. pursuant to the Voting Agreement with
Acquisition Co. described in Item 6.
By virtue of their status as a "group" for purposes of Rule
13d-5, each of the Reporting Parties may be deemed to have shared voting and
dispositive power over the shares owned by the other Reporting Parties. However,
the filing of this Schedule 13D shall not be construed as an admission that any
of the Reporting Parties other than Acquisition Co. is, for the purposes of
Section 13(d) or 13(g) of the Exchange Act, the beneficial owner of any
securities held by any other Reporting Person.
None of the Reporting Parties nor to the knowledge of the
Reporting Parties, any of the persons listed in Appendix A hereto, has effected
any transactions in the Common Stock during the 60 day period ending on February
14
<PAGE>
2, 2000. Except as set forth above, no person other than the Reporting Parties
has the right to received or the power to direct the receipt of dividends from,
or the proceeds from the sale of, the shares of Common Stock beneficially owned
by the Reporting Parties as described above.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Management Letter Agreement. The Management Group Investors
and MI LLC have entered into a letter agreement (the "Management Letter
Agreement"), which is attached hereto as Exhibit 2, pursuant to which MI LLC and
each of the Management Group Investors agreed that, subject to the execution of
mutually acceptable documentation and satisfaction of the conditions referred to
in the Term Sheet attached thereto and in the Proposal Letter, they were
prepared to proceed as equity partners in connection with the proposed
acquisition of the Company. Each Management Group Investor further agreed that
he would contribute shares of Common Stock in exchange for shares of common
stock of Acquisition Co. and would not sell, convey, transfer or otherwise
dispose of any Common Stock or options to purchase Common Stock currently held
by him without the prior consent of MI LLC until the earliest to occur of (a)
the date MI LLC notifies him that it has determined not to proceed with the
proposed acquisition of the Company; or (b) if a definitive agreement has not
been executed by the Company, February 29, 2000; or (c) the date of termination
of such definitive agreement (such period, the "Stand-Off Period"). Each
Management Group Investor further agreed that during the Stand Off Period he
would work exclusively with MI LLC with respect to the proposed acquisition of
the Company and that unless and until MI LLC notifies him that it has determined
not to proceed with the proposed acquisition of the Company, neither such
Management Group Investor nor his advisors or representatives would (i) solicit
or encourage any third party with respect to any such acquisition, (ii ) enter
into any discussions or negotiations related to such acquisition, or (iii)
provide any information to any third party with respect to an acquisition except
with respect to clauses (ii) and (iii), to the extent that such Management Group
Investor is directed by the Board of Directors of the Company to do so, in order
to permit the Board to comply with its fiduciary duties under applicable law as
advised by counsel.
Voting Agreement with Management Group Investors. As a
condition to entering into the Merger Agreement, Acquisition Co. required that
each of the Management Group Investors enter into a Voting Agreement with
Acquisition Co., strictly in his or her capacity as a beneficial owner of Common
Stock and not in his or her capacity as a director or officer of the Company.
Pursuant to such Voting Agreement, each Management Group Investor has agreed to
vote or cause to be voted all shares of Common Stock held of record or
beneficially owned by him or her (whether currently owned or thereafter
acquired) in favor of the Merger and the adoption of the Merger Agreement and
any actions required in furtherance of the Merger. The form of Voting Agreement
is attached hereto as Exhibit 3.
Stock Purchase Agreement with Management Group Investors.
As a condition to entering into the Merger Agreement, Acquisition Co. required
that each of the Management Group Investors enter into a Stock Purchase
Agreement (attached hereto as Exhibit 3) pursuant to which they have agreed to
15
<PAGE>
contribute shares of Common Stock representing an aggregate value of $2,500,000
in exchange for shares of common stock of Acquisition Co.
Agreements with Evan Buckley. While the Reporting Parties
did not have an agreement with Mr. Evan Buckley, the Company's current Chairman
and Chief Executive Officer, in respect of the proposed acquisition of the
Company, due to the significant shareholding position of Mr. Buckley and his
contributions to the Company's business, Acquisition Co. required as a condition
to its proposed acquisition of the Company that Mr. Buckley enter into (a) a
voting agreement, (b) a stock purchase agreement and (c) a consulting agreement.
Pursuant to the Buckley Voting Agreement (attached hereto as Exhibit 4), Mr.
Buckley, strictly in his capacity as a beneficial owner of Common Stock and not
in his capacity as a director or officer of the Company, has agreed to vote or
cause to be voted all shares of Common Stock held of record or beneficially
howned by him (whether currently owned or thereafter acquired) in favor of the
Merger and the adoption of the Merger Agreement and any actions required in
furtherance of the Merger. The Company's 1999 Proxy Statement discloses that as
of October 15, 1999, Mr. Buckley beneficially owned 1,549,717 shares of Common
Stock representing 30.7% of the Company's Common Stock. Pursuant to the Buckley
Stock Purchase Agreement, (attached hereto as Exhibit 5) Mr. Buckley has
committed to contribute to Acquisition Co. shares of Common Stock representing
an aggregate value of $2,500,000 in exchange for shares of Non-Voting, 8%
Cumulative Preferred Stock of Acquisition Co. which are redeemable over a three
year period. Pursuant to the Consulting Agreement, Mr. Buckley has agreed to
render consulting services to the surviving corporation during a period of up to
one year following the Merger, which will include advising, directing, and/or
assisting with, or partially or completely handling, transition and other
matters within his special expertise in the sub-prime lending and mortgage
origination businesses as directed by the Surviving Corporation.
The Reporting Parties disclaim beneficial ownership of Mr.
Buckley's Common Stock and disclaim that Mr. Buckley is a member of their group
for purposes of Rule 13d-5.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
1. Agreement and Plan of Merger between BNC Mortgage Inc. and
BNCM Acquisition Co., dated as of February 3, 2000.
2. Letter Agreement among MI LLC and the Management Group
Investors.
3. Form of Voting Agreement with Management Group Investors.
4. Stock Purchase Agreement among MI LLC, the Management Group
Investors and BNCM Acquisition Co.
5. Buckley Stock Purchase Agreement between Evan Buckley and
BNCM Acquisition Co.
16
<PAGE>
6. Stock Purchase Agreement among Evan Buckley and BNCM
Acquisition Co.
17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge
and belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: February 3, 2000
BNCM ACQUISITION CO.
By: /s/ Karen Manson
--------------------------------
Name: Karen Manson
Title: Secretary and
Senior Vice President
MORTGAGE INVESTCO LLC
By: /s/ Eileen Bannon
--------------------------------
Name: Eileen Bannon
Title: Assistant Secretary
/s/ Kelly W. Monahan
------------------------------------
Kelly W. Monahan
/s/ Peter R. Evans
------------------------------------
Peter R. Evans
/s/ Al Lapena
------------------------------------
Al Lapena
/s/ Gary Vander-Haeghen
------------------------------------
Gary Vander-Haeghen
/s/ Marles M. Crow
------------------------------------
Marles M. Crow
/s/ Jamie Langford
------------------------------------
Jamie Langford
18
<PAGE>
Appendix A
BNCM ACQUISITION CO.
BOARD OF DIRECTORS
NAME/TITLE BUSINESS ADDRESS
- ---------- ----------------
KURT LOCHER Managing Director
Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
BNCM ACQUISITION CO.
EXECUTIVE OFFICERS
NAME/TITLE BUSINESS ADDRESS
- ---------- ----------------
KURT LOCHER Managing Director
President Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
MIKE MCCULLY
Treasurer and Senior Vice President Senior Vice President
Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
KAREN MANSON
Secretary and Senior Vice President Senior Vice President
Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
MORTGAGE INVESTCO LLC
BOARD OF MANAGERS
NAME/TITLE BUSINESS ADDRESS
- ---------- ----------------
KURT LOCHER Managing Director
Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
THEODORE P. JANULIS Managing Director
Lehman Brothers Inc.
3 World Financial Center
<PAGE>
MORTGAGE INVESTCO LLC
EXECUTIVE OFFICERS
NAME/TITLE BUSINESS ADDRESS
- ---------- ----------------
MARTIN P. HARDING Managing Director
Managing Director Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
THEODORE P. JANULIS Managing Director
Managing Director Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
WILLIAM E. LIGHTEN Managing Director
Managing Director Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
KURT LOCHER Managing Director
Managing Director Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
LEHMAN BROTHERS HOLDINGS INC.
BOARD OF DIRECTORS
NAME / TITLE BUSINESS ADDRESS
- ------------ ----------------
MICHAEL L. AINSLIE Lehman Brothers
Private Investor and former President 3 World Financial Center
and Chief Executive Officer of New York, NY 10285
Sotheby's Holdings
JOHN F. AKERS Lehman Brothers
Retired Chairman of International 3 World Financial Center
Business Machines Corporation New York, NY 10285
ROGER S. BERLIND Lehman Brothers
Theatrical Producer 3 World Financial Center
New York, NY 10285
<PAGE>
THOMAS H. CRUIKSHANK Lehman Brothers
Retired Chairman and Chief Executive 3 World Financial Center
Officer of Halliburton Company New York, NY 10285
RICHARD S. FULD, JR. Lehman Brothers
Chairman and Chief Executive Officer 3 World Financial Center
of Lehman Brothers Holdings Inc. New York, NY 10285
HENRY KAUFMAN Lehman Brothers
President of Henry Kaufman & Company, 3 World Financial Center
Inc. New York, NY 10285
HIDEICHIRO KOBAYASHI* Lehman Brothers
General Manager for the Americas 3 World Financial Center
Nippon Life Insurance Co. New York, NY 10285
JOHN D. MACOMBER Lehman Brothers
Principal of JDM Investment Group 3 World Financial Center
New York, NY 10285
DINA MERRILL Lehman Brothers
Actress and Director and Vice 3 World Financial Center
Chairman of RKO Pictures, Inc. New York, NY 10285
LEHMAN BROTHERS HOLDINGS INC.
EXECUTIVE OFFICERS
RICHARD S. FULD, JR. Lehman Brothers
Chairman and Chief Executive Officer 3 World Financial Center
New York, NY 10285
JOHN L. CECIL Lehman Brothers
Chief Financial and 3 World Financial Center
Administrative Officer New York, NY 10285
JOSEPH M. GREGORY Lehman Brothers
Head of Global Equities 3 World Financial Center
New York, NY 10285
BRADLEY H. JACK Lehman Brothers
Co-Head of Investment Banking 3 World Financial Center
New York, NY 10285
STEPHEN M. LESSING Lehman Brothers
Head of Global Sales and Research 3 World Financial Center
New York, NY 10285
<PAGE>
MICHAEL F. MCKEEVER Lehman Brothers
Co-Head of Investment Banking 3 World Financial Center
New York, NY 10285
JEFFREY VANDERBEEK Lehman Brothers
Head of Fixed Income 3 World Financial Center
New York, NY 10285
o All US citizens except where noted with an *
<PAGE>
EXHIBIT INDEX
1. Agreement and Plan of Merger between BNC Mortgage Inc. and
BNCM Acquisition Co., dated as of February 3, 2000.
2. Letter Agreement among MI LLC and the Management Group
Investors.
3. Form of Voting Agreement with Management Group Investors.
4. Stock Purchase Agreement among MI LLC, the Management Group
Investors and BNCM Acquisition Co.
5. Buckley Stock Purchase Agreement between Evan Buckley and
BNCM Acquisition Co.
6. Stock Purchase Agreement among Evan Buckley and BNCM
Acquisition Co.
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
BETWEEN
BNC MORTGAGE, INC.
AND
BNCM ACQUISITION CO.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article I THE MERGER...........................................................................................1
SECTION1.01. The Merger.......................................................................................1
SECTION1.02. Effective Time...................................................................................1
SECTION1.03. Effects of the Merger............................................................................2
SECTION1.04. Certificate of Incorporation.....................................................................2
SECTION1.05. Bylaws...........................................................................................2
SECTION1.06. Directors and Officers...........................................................................2
Article II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES...................................................2
SECTION2.01. Conversion of Securities.........................................................................2
SECTION2.02. Exchange of Certificates and Cash................................................................3
SECTION2.03. Stock Transfer Books.............................................................................5
SECTION2.04. 2Stock Options; Payment Rights...................................................................5
SECTION2.05. Outstanding Warrants.............................................................................5
SECTION2.06. Dissenting Shares................................................................................6
Article III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................6
SECTION3.01. Organization and Qualifications; Subsidiaries....................................................6
SECTION3.02. Capitalization...................................................................................7
SECTION3.03. Authority Relative to This Agreement.............................................................8
SECTION3.04. No Conflict; Required Filings and Consents.......................................................8
SECTION3.05. Opinion of Financial Advisor.....................................................................9
SECTION3.06. Board Approval...................................................................................9
SECTION3.07. SEC Reports......................................................................................9
SECTION3.08. Absence of Certain Changes......................................................................10
SECTION3.09. Compliance with Laws............................................................................10
SECTION3.10. Litigation......................................................................................11
SECTION3.11. Undisclosed Liabilities.........................................................................11
SECTION3.12. Labor Matters...................................................................................11
SECTION3.13. Proxy Statement.................................................................................11
SECTION3.14. Brokers.........................................................................................11
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
Article IV REPRESENTATIONS AND WARRANTIES OF MERGER SUB........................................................12
SECTION4.01. Organization and Qualification..................................................................12
SECTION4.02. Authority Relative to This Agreement............................................................12
SECTION4.03. No Conflict; Required Filings and Consents......................................................12
SECTION4.04. Brokers.........................................................................................13
SECTION4.05. Funds...........................................................................................13
SECTION4.06. Information Supplied............................................................................13
SECTION4.07. Employment Agreement with Kelly Monahan.........................................................13
Article V CONDUCT OF BUSINESS PENDING THE MERGER..............................................................13
SECTION5.01. Conduct of Business by the Company Pending the Merger...........................................14
Article VI ADDITIONAL COVENANTS................................................................................17
SECTION6.01. Access to Information; Confidentiality..........................................................17
SECTION6.02. Proxy Statement; Schedule 13E-3.................................................................17
SECTION6.03. Action by Stockholders..........................................................................18
SECTION6.04. No Solicitation.................................................................................18
SECTION6.05. Directors' and Officers' Insurance and Indemnification..........................................20
SECTION6.06. Officers........................................................................................21
SECTION6.07. Further Action; Best Efforts....................................................................21
SECTION6.08. Public Announcements............................................................................22
SECTION6.09. Conveyance Taxes................................................................................22
SECTION6.10. Event Notices...................................................................................22
Article VII CLOSING CONDITIONS..................................................................................23
SECTION7.01. Conditions to Obligations of Each Party to Effect the Merger....................................23
SECTION7.02. Additional Conditions to Obligations of Merger Sub..............................................23
SECTION7.03. Additional Conditions to Obligations of the Company.............................................25
Article VIII TERMINATION, AMENDMENT AND WAIVER...................................................................25
SECTION8.01. Termination.....................................................................................25
SECTION8.02. Effect of Termination...........................................................................27
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
SECTION8.03. Amendment.......................................................................................27
SECTION8.04. Waiver..........................................................................................27
SECTION8.05. Fees, Expenses and Other Payments...............................................................28
Article IX GENERAL PROVISIONS..................................................................................30
SECTION9.01. Effectiveness of Representations, Warranties and Agreements.....................................30
SECTION9.02. Notices.........................................................................................30
SECTION9.03. Certain Definitions.............................................................................31
SECTION9.04. Headings........................................................................................33
SECTION9.05. Severability....................................................................................33
SECTION9.06. Entire Agreement................................................................................33
SECTION9.07. Assignment......................................................................................34
SECTION9.08. Parties in Interest.............................................................................34
SECTION9.09. Governing Law...................................................................................34
SECTION9.10. Submission to Jurisdiction; Waiver of Jury Trial................................................34
SECTION9.11. Enforcement of this Agreement...................................................................34
SECTION9.12. Counterparts....................................................................................35
</TABLE>
iii
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 3, 2000 (the
"AGREEMENT"), between BNC MORTGAGE, INC., a Delaware corporation (the
"COMPANY"), and BNCM ACQUISITION CO., a Delaware corporation (the "MERGER SUB").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Merger Sub will merge with and into the Company (the
"MERGER") pursuant to which each outstanding share of common stock, par value
$0.001 per share, of the Company (the "COMMON STOCK") other than shares owned by
Merger Sub), shall be converted into the right to receive $10.00 in cash per
share of Common Stock, as more fully set forth herein;
WHEREAS, the Board of Directors of the Company, based on the
unanimous recommendation of the Special Committee (as defined in Section 3.07),
has determined that the Merger is advisable and fair to and in the best
interests of the Company and its stockholders (other than Merger Sub and its
affiliates and members of the Management Group (as defined in Section 9.03)) and
has approved this Agreement, the Merger and the other transactions contemplated
hereby and has recommended approval and adoption of this Agreement by the
stockholders of the Company.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
Article I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.02), Merger Sub shall be merged with and into the Company.
Following the Merger, the separate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"SURVIVING CORPORATION").
SECTION 1.02. Effective Time. As soon as practicable after the satisfaction or,
if permissible, waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware and by making any related filings required under the DGCL in connection
with the Merger. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
<PAGE>
Delaware or at such later time as is agreed to by the parties hereto and as is
specified in the Certificate of Merger (the "EFFECTIVE TIME" or the "CLOSING").
SECTION 1.03. Effects of the Merger. From and after the Effective Time, the
Merger shall have the effects set forth in the DGCL (including, without
limitation, Sections 259, 260 and 261 thereof).
SECTION 1.04. Certificate of Incorporation. The certificate of incorporation of
Merger Sub immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation (the "SURVIVING CERTIFICATE") until
thereafter amended in accordance with the DGCL. At the Effective Time, such
certificate shall be amended to change the name of the Surviving Corporation to
"BNC Mortgage Inc."
SECTION 1.05. Bylaws. The bylaws of Merger Sub immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
amended in accordance with the Surviving Certificate and the DGCL.
SECTION 1.06. Directors and Officers. From and after the Effective Time, until
their respective successors are duly elected or appointed and qualified in
accordance with applicable law, (a) the directors of Merger Sub at the Effective
Time shall be the directors of the Surviving Corporation and (b) the officers of
the Company at the Effective Time shall be the officers of the Surviving
Corporation.
Article II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Each share of the Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Common Stock to be canceled
pursuant to Section 2.01(b) and any Dissenting Shares to the extent provided in
Section 2.06) shall be converted into the right to receive $10.00 in cash,
without interest (the "MERGER CONSIDERATION"). At the Effective Time, each share
of Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing any such share (other than shares to be canceled pursuant to Section
2.01(b) and any Dissenting Shares) shall thereafter represent only the right to
receive, upon the surrender of such certificate in accordance with the
provisions of Section 2.02, an amount in cash per share equal to the Merger
Consideration. The holders of such certificates previously evidencing such
shares of Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such shares of Common Stock except as
otherwise provided herein or by law.
2
<PAGE>
(b) Each share of capital stock of the Company (i) held in the treasury of the
Company or by any wholly owned subsidiary of the Company or (ii) owned by Merger
Sub or any of its subsidiaries shall automatically be canceled, retired and
cease to exist without any conversion thereof and no payment shall be made with
respect thereto.
(c) Each share of common stock and each share of preferred stock of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into and
become one share of common stock and one share of preferred stock (with the same
rights, limitations and preferences), respectively, of the Surviving Corporation
and such shares shall constitute the only outstanding shares of capital stock of
the Surviving Corporation.
SECTION 2.02. Exchange of Certificates and Cash. (a) Exchange Agent. On or
before the Closing Date, Merger Sub shall enter into an agreement providing for
the matters set forth in this Section 2.02 with a bank or trust company selected
by Merger Sub and reasonably acceptable to the Company (the "EXCHANGE AGENT"),
authorizing such Exchange Agent to act as Exchange Agent in connection with the
Merger. Immediately prior to the Effective Time, Merger Sub shall deposit or
shall cause to be deposited with or for the account of the Exchange Agent, for
the benefit of the holders of shares of Common Stock (other than Dissenting
Shares and shares to be canceled pursuant to Section 2.01(b)), an amount in cash
equal to the Merger Consideration payable pursuant to Section 2.01(a) (such cash
funds are hereafter referred to as the "EXCHANGE FUND").
(b) Exchange Procedures. As soon as practicable after the Effective Time, the
Surviving Corporation will cause the Exchange Agent to mail to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time evidenced outstanding shares of Common Stock (other than Dissenting Shares
and shares to be canceled pursuant to Section 2.01(b)) (the "CERTIFICATES"), (i)
a form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Merger Sub may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Merger Sub or the Surviving Corporation, together with a letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions (collectively, the "TRANSMITTAL
DOCUMENTS"), the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each share of Common Stock
formerly represented by such Certificate, without any interest thereon, less any
required withholding of taxes, and the Certificate so surrendered shall
thereupon be canceled. In the event of a transfer of ownership of shares of
Common Stock which is not registered in the transfer records of the Company, the
Merger Consideration may be issued and paid in accordance with this Article II
to the transferee of such shares if the Certificate evidencing such shares of
Common Stock is presented to the Exchange Agent and is properly endorsed or
otherwise in proper form for transfer. The signature on the Certificate or any
related stock power must be properly guaranteed and the person requesting
3
<PAGE>
payment of the Merger Consideration must either pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate so surrendered or establish to the Surviving Corporation that
such tax has been paid or is not applicable. The Merger Consideration will be
delivered by the Exchange Agent as soon as practicable following surrender of a
Certificate and the related Transmittal Documents. Cash payments may be made by
check unless otherwise required by a depositary institution in connection with
the book-entry delivery of securities. No interest will be payable on such
Merger Consideration. Until surrendered in accordance with this Section 2.02,
each Certificate shall be deemed at any time after the Effective Time to
evidence only the right to receive, upon such surrender, the Merger
Consideration for each share of Common Stock formerly represented by such
Certificate. The Exchange Fund shall not be used for any purpose other than as
set forth in this Article II. Any interest, dividends or other income earned on
the investment of cash held in the Exchange Fund shall be for the account of the
Surviving Corporation.
(c) Termination of Exchange Fund. Any portion of the Exchange Fund (including
the proceeds of any investments thereof) which remains undistributed to the
holders of Common Stock for six months following the Effective Time shall be
delivered to the Surviving Corporation, upon demand. Any holders of Common Stock
who have not theretofore complied with this Article II shall thereafter look
only to the Surviving Corporation for payment of the Merger Consideration. Any
amounts remaining unclaimed by holders of Common Stock five years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any Governmental
Entity) shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of any claims or interest of any
Person previously entitled thereto.
(d) No Liability. Notwithstanding anything to the contrary in this Article II,
none of Merger Sub, the Surviving Corporation or the Company shall be liable to
any holder of Common Stock for any cash delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(e) Withholding Rights. The Surviving Corporation and the Exchange Agent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Common Stock such amounts
as the Surviving Corporation or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the United States
Internal Revenue Code of 1986, as amended (the "CODE"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Corporation or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Common Stock in respect of which such deduction and withholding
was made by the Surviving Corporation or the Exchange Agent.
4
<PAGE>
(f) Lost, Stolen or Destroyed Certificates. In the event any Certificates
evidencing shares of Common Stock shall have been lost, stolen or destroyed, the
holder of such lost, stolen or destroyed Certificate(s) shall execute an
affidavit of that fact upon request. The holder of any such lost, stolen or
destroyed Certificate(s) shall also deliver, if reasonably required by the
Surviving Corporation, a reasonable indemnity against any claim that may be made
against Merger Sub, the Surviving Corporation or the Exchange Agent with respect
to the Certificate(s) alleged to have been lost, stolen or destroyed. The
affidavit and any indemnity which may be required hereunder shall be delivered
to the Exchange Agent, who shall be responsible for making payment for such
lost, stolen or destroyed Certificates(s) pursuant to the terms hereof.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of shares of Common Stock thereafter on the records of the Company.
Any Certificates presented to the Exchange Agent or the Surviving Corporation
for any reason at or after the Effective Time shall be exchanged for the Merger
Consideration pursuant to the terms hereof.
SECTION 2.04. Stock Options; Payment Rights. Prior to the Effective Time, the
Board of Directors of the Company (or, if appropriate, any committee thereof)
shall adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding Option heretofore granted under the Company's 1997
Stock Option, Deferred Stock and Restricted Stock Plan (the "STOCK OPTION PLAN")
or any other plan, whether or not then vested or exercisable, shall, at or
immediately prior to the Effective Time, be canceled, and each holder thereof
shall be entitled to receive a payment in cash from the Company (which amount
shall be subject to any applicable withholding taxes and shall be paid without
interest, the "CASH PAYMENT"), upon cancellation, equal to the product of (x)
the total number of Shares subject or related to such Option, whether or not
then vested or exercisable, and (y) the excess, if any, of the Merger
Consideration over the exercise price or purchase price, as the case may be, per
Share subject or related to such Option. Each such Cash Payment to be paid to
each holder of an outstanding Option shall be paid by the Surviving Corporation
as soon as practicable after the Effective Time. The Stock Option Plan (and any
other plan, program or arrangement other than the Company's tax-qualified
defined contribution plan) providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any subsidiary shall
terminate as of the Effective Time.
SECTION 2.05. Outstanding Warrants. As soon as practicable following the date of
this Agreement, the Company shall use its reasonable best efforts to cause all
outstanding warrants for Common Stock to be canceled in exchange for the right
to receive at the Effective Time an amount in cash equal to the product of (i)
the total number of shares of Common Stock subject to such warrant, multiplied
by (ii) the excess, if any, of the Merger Consideration over the exercise price
per share of Common Stock subject to such warrant.
5
<PAGE>
SECTION 2.06. Dissenting Shares. (a) Notwithstanding any other provision of this
Agreement to the contrary, shares of Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders (i)
who shall not have voted in favor of adoption of this Agreement and (ii) who
shall be entitled to and shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL ("DISSENTING SHARES"),
shall not be converted into or represent the right to receive the Merger
Consideration unless such stockholders fail to perfect, withdraw or otherwise
lose their right to appraisal. Such stockholders shall be entitled to receive
payment of the appraised value of such Dissenting Shares in accordance with the
provisions of the DGCL. If, after the Effective Time, any such stockholder fails
to perfect, withdraws or loses its right to appraisal, such shares of Common
Stock shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration, without interest thereon, upon
surrender of the Certificate or Certificates that formerly evidenced such shares
of Common Stock in the manner set forth in Section 2.02.
(b) The Company shall give Merger Sub prompt notice of any demands for appraisal
received by it, withdrawals of such demands, and any other instruments served
pursuant to the DGCL and received by the Company and relating thereto. Merger
Sub shall direct all negotiations and proceedings with respect to demands for
appraisal under the DGCL. The Company shall not, except with the prior written
consent of Merger Sub, make any payment with respect to any demands for
appraisal, or offer to settle, or settle, any such demands.
Article III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Merger Sub that:
SECTION 3.01. Organization and Qualifications; Subsidiaries. (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 corporate power and all material
licenses, consents, permits and other approvals necessary to carry on its
business as it is now being conducted. The Company is licensed, qualified, and
in good standing in each state in which it originates mortgages if the laws of
such state require licensing or qualification in order to originate mortgage
loans and otherwise conduct business of the type conducted by the Company,
except where the failure to be so qualified or licensed or in good standing has
not had and could not reasonably be expected to have a Company Material Adverse
Effect. The Company has delivered to Merger Sub complete and correct copies of
its Certificate of Incorporation and Bylaws, each as amended to date.
(b) The only subsidiaries of the Company are those set forth in Section 3.01 of
the Company Disclosure Schedule. Except as set forth in Section 3.01 of the
Company Disclosure Schedule, each subsidiary of the Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power to carry on its
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business as it is now being conducted. Each subsidiary of the Company is duly
qualified as a foreign corporation or licensed 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 makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed or in good
standing has not had and could not reasonably be expected to have a Company
Material Adverse Effect. The Company has delivered to Merger Sub complete and
correct copies of the organizational documents of each subsidiary, each as
amended to date.
(c) All of the outstanding shares of capital stock of each such subsidiary have
been validly issued and are fully paid and non-assessable and are owned by the
Company, by another wholly owned subsidiary of the Company or by the Company and
another such wholly owned subsidiary, free and clear of all pledges, claims,
equities, options, liens, charges, rights of first refusal, encumbrances and
security interests of any kind or nature whatsoever (collectively, "LIENS").
Except for the capital stock of its subsidiaries, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in any
corporation, partnership, limited liability company, joint venture or other
entity.
SECTION 3.02. Capitalization. (a) The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock, par value $0.001 per share ("PREFERRED STOCK") of which 570,000 shares
have been designated Series A Junior Participating Preferred Stock. As of
December 31, 1999, (i) 5,042,350 shares of Common Stock were outstanding, all of
which were validly issued, fully paid and nonassessable and not subject to
preemptive rights; (ii) no shares of Preferred Stock were issued and
outstanding; (iii) no shares of Common Stock and no shares of Preferred Stock
were held in the treasury of the Company; (iv) 800,000 shares of Common Stock
were reserved for issuance upon the exercise of outstanding stock options
granted pursuant to the Stock Option Plan; (v) 317,319 shares of Common Stock
were reserved for issuance upon the exercise of outstanding warrants; (vi)
570,000 shares of Series A Junior Participating Preferred Stock were reserved
for issuance upon exercise of the rights associated with the Common Stock; (vii)
no Company Subsidiary owned any shares of the Company's capital stock; and
(viii) there were no securities of any subsidiary of the Company or any other
Person outstanding which are convertible into or exercisable or exchangeable for
capital stock of the Company. Except as set forth above, no shares of capital
stock or other voting securities of the Company have been issued, are reserved
for issuance or are outstanding.
(b) Except as otherwise disclosed in Section 3.02 of the Company Disclosure
Schedule, there are no existing rights, options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments, or
obligations which would require the Company or any of its subsidiaries to issue
or sell shares of Common Stock, Preferred Stock or any other equity securities,
or securities convertible into or exchangeable or exercisable for shares of
Common Stock, Preferred Stock or any other equity or debt securities of the
Company or any of its subsidiaries. Except as disclosed in Section 3.02 of the
Company Disclosure Schedule, the Company has no commitments or obligations to
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purchase or redeem any shares of Common Stock. Section 3.02 of the Company
Disclosure Schedule contains a complete and accurate list of all outstanding
Options and warrants and the exercise price thereof.
(c) Upon the Company taking the actions referred to in Sections 2.04 and 2.05,
no holder of Options and no holder of warrants will have any rights to receive
shares of capital stock of the Surviving Corporation upon exercise of
outstanding Options or warrants.
SECTION 3.03. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the consummation by the Company of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action by the
Company (other than, with respect to the Merger, the adoption of this Agreement
by the holders of a majority of the aggregate voting power of the issued and
outstanding shares of Common Stock (such vote being collectively referred to as
the "COMPANY STOCKHOLDER APPROVAL"), and the filing and recordation of
appropriate merger documents as required by, and in accordance with, the DGCL).
This Agreement has been duly and validly executed and delivered by the Company
and, assuming the due authorization, execution and delivery by Merger Sub,
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and by general
principles of equity.
SECTION 3.04. No Conflict; Required Filings and Consents. (a) Except as
otherwise disclosed in Section 3.04 of the Company Disclosure Schedule, the
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the Company's
Certificate of Incorporation or its Bylaws, or the certificate of incorporation,
bylaws or other equivalent organizational documents of any of its subsidiaries
or (ii) conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to the Company or any subsidiary of the Company or by which
any property or asset of the Company or any subsidiary of the Company is bound
or affected, (iii) conflict with, or violate, or cause a default under any loan
or credit agreement, note, bond, mortgage, indenture, lease, license or other
agreement, instrument, contract or permit applicable to the Company or any of
its subsidiaries or their respective properties or assets, or (iv) result in the
creation of a Lien on any assets or properties of the Company or any subsidiary
of the Company, except, in the case of clauses (ii) and (iii), for any such
conflicts, violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby by the Company will not, require any consent,
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approval, authorization or permit of, or filing with or notification to, any
governmental body, agency or official (each a "GOVERNMENTAL Entity"), except for
(i) any applicable requirements of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), (ii) the pre-merger notification requirements, if any, of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR ACT"), (iii) the filing and recordation of
appropriate merger and similar documents as required by the DGCL and (iv) the
change of control notifications to, and approvals from, state and federal
mortgage licensing agencies and authorities listed in Section 3.04 of the
Company Disclosure Schedule.
SECTION 3.05. Opinion of Financial Advisor. Friedman, Billings, Ramsey & Co.,
Inc. (the "COMPANY FINANCIAL ADVISOR") has delivered to the Special Committee
(as defined below) its opinion that, as of the date hereof, the consideration to
be received by the stockholders of the Company (other than Merger Sub and its
affiliates and members of the Management Group) pursuant to the Merger is fair
to such stockholders from a financial point of view.
SECTION 3.06. Board Approval. (a) The Board of Directors of the Company, based
on the unanimous recommendation of the Special Committee of the Board of
Directors of the Company (the "SPECIAL COMMITTEE"), at a meeting duly called and
held and at which a quorum was present and voting, unanimously (i) determined
that this Agreement and the Merger are advisable and fair to and in the best
interests of the Company's stockholders (other than Merger Sub and its
affiliates and members of the Management Group), (ii) approved this Agreement,
the Merger and the other transactions contemplated hereby, and (iii) resolved to
recommend approval and adoption of this Agreement by the Company's stockholders.
Such approval is sufficient to render inapplicable to the Merger, this Agreement
and the transactions contemplated hereby the provisions of Section 203 of the
DGCL or any antitakeover provision in the Company's Certificate of Incorporation
and Bylaws.
(b) The Company has taken all action necessary to render the rights issued
pursuant to the Rights Agreement, dated as of October 13, 1998, between the
Company and U.S. Stock Transfer Corporation (the "RIGHTS AGREEMENT")
inapplicable to the Offer, the Merger, this Agreement and the transactions
contemplated hereby. Prior to the Effective Time, the Company shall have taken
all action necessary to cause the Rights Agreement to terminate immediately
prior to the Effective Time.
SECTION 3.07. SEC Reports. (a) Since the date the Company became subject to the
reporting requirements of the Exchange Act, the Company has filed all required
forms, reports and documents with the Securities and Exchange Commission (the
"SEC") required to be filed by it pursuant to the federal securities laws and
the SEC rules and regulations thereunder (collectively, the "COMPANY SEC
DOCUMENTS"), all of which have complied as of their respective filing dates in
all material respects with all applicable requirements of the Securities Act of
1933 (the "SECURITIES ACT") and the Exchange Act, and the rules promulgated
thereunder. None of the Company SEC Documents at the time filed contained any
untrue statement of a material fact or omitted to state a material fact required
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to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the Company SEC
Documents (including the notes thereto) at the time filed complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (and include, in the case of any unaudited interim
financial statements, reasonable accruals for normal year-end adjustments). No
subsidiaries of the Company are required to file periodic reports with the SEC
under the Exchange Act.
SECTION 3.08. Absence of Certain Changes. Except as specifically disclosed in
the Company SEC Documents filed prior to the date hereof or as set forth in
Section 3.08 of the Company Disclosure Schedule, since September 30, 1999 the
Company and its subsidiaries have conducted their business only in the ordinary
course, and during such period there has not been: (a) any event, change, effect
or development that has had or could reasonably be expected to have a Company
Material Adverse Effect between September 30, 1999 and the date hereof; (b) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of the Company or any repurchase, redemption or
other acquisition by the Company or any of its subsidiaries of any capital stock
of the Company; (c) any damage, destruction or loss, whether or not covered by
insurance that has had or could reasonably be expected to have a Company
Material Adverse Effect; (d) any change in accounting methods, principles or
practices by the Company or its subsidiaries affecting the consolidated assets,
liabilities, results of operations or business of the Company, except insofar as
have been required by a change in generally accepted accounting principles; (e)
any making or rescission of any material express or deemed election relating to
Taxes, settled or compromised any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to Taxes,
or except as may be required by applicable law, made any change to any of its
material methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of its most recently filed
federal income tax return; or (f) any action, event, occurrence or transaction
that would have been prohibited by Section 5.01 hereof.
SECTION 3.09. Compliance with Laws. Except as set forth in the Company SEC
Documents filed prior to the date hereof: (a) neither the Company nor any of its
subsidiaries is subject to any material judgment, injunction, order or decree;
and (b) neither the Company nor any of its subsidiaries is in violation of any
applicable material law, rule, regulation, judgment, injunction, order or
decree, including without limitation, any federal, state or local law applicable
to the origination, purchase or sale of residential mortgage loans in the
jurisdictions in which the Company and such subsidiaries conduct such business,
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except for violations which could not reasonably be expected to have a Company
Material Adverse Effect.
SECTION 3.10. Litigation. Except as disclosed in the Company SEC Documents filed
prior to the date hereof, there is no claim, suit, action or proceeding pending
or, to the knowledge of the Company, threatened against the Company or any of
its subsidiaries which individually or in the aggregate has had or could
reasonably be expected to have a Company Material Adverse Effect.
SECTION 3.11. Undisclosed Liabilities. Except as and to the extent specifically
disclosed in the Company SEC Documents or accrued on the September 30, 1999
balance sheet included in the Company SEC Documents, or as set forth in Section
3.11 of the Company Disclosure Schedule, and except for liabilities incurred in
the ordinary course of business and otherwise not in contravention of this
Agreement, the Company and each of its subsidiaries does not have any material
liabilities or obligations of any nature (whether absolute, contingent or
otherwise).
SECTION 3.12. Labor Matters. Neither the Company nor any of its subsidiaries is
a party to or otherwise bound by any collective bargaining agreement, contract
or other agreement or understanding with a labor union or labor organization,
nor is any such contract or agreement presently being negotiated.
SECTION 3.13. Proxy Statement. The Proxy Statement will comply in all material
respects with the Exchange Act, except that no representation is made by the
Company with respect to information supplied by or on behalf of Merger Sub, any
affiliate of Merger Sub specifically for inclusion in the Proxy Statement. None
of the information supplied by the Company specifically for inclusion in the
Proxy Statement shall, at the time the Proxy Statement is mailed or at the time
of the Company Stockholders' Meeting or at the Effective Time, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that the Company makes no representation or warranty as to any of the
information relating to and supplied by or on behalf of Purchaser specifically
for inclusion in the Proxy Statement. The letter to stockholders, notice of
meeting, proxy statement and form of proxy to be distributed to stockholders in
connection with the Merger, and any schedule required to be filed with the SEC
in connection therewith, together with any amendments or supplements thereto,
are collectively referred to herein as the "PROXY STATEMENT."
SECTION 3.14. Brokers. No broker, finder or investment banker (other than the
Company Financial Advisor) is entitled to any brokerage, finder's or other fee
or commission in connection with this Agreement, the Merger and the other
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company. The Company has provided Merger Sub a copy of the agreement between
the Company and the Company Financial Advisor pursuant to which such fees are
payable.
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Article IV
REPRESENTATIONS AND WARRANTIES OF MERGER SUB
Merger Sub hereby makes to the Company the representations and warranties set
forth below:
SECTION 4.01. Organization and Qualification. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has the requisite power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. Merger Sub is duly qualified or
licensed and in good standing to do business in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Merger Sub Material Adverse Effect.
SECTION 4.02. Authority Relative to This Agreement. Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Merger Sub and the
consummation by it of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Merger Sub and no other
corporate proceedings on the part of Merger Sub are necessary to authorize this
Agreement or to consummate such transactions (other than the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by Merger Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes the legal, valid and binding obligation of Merger Sub, enforceable
against it in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and by general
principles of equity.
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by Merger Sub do not, and the performance of this
Agreement and the consummation of the transactions contemplated hereby will not,
(i) conflict with or violate the Certificate of Incorporation or bylaws of
Merger Sub, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Merger Sub or by which any of its properties or
assets are bound or affected, (iii) conflict with, or violate, or cause a
default under any loan or credit agreement, note, bond, mortgage, indenture,
lease, license or other agreement, instrument, contract or permit applicable to
Merger Sub, its properties or assets, or (iv) result in the creation of a Lien
on any assets or properties of Merger Sub except, in the case of clauses (ii)
and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, have a Merger Sub
Material Adverse Effect
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(b) The execution and delivery of this Agreement by Merger Sub do not, and the
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby by Merger Sub will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for (A) any applicable requirements, if any, of
the Exchange Act and state takeover laws, (B) the pre-merger notification
requirements, if any, of the HSR Act and (C) filing and recordation of
appropriate merger and similar documents as required by the DGCL and (ii) where
the failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Merger Sub Material Adverse Effect.
SECTION 4.04. Brokers. No broker, finder or investment banker other than Lehman
Brothers Inc. and its affiliates is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement, the Merger and the other
transactions contemplated hereby based upon arrangements made by or on behalf of
Merger Sub or the members of the Management Group.
SECTION 4.05. Funds. Merger Sub has or will have at Closing sufficient funds to
consummate the transactions contemplated in this Agreement. Merger Sub has
executed a commitment letter with an affiliate of Lehman Brothers Holdings Inc.
which, together with contributions to be made to Merger Sub by the Management
Group and Evan R. Buckley, will provide for such funds.
SECTION 4.06. Information Supplied. None of the information supplied or to be
supplied by Merger Sub specifically for inclusion in the Proxy Statement shall
at the time the Proxy Statement is mailed or at the time of the Company
Stockholders' Meeting or at the Effective Time contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.07. Employment Agreement with Kelly Monahan. Kelly Monahan and Merger
Sub have entered into a valid and binding employment agreement pursuant to which
Mr. Monahan has agreed to serve as an executive officer of the Surviving
Corporation at the Effective Time. Such agreement is enforceable against Merger
Sub in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the rights of creditors generally and by general
principles of equity
Article V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees as to itself and its subsidiaries that, between the date of
this Agreement and the Effective Time, unless Merger Sub shall have consented
within five (5) days after receipt of notice from the Company of such proposed
action, and except as expressly contemplated or permitted by this Agreement:
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(a) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company and its Subsidiaries shall carry on their respective businesses in
the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use all
reasonable efforts to preserve intact their present lines of business, maintain
their rights and franchises and preserve their relationships with customers,
suppliers, regulators, distributors, creditors, lessors, employees and others
having business dealings with them to the end that their ongoing businesses
shall not be impaired in any material respect at the Effective Time;
(b) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any of its subsidiaries to alter the
fundamental nature of its business or enter into material new lines of business
outside the origination, purchase and of residential mortgage loans and
activities incident thereto;
(c) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any of its subsidiaries to incur or
commit to any capital expenditures other than capital expenditures incurred or
committed to in the ordinary course of business consistent with past practice
and with the Company's current business plan (a copy of which has been provided
to Merger Sub);
(d) the Company shall not, and shall not permit any of its subsidiaries to, and
shall not propose to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock, except dividends by
wholly owned subsidiaries of the Company, (ii) split, combine, subdivide or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned subsidiary of the Company, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock;
(e) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any of its subsidiaries to, issue,
deliver, sell, transfer, pledge or otherwise encumber or authorize or propose
the issuance, delivery, sale, transfer, pledge or encumbrance of, any shares of
its capital stock, any voting debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such shares
or voting debt, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of Common Stock upon the exercise of
warrants, Options or in connection with other stock-based benefits plans, in
each case, outstanding on the date hereof in accordance with their current terms
and (ii) issuances by a wholly owned subsidiary of the Company of capital stock
to such subsidiary's parent or another wholly owned subsidiary of the Company;
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(f) except as required by applicable law, the Company and its subsidiaries shall
not amend or propose to amend their respective certificates of incorporation,
bylaws or other governing documents;
(g) the Board of Directors shall direct the management of the Company to not,
and to not permit any of the Company's subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (other than the acquisition of assets used in the operations of the
business of the Company and its subsidiaries in the ordinary course); provided,
however, that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing subsidiaries of the Company, (y) the creation
of new subsidiaries of the Company organized to conduct or continue activities
otherwise permitted by this Agreement, or (z) any transaction authorized under
Section 6.04; and provided, further, that upon consultation with Merger Sub the
Company may renew or enter into new warehouse line of credit facilities on
substantially the same terms as such existing facilities, including, without
limitation, as to the amount of such facilities;
(h) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any subsidiary of the Company to,
sell, lease, encumber or otherwise dispose of, or agree to sell, lease, encumber
or otherwise dispose of, any of its assets (including capital stock of
subsidiaries of the Company) which are material, individually or in the
aggregate, to the Company and its subsidiaries, taken as a whole; provided,
however, that the foregoing shall not prohibit sale of residential mortgage
loans in the ordinary course of business or pursuant to existing agreements or
the granting of Liens on residential mortgage loans in connection with
borrowings under the Company's warehouse line of credit facilities;
(i) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any of its subsidiaries to, (i)
other than in connection with actions permitted by this Agreement or in
connection with the origination, purchase and sale of residential mortgage loans
in the ordinary course of business, and activities incident thereto, make any
loans, advances or capital contributions to, or investments in, any other
Person, other than the Company or a wholly-owned subsidiary of the Company or
(ii) pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), or settle any
litigation, other than indebtedness, issuances of debt securities, guarantees,
loans, advances, capital contributions, investments, payments, discharges or
satisfactions incurred or committed to in the ordinary course of business
consistent with past practice;
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(j) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any of its subsidiaries to, take any
action that would result in (x) any of the representations and warranties set
forth in Article III which is qualified as to materiality being untrue, (y) any
of the representations and warranties set forth in Article III which is not so
qualified being untrue in any material respect, or (z) any of the conditions to
the Merger set forth in Article VII not being satisfied;
(k) except as disclosed in the Company SEC Documents filed prior to the date of
this Agreement, or as required by a Governmental Entity, the Board of Directors
shall direct the management of the Company not to change the Company's methods
of accounting in effect at June 30, 1999, except as required by changes in
United States Generally Accepted Accounting Principles as concurred in by the
Company's independent auditors;
(l) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit its subsidiaries to, (i) enter into,
adopt, amend (except as may be required by applicable law), renew (except on
substantially the same terms) or terminate any Benefit Plan, or any other
employee benefit agreement, arrangement, plan or policy between the Company or
any of its subsidiaries and one or more of its directors or officers, (ii)
increase or accelerate the compensation or fringe benefits of any of its
directors, officers or employees, (iii) grant any stock options, stock
appreciation rights, restricted stock, restricted stock units or performance
units or shares other than as required by existing agreements with individual
employees, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing or (iv) enter into or renew any contract, agreement,
commitment or arrangement providing for the payment to any director, officer or
employee of such party of compensation or benefits contingent, or the terms of
which are materially altered, upon the occurrence of any of the transactions
contemplated by this Agreement;
(m) the Board of Directors of the Company shall direct the management of the
Company to take or refrain from taking, as the case may be, such action so that
the Company shall not, and shall not permit any subsidiary to, make or rescind
any material express or deemed election relating to Taxes, settle or compromise
any material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or except as may be
required by applicable law, make any change to any of its material methods of
reporting income or deductions for federal income tax purposes from those
employed in the preparation of its most recently filed federal income tax
return; and
(n) the Board of Directors of the Company shall not take any action that is
inconsistent with, or in contravention of, the directions it gives or is
required to give to the management of the Company in compliance with this
Section 5.01; this Section 5.01 (other than Subsections 5.01(d) and (f)) shall
be breached only if the Board of Directors of the Company takes such
inconsistent or contravening action, fails to take action to direct the
management of the Company as required under this Section 5.01 (such action to be
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accomplished by reason of resolutions adopted by the Board of Directors as of
the date hereof), or as a result of action or inaction taken by any member of
the Management Group if such action or inaction was taken with the actual
knowledge of a majority of the members of the Special Committee and the Board of
Directors fails to supervise the compliance by the Management Group with such
directions consistent with the provisions of the DGCL
Article VI
ADDITIONAL COVENANTS
SECTION 6.01. Access to Information; Confidentiality. From the date hereof to
the Effective Time, the Company shall (and shall cause its subsidiaries and the
officers, directors, employees, auditors and agents of the Company and of each
of its subsidiaries to) afford the officers, employees and agents of Merger Sub
(the "MERGER SUB REPRESENTATIVES") reasonable access upon reasonable notice
during normal business hours to its officers, employees, agents, properties,
offices, plants and other facilities, books and records, and shall furnish such
Merger Sub Representatives with all financial, operating and other data and
information as may from time to time be reasonably requested. Merger Sub agrees
to be bound by the terms of the Confidentiality Agreement, dated as of October
19, 1999, between the Company and Lehman Brothers Inc. (the "CONFIDENTIALITY
AGREEMENT").
SECTION 6.02. Proxy Statement; Schedule 13E-3. (a) As soon as practicable after
the date of this Agreement, the Company shall prepare and file with the SEC the
Proxy Statement, in form and substance reasonably satisfactory to Merger Sub,
relating to the meeting of the Company's stockholders to be held in connection
with the Merger. Merger Sub shall furnish to the Company such information
concerning itself as the Company may reasonably request in connection with the
preparation of the Proxy Statement. The Proxy Statement will comply in all
material respects with applicable federal securities laws, except that no
representation is made by the Company with respect to information supplied by
Merger Sub for inclusion in the Proxy Statement. As promptly as practicable
after the Proxy Statement has been cleared by the SEC, the Company shall mail
the Proxy Statement to its stockholders. The Proxy Statement shall include the
opinion of the Company Financial Advisor referred to in Section 3.05 hereof.
(b) The information provided by each of the Company and Merger Sub for use in
the Proxy Statement shall not, at (i) the time the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to the stockholders of
the Company or (ii) the time of the Company stockholders' meeting contemplated
by such Proxy Statement, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. If at any time prior to the
Effective Time any event or circumstance relating to any party hereto, or their
respective officers or directors, should be discovered by such party which
should be set forth in an amendment or a supplement to the Proxy Statement, such
party shall promptly inform the Company and Merger Sub thereof and take
appropriate action in respect thereof.
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(c) As soon as practicable after the date of this Agreement, Merger Sub, members
of the Management Group and the Company shall file with the SEC a Rule 13E-3
Transaction Statement on Schedule 13E-3 ("SCHEDULE 13E-3"), with respect to the
Merger. Each of the parties hereto agrees to use its reasonable best efforts to
cooperate and to provide each other with such information as any of such parties
may reasonably request in connection with the preparation of the Schedule 13E-3.
The information provided by each of the Company and Merger Sub for use in the
Schedule 13E-3 shall not, at the time the Schedule 13E-3 is filed with the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading. Each party hereto agrees promptly to supplement, update
and correct any information provided by it for use in the Schedule 13E-3 if and
to the extent that it is or shall have become incomplete, false or misleading.
SECTION 6.03. Action by Stockholders. Except as otherwise required by the
fiduciary duties of the Board of Directors of the Company under applicable law
(as determined in good faith by the Special Committee after consulting with its
outside legal counsel): (a) the Company, acting through its Board of Directors,
shall, in accordance with applicable law, the Company's Certificate of
Incorporation and Bylaws, duly call, give notice of, convene and hold a special
meeting of stockholders (the "COMPANY STOCKHOLDERS' MEETING") as soon as
reasonably practicable after the date of this Agreement for the purpose of
adopting this Agreement and (b) the Company will, through the Board of Directors
based on the recommendation of the Special Committee, recommend to its
stockholders the adoption of this Agreement. Merger Sub and the Management Group
shall vote all shares of Common Stock owned by them in favor of the adoption of
this Agreement.
SECTION 6.04. No Solicitation. (a) The Company agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
investment bankers, attorneys or other agents or representatives to directly or
indirectly, solicit, initiate or encourage any inquiries or the making of any
proposal or provide any information about the Company or its subsidiaries with
respect to any merger, consolidation or other business combination involving the
Company or its subsidiaries or their respective assets or capital stock (a
"TAKEOVER PROPOSAL") or negotiate, explore or otherwise engage in discussions
with any corporation, partnership, person or other entity or group (other than
Merger Sub, any of its affiliates or representatives) (collectively, a "PERSON")
with respect to any Takeover Proposal or enter into any agreement, arrangement
or understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement; provided,
however, that if the Board of Directors of the Company or the Special Committee
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determines in good faith, after consultation with outside counsel, that it is
advisable to do so in order to act in a manner consistent with its fiduciary
duties to the Company's stockholders under applicable law, the Company may, in
response to what the Board of Directors in good faith reasonably believes may be
a Superior Proposal (as defined below), which proposal was not solicited by it
and which did not otherwise result from a breach of this Section 6.04, and
subject to providing prior written notice of its decision to take such action to
Merger Sub and compliance with the other requirements of this Section 6.04, (i)
furnish information with respect to the Company and its subsidiaries to any
Person making a Superior Proposal pursuant to a customary confidentiality
agreement and (ii) participate in discussions or negotiations regarding and
execute any agreements (including but not limited to any Acquisition Agreement),
in connection with such Superior Proposal.
(b) Except as expressly permitted by this Agreement, neither the Board of
Directors of the Company nor the Special Committee shall (i) withdraw or modify
, or propose publicly to withdraw or modify, in a manner adverse to Merger Sub,
the approval or recommendation by the Board of Directors of the Company or such
committee of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend any Takeover Proposal, or (iii) cause the
Company to enter into any Acquisition Agreement.
(c) In addition to the obligations of the Company set forth in paragraphs (a)
and (b) of this Section 6.04, the Company shall promptly (and in any event
within one day) advise Merger Sub orally and in writing of any request for
information or any Takeover Proposal, the material terms and conditions of such
request or Takeover Proposal (and any amendments or proposed amendments thereto)
and the identity of the person making such request or Takeover Proposal.
(d) Nothing contained in this Section 6.04 shall prohibit the Company or its
Board of Directors, upon the recommendation of the Special Committee, from
taking and disclosing to the Company's stockholders a position with respect to a
tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Company's stockholders or otherwise which, in the judgment of the Special
Committee upon advice of legal counsel, is advisable under applicable law or
rules of any stock exchange; provided, however, that, except as contemplated by
clause (b) of this Section 6.04, neither the Company nor the Board of Directors
nor the Special Committee thereof shall withdraw or modify, or propose publicly
to withdraw or modify, its position with respect to this Agreement or the Merger
or approve or recommend, or propose publicly to approve or recommend, a Takeover
Proposal.
(e) For purposes of this Agreement:
(i) "SUPERIOR PROPOSAL" means any proposal made by a third party to
acquire, directly or indirectly, including pursuant to a tender offer, exchange
offer, merger, consolidation, business combination, recapitalization,
reorganization, liquidation, dissolution or similar transaction, for
consideration to the Company's stockholders consisting of cash and/or
securities, at least 15% of the shares of the Company's capital stock then
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outstanding or all or substantially all of the assets of the Company, on terms
which the Board of Directors, upon the recommendation of the Special Committee
(based upon the advice of its financial advisor), determines in its good faith
reasonable judgment to be more favorable to the Company's stockholders than the
Merger and for which financing, to the extent required, is then committed.
(ii) "ACQUISITION AGREEMENT" means any letter of intent, agreement in
principle, acquisition agreement or other similar agreement, contract or
commitment related to any Takeover Proposal.
SECTION 6.05. Directors' and Officers' Insurance and Indemnification.
(a) From and after the consummation of the Merger, the parties shall, and shall
cause the Surviving Corporation to, indemnify, defend and hold harmless any
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer or director (the "INDEMNIFIED
PARTY") of the Company and its subsidiaries against all losses, claims, damages,
liabilities, costs and expenses (including attorneys' fees and expenses),
judgments, fines, losses, and amounts paid in settlement, with the written
approval of the Surviving Corporation (which approval shall not be unreasonably
withheld), in connection with any actual or threatened action, suit, claim,
proceeding or investigation (each a "CLAIM") to the extent that any such Claim
is based on, or arises out of, (i) the fact that such person is or was a
director, officer, employee or agent of the Company or any subsidiaries or is or
was serving at the request of the Company or any of its subsidiaries as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (ii) this Agreement, or any of the
transactions contemplated hereby, in each case to the extent that any such Claim
pertains to any matter or fact arising, existing, or occurring prior to or at
the Effective Time, regardless of whether such Claim is asserted or claimed
prior to, at or after the Effective Time, to the full extent permitted under
Delaware law or the Company's Certificate of Incorporation, Bylaws or
indemnification agreements in effect at the date hereof.
(b) Merger Sub and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of the Indemnified Party as provided
in the Company's Certificate of Incorporation and Bylaws as in effect as of the
date hereof shall survive the Merger and shall continue in full force and
effect, without any amendment thereto, to the extent such rights are consistent
with the DGCL; provided that in the event any claim or claims are asserted or
made within such six year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims; provided further, that any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under Delaware law, the Company's Certificate of Incorporation or
Bylaws or such agreements, as the case may be, shall be made by independent
legal counsel selected by the Indemnified Party and reasonably acceptable to the
Surviving Corporation; and, provided further, that nothing in this Section 6.05
shall impair any rights or obligations of any present or former directors or
officers of the Company.
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(c) The parties shall cause the Surviving Corporation to maintain the Company's
existing officers' and directors' liability insurance policy ("D&O INSURANCE")
for a period of not less than five (5) years after the Effective Date; provided,
that the Surviving Corporation may substitute therefor policies of substantially
similar coverage and amounts containing terms no less advantageous to such
former directors or officers ("SUBSTANTIALLY SIMILAR D&O INSURANCE") so long as
such substitution does not result in gaps or lapses in coverage; provided,
further, if the existing D&O Insurance expires or is cancelled during such
period, Merger Sub or the Surviving Corporation will use its best efforts to
obtain Substantially Similar D&O Insurance; provided, however, that if the
aggregate annual premiums for such D&O Insurance (or successor insurance policy)
at any time during such period exceed 500% of the per annum rate of premiums
currently paid by the Company for such insurance on the date of this Agreement
or $250,000, then the parties will cause the Surviving Corporation to, and the
Surviving Corporation will, provide the maximum coverage that shall then be
available at an annual premium equal to 500% of such rate (provided, however,
that in no event shall the Company be required to pay any annual premiums in
excess of $250,000).
(d) The provisions of this Section 6.05 are intended to be in addition to the
rights otherwise available to the current officers and directors of the Company
by law, charter, statute, bylaw or agreement, and shall operate for the benefit
of, and shall be enforceable by, the Indemnified Parties, their heirs and
personal representatives, and shall be binding on the Surviving Corporation and
its respective successors and assigns.
SECTION 6.06. Officers. Immediately prior to the Effective Time, the Company
shall take all action necessary to appoint as officers of the Company the
Persons designated by Merger Sub.
SECTION 6.07. Further Action; Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each of the parties
hereto shall (i) make promptly its respective filings and thereafter make any
other required submissions under the HSR Act with respect to the Merger and the
other transactions contemplated hereby, and (ii) use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations or otherwise to consummate and make effective the Merger and the
other transactions contemplated hereby.
(b) Notwithstanding the provisions of Section 6.06(a), nothing contained in this
Agreement shall obligate Merger Sub to take any action to consummate the Merger
and the other transactions contemplated hereby, the consummation of which is
dependent or conditioned on the receipt of any governmental or regulatory
approval or consent, in the event that the approval or consent so received
specifically includes conditions or restrictions in addition to those imposed by
laws and regulations of general applicability as in effect from time to time
(including conditions in addition to those imposed by existing laws and
regulations which require the prior approval of any governmental or regulatory
agency to the taking of any action or the consummation of any transaction), the
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direct or indirect effect of which is or would be, to materially restrict, limit
or otherwise subject to penalty Merger Sub in the ownership of its assets or the
conduct of its business. For purposes of the foregoing, a condition, restriction
or limitation arising out of any such approval or consent shall be deemed to be
a material restriction or limitation on Merger Sub (regardless of whether Merger
Sub is a party to or otherwise legally obligated by such consent or approval) to
the extent that the taking of an action or the consummation of a transaction by
Merger Sub would result in Merger Sub, the Company or any subsidiary of the
Company being in material breach or violation of such consent or approval or
otherwise causing such consent or approval to terminate or expire.
(c) In case at any time after the Effective Time any further action is necessary
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall use their reasonable best efforts to take
all such action.
SECTION 6.08. Public Announcements. Merger Sub and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated
hereby and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which consent shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may be required by law, regulation or any listing agreement or
arrangement to which the Company or Merger Sub is a party with a national
securities exchange or the Nasdaq Stock Market if it has used all reasonable
efforts to consult with the other party and to obtain such party's consent but
has been unable to do so in a timely manner.
SECTION 6.09. Conveyance Taxes. Merger Sub and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated by this Agreement that
are required or permitted to be filed on or before the Effective Time.
SECTION 6.10. Event Notices. From and after the date of this Agreement until the
Effective Time, the Company shall promptly notify Merger Sub of (i) the
occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of
which has resulted in, or could reasonably be expected to result in, any
condition to the Merger set forth in Article VII, not being satisfied, (ii) the
Company's failure to comply with any covenant or agreement to be complied with
by it pursuant to this Agreement which has resulted in, or could reasonably be
expected to result in any condition to the Merger set forth in Article VII, not
being satisfied and (iii) any representation or warranty made by the Company
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified as to materiality becoming untrue or inaccurate in any material
respect. The Company's delivery of any notice pursuant to this Section 6.10
shall not cure any breach of any representation or warranty of the Company
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contained in this Agreement or otherwise limit or affect the remedies available
hereunder to Merger Sub, and the inadvertent failure to promptly deliver said
notice shall not be deemed a breach of this Agreement.
Article VII
CLOSING CONDITIONS
SECTION 7.01. Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable law:
(a) Stockholder Approval. The Company Stockholder Approval shall have been
obtained.
(b) No Order. No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or the
other transactions contemplated by this Agreement; provided, however,, that the
parties shall use their reasonable best efforts (subject to Section 6.06(b)) to
cause any such decree, judgment, injunction or other order to be vacated or
lifted.
(c) HSR Act. Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the Department of Justice or the Federal Trade
Commission challenging or seeking to enjoin the consummation of the Merger,
which action shall not have been withdrawn or terminated.
SECTION 7.02. Additional Conditions to Obligations of Merger Sub. The obligation
of Merger Sub to effect the Merger is also subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. Each of the representations and warranties
of the Company contained in this Agreement shall, if qualified by materiality,
be true and correct, and if not so qualified, be true and correct in all
material respects, in each case as of the Effective Time as though made on and
as of the Effective Time, except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date; provided, however, that any such representation or warranty shall not be
deemed to be false or incorrect as a result of action or inaction taken by any
member of the Management Group between the date of this Agreement and the
Closing Date if such action or inaction was taken without the actual knowledge
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of a majority of the Special Committee of the Board of Directors of the Company
or with the actual knowledge of the Board of Directors if the Board instructs
the Management Group not to take any such action, so long as the Board of
Directors continues to exercise its duties to supervise management of the
Company consistent with the provisions of the DGCL.
(b) Agreement and Covenants. The Company shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it at or prior to the Effective Time.
(c) Dissenting Shares. On the Closing Date, Dissenting Shares shall aggregate no
more than 18% of the then outstanding shares of Common Stock.
(d) Company Material Adverse Effect. Subsequent to the date of this Agreement,
there shall not have occurred an event or events, other than events affecting
the credit markets generally or the ability of financial institutions to raise
capital (including the Credit Market Events) which, individually or in the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect; provided, however, that this condition shall not be deemed to
have been breached if the Company Material Adverse Effect is significantly the
result of (i) any action or inaction taken by a member of the Management Group
specifically identified under Article V and taken in contravention of the
directions to be given to the management of the Company by the Board of
Directors pursuant to Article V (such action to be accomplished by reason of
resolutions adopted by the Board of Directors as of the date hereof) or (ii) any
action or inaction not subject to Article V taken by a member of the Management
Group and (A) said member (i) acted in a manner inconsistent with, or failed to
act in a manner consistent with, the business judgment rule as interpreted in
accordance with Delaware law or (ii) reasonably believed that such action or
inaction should have been communicated to the Special Committee and did not so
communicate to the Special Committee prior to taking such action or inaction or
(B) such action or inaction was taken without the actual knowledge of a majority
of the Special Committee and out of the ordinary course of business consistent
with past practices.
(e) Market Material Adverse Effect. On the Closing Date, a Market Material
Adverse Effect shall not have occurred and be continuing.
(f) Officer's Certificate. Merger Sub shall have received a certificate of an
appropriate officer of the Company to the effect that the conditions set forth
in Section 7.02(a), (b), (c) and (d) have been satisfied at the Effective Time.
(g) Third Party Consents. The Company and its subsidiaries shall have obtained
all third party consents identified with an asterisk in Section 3.04 of the
Company Disclosure Schedule and the same shall be in full force and effect at
the closing.
(h) Management. On the Closing Date, Kelly Monahan shall continue to actively
serve as an executive officer of the Company.
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(i) Litigation. There shall be no claim, suit, action or proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of its
subsidiaries which questions or challenges the validity of this Agreement, the
transactions contemplated hereby or any action taken or to be taken by the
Company or which attempts to restrain, enjoin or prohibit the transactions
contemplated hereby.
SECTION 7.03. Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. Each of the representations and warranties
of Merger Sub contained in this Agreement shall, if qualified by materiality, be
true and correct, and if not so qualified, be true and correct in all material
respects, in each case as of the Effective Time as though made on and as of the
Effective Time, except (i) for changes specifically permitted by this Agreement
and (ii) that those representations and warranties which address matters only as
of a particular date shall remain true and correct as of such date.
(b) Agreement and Covenants. Merger Sub shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it at or prior to the Effective Time.
(c) Officer's Certificate. The Company shall have received a certificate of an
appropriate officer of Merger Sub to the effect that the conditions set forth in
Section 7.03(a) and (b) have been satisfied at the Effective Time.
Article VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
adoption of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the Company (acting through the Special
Committee) and Merger Sub;
(b) by either Merger Sub or the Company if the Effective Time shall not have
occurred on or before July 31, 2000; provided, however, that the right to
terminate this Agreement under this Section 8.01(b) shall not be available to
the party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) by either Merger Sub or the Company, if any permanent injunction, order,
decree, ruling or other action by any Governmental Entity preventing the
consummation of the Merger shall have become final and nonappealable;
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(d) by Merger Sub, if (i) the Board of Directors of the Company (acting through
the Special Committee) withdraws, modifies or changes its approval or
recommendation of this Agreement in a manner adverse to Merger Sub or shall have
resolved to do so, (ii) the Board of Directors of the Company shall have
recommended to the stockholders of the Company a Takeover Proposal or shall have
resolved to do so, or (iii) a tender offer or exchange offer for at least 20% of
the outstanding shares of capital stock of the Company is commenced and the
Board of Directors of the Company (acting through the Special Committee) fails
to recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the acceptance of
such tender offer or exchange offer by its stockholders);
(e) by Merger Sub or the Company, if this Agreement shall fail to receive the
Company Shareholder Approval for adoption at the Company Stockholders' Meeting
or any adjournment or postponement thereof;
(f) by Merger Sub, upon a breach of any material representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company that is qualified as to
materiality shall have become untrue, or if any representation or warranty of
the Company that is not so qualified shall have become untrue in any material
respect, in each case such that the conditions to the Merger set forth in
Article VII would not be satisfied (a TERMINATING COMPANY BREACH"); provided,
however, that, if such Terminating Company Breach is curable by the Company
through the exercise of its reasonable best efforts and for so long as the
Company continues to exercise such reasonable best efforts, Merger Sub may not
terminate this Agreement under this Section 8.01(f);
(g) by the Company, upon a breach of any material representation, warranty,
covenant or agreement on the part of Merger Sub set forth in this Agreement, or
if any representation or warranty of Merger Sub that is qualified as to
materiality shall have become untrue, or if any representation or warranty of
Merger Sub that is not so qualified shall have become untrue in any material
respect, in each case such that the conditions to the Merger set forth in
Article VII would not be satisfied (a TERMINATING MERGER SUB BREACH"); provided,
however, that, if such Terminating Merger Sub Breach is curable by Merger Sub
through the exercise of its reasonable best efforts and for so long as Merger
Sub continues to exercise such reasonable best efforts, the Company may not
terminate this Agreement under this Section 8.01(g);
(h) by the Company, to allow the Company to enter into an Acquisition Agreement
in respect of a Superior Proposal if the Board of Directors of the Company (upon
recommendation of the Special Committee) determines, following receipt of advice
of independent legal counsel, that failure to do so would cause the Board of
Directors of the Company to breach its fiduciary duties under applicable law;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 8.01(h) until five business days have elapsed following delivery to
Merger Sub of written notice of such determination of the Company (which written
notice will inform Merger Sub of the material terms and conditions of the
Superior Proposal) and the Company shall and shall cause its legal and financial
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advisors to, during such five business day period, negotiate in good faith with
Merger Sub to make such adjustments to the terms and conditions of this
Agreement as would enable the Company to proceed with the transactions
contemplated herein; and provided, further, however, that such termination under
this Section 8.01(h) shall not be effective until the Company has made payment
to Merger Sub of the amounts required to be paid pursuant to Section 8.05(b).
SECTION 8.02. Effect of Termination. Except as provided in Section 8.05 or
Section 9.01(b), in the event of the termination of this Agreement pursuant to
Section 8.01, this Agreement shall forthwith become void, there shall be no
liability on the part of any party hereto, or any of their respective officers
or directors, to the other and all rights and obligations of any party hereto
shall cease, subject to the remedies of the parties set forth in Sections
8.05(b) and (c); provided, however, that nothing herein shall relieve any party
from liability for the willful breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement; provided further, however,
that the Company shall not be deemed to have willfully breached its
representations, warranties, covenants or agreements set forth in this Agreement
as a result of action or inaction taken by any member of the Management Group
between the date of this Agreement and the Closing Date if such action or
inaction was taken without the actual knowledge of a majority of the Special
Committee of the Board of Directors of the Company, or with the actual knowledge
of the Board of Directors if the Board instructs the Management Group not to
take such action, so long as the Board of Directors continues to exercise its
duties to supervise management of the Company consistent with the provisions of
the DGCL.
SECTION 8.03. Amendment. Before or after adoption of this Agreement by the
stockholders of the Company, this Agreement may be amended by the parties hereto
at any time prior to the Effective Time; provided, however, that (a) any such
amendment shall, on behalf of the Company, have been approved by the Special
Committee and (b) after adoption of this Agreement by the stockholders of the
Company, no amendment which under applicable law may not be made without the
approval of the stockholders of the Company may be made without such approval.
This Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 8.04. Waiver. At any time prior to the Effective Time, either the
Company (acting through the Special Committee), on the one hand, or Merger Sub,
on the other, may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document delivered pursuant hereto and (c) waive compliance by the other
party with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby and, with respect to
extensions or waivers granted by the Company, if the Special Committee shall
have approved such waiver or extension.
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SECTION 8.05. Fees, Expenses and Other Payments. (a) Subject to paragraphs (b)
and (c) of this Section 8.05, all costs and expenses (including any expenses
related to any claims or litigation in connection with the transactions
contemplated by this Agreement, or any settlement thereof), including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants and other out-of-pocket expenses, incurred or to be incurred by the
parties hereto (which in the case of Merger Sub includes those incurred or to be
incurred by its equity investors) in connection with the transactions
contemplated hereby (with respect to such party, its "EXPENSES"), shall be borne
solely and entirely by the party which has incurred such costs and expenses;
provided, however, that all costs and expenses related to printing and mailing
the Proxy Statement shall be borne by the Company.
(b) The Company agrees that, if (i) the Company shall terminate this Agreement
pursuant to Section 8.01(h), (ii) Merger Sub shall terminate this Agreement
pursuant to Section 8.01(d)(i) or 8.01(d)(ii), or (iii) (A) Merger Sub shall
terminate this Agreement pursuant to Section 8.01(e) or Section 8.01(f), (B)
prior to the time of such termination, any person shall have made a public
announcement or otherwise communicated to the Company and its stockholders with
respect to a Takeover Proposal with respect to the Company, and (C) within six
(6) months after the date this Agreement is terminated, the Company enters into
a definitive agreement with respect to a Takeover Proposal or a Takeover
Proposal is consummated, then in accordance with Section 8.05(d), after such
termination, or in the case of clause (iii) upon the entering into an agreement
with respect to, or consummation of such Takeover Proposal, the Company shall
pay to Merger Sub an amount equal to Merger Sub's documented Expenses in
connection with this Agreement and the transactions contemplated hereby (which
amount shall not exceed $500,000) and a termination fee in the amount of
$1,500,000 (the "TERMINATION FEE" and together with such Expenses, the
"TERMINATION AMOUNT"); provided, however, that in no event shall the Company be
obligated to pay more than one Termination Amount.
(c) The Company agrees that it shall pay to Merger Sub an amount equal to Merger
Sub's documented Expenses directly related to this Agreement and the
transactions contemplated hereby (which amount shall not exceed $500,000) if
this Agreement is terminated pursuant to Section 8.01(f) based upon a breach of
a covenant or agreement or of any of the warranties and representations
contained in Sections 3.01 (Organization and Qualification; Subsidiaries), 3.02
(Capitalization), 3.03 (Authority Relative to this Agreement), 3.05 (Opinion of
Financial Advisor), 3.06 (Board Approval), 3.13 (Proxy Statement) or 3.14
(Brokers).
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<PAGE>
(d) Except as otherwise provided in this Agreement, any payment required to be
made pursuant to Section 8.05(b) or Section 8.05(c) shall be made to Merger Sub
by the Company not later than ten business days after delivery to the Company by
Merger Sub of notice of demand for payment and shall be made by wire transfer or
immediately available funds to an account designated by Merger Sub.
(e) Merger Sub agrees that it shall pay to the Company an amount equal to the
Company's documented Expenses directly related to this Agreement and the
transactions contemplated hereby (which amount shall not exceed $500,000) if
this Agreement is terminated pursuant to Section 8.01(g). Any payment required
to be made pursuant to this Section 8.05(e) shall be made to the Company by
Merger Sub not later than ten business days after delivery to Merger Sub by the
Company of notice of demand for payment and shall be made by wire transfer or
immediately available funds to an account designated by the Company.
(f) The parties hereto acknowledge that the agreements contained in this Section
8.05 are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, neither the Company nor Merger Sub would
enter into this Agreement; accordingly, if either party fails to pay promptly
the Termination Amount and/or expenses as applicable, and, in order to obtain
such payment, the receiving party commences a suit which results in a judgment
against the paying party for the Termination Amount and/or expenses, as
applicable, the paying party shall pay to the receiving party its expenses
incurred in connection with such suit, together with interest on the Termination
Amount and/or expenses, as applicable, at the prime rate published as the
average rate in the "Money Rates" section of The Wall Street Journal on the date
such payment was required to be made.
(g) Subject to the following sentences, the payments required by this Section
8.05 shall constitute liquidated damages in full and complete satisfaction of,
and shall be the sole and exclusive remedy of the parties for any loss,
liability, damage or claim arising out of or in conjunction with the
transactions contemplated in this Agreement, including any termination of this
Agreement pursuant to Section 8.01 and shall not constitute a penalty.
Notwithstanding the foregoing sentence, if (i) this Agreement is terminated by
Merger Sub as a result of a willful breach of any representation, warranty,
covenant or agreement by the Company and no Termination Fee is required to be
paid pursuant to Section 8.05, Merger Sub may pursue any remedies available to
it at law or in equity and shall be entitled to recover such additional amounts
as Merger Sub may be entitled to receive at law or in equity or (ii) this
Agreement is terminated by the Company as a result of a willful breach of any
representation, warranty, covenant or agreement by Merger Sub, the Company may
pursue any remedies available to it at law or in equity and shall be entitled to
recover such amounts as the Company may be entitled to receive at law or in
equity.
29
<PAGE>
Article IX
GENERAL PROVISIONS
SECTION 9.01. Effectiveness of Representations, Warranties and Agreements.
(a) Except as set forth in Section 9.01(b), the representations, warranties and
agreements of each party hereto shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of any other party
hereto, any person controlling any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VIII, except that the agreements set forth in Articles I, II
and IX and Section 6.05 shall survive the Effective Time and those set forth in
Sections 8.02 and 8.05 and Article IX shall survive termination.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing (including telecopy or
similar writing) and shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 9.02
and the appropriate telecopy confirmation is received or (ii) if given by any
other means, when delivered at the address specified in this Section 9.02 (or at
such other address for a party as shall be specified by like notice):
(a) If to Merger Sub:
----------------
c/o BNC Mortgage, Inc.
1063 McGaw Avenue
Irvine, CA 92614-5532
Attention: Mr. Kelly W. Monahan
Telecopy: (949) 475-5027
30
<PAGE>
with copies to:
--------------
Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
Attention: Michael McCully, Senior Vice President,
Karen Manson, Senior Vice President
Telecopy: (212) 526-0035
Weil, Gotshal & Manges LLP
1615 L. Street, N.W., Suite 700
Washington, DC. 20036
Attention: W. Michael Bond, Esq.
Telecopy: (202) 857-0940
Troop, Steuber, Pasich, Reddick, & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, CA 90067-3010
Attention: David H. Sands, Esq.
Telecopy: (310) 728-2200
if to the Company to:
--------------------
BNC Mortgage, Inc.
1063 McGaw Avenue
Irvine, CA 92614-5532
Attention: Special Committee of the Board of Directors
Telecopy: (949) 260-6464
with a copy to:
--------------
Kirkpatrick & Lockhart LLP
9100 Wilshire Blvd.
Beverly Hills, CA 90212
Attention: Thomas J. Poletti, Esq.
Telecopy: (310) 274-8293
SECTION 9.03 Certain Definitions. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned person;
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<PAGE>
(b) "BUSINESS DAY" means any day other than a day on which (i) banks in the
State of New York are authorized or obligated to be closed or (ii) the SEC or
The Nasdaq National Market is closed;
(c) "COMPANY MATERIAL ADVERSE EFFECT" shall mean any change or effect that is
(after giving effect to any appropriate reserves for such matter on the
financial statements included in the Company SEC Documents filed prior to the
date hereof) materially adverse to the business, prospects, results of
operations, assets, liabilities or financial condition of the Company and its
subsidiaries, taken as a whole, or any event, matter, condition or effect which
precludes the Company from performing its material obligations under this
Agreement or the consummation of the transactions contemplated herein.
(d) "CONTROL" (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
polices of a person or entity, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise; and
(e) "CREDIT MARKET EVENTS" means any of the following events: (i) a limitation
(whether or not mandatory) by any United States Government Entity which affects
the extension of credit by banks or other United States financial institutions;
(ii) interest rate increases by the Federal Reserve Bank of the United States;
(iii) the implementation of previously announced proposed changes to capital
requirements for sub-prime originators and investors; (iv) a disruption or
adverse change in the financial or capital markets generally; (v) an event or
events that affects the "repo market" or comparable "lending market" for
financing debt obligations secured by residential mortgage loans or affects the
ability of mortgage lenders generally to finance residential mortgage loans
through the "repo market" or "lending market" with traditional counterparties;
or (vi) an event or events that affects the "securities market" for securities
backed by residential mortgage loans or mortgage lenders generally not being
able to sell securities backed by residential mortgage loans.
(f) "MANAGEMENT GROUP" means collectively, Kelly W. Monahan, Peter R. Evans, Al
Lapena, Gary Vander-Haeghen, Marles Crow and Jamie Langford.
(g) "MARKET MATERIAL ADVERSE EFFECT" means the occurrence of any of the
following: (i) a limitation (whether or not mandatory) by any United States
Governmental Entity which materially and adversely affects, or any other event
which materially affects, the extension of credit by banks or other United
States financial institutions, other than interest rate increases by the Federal
Reserve Bank of the United States, and other than the implementation of any
previously announced proposed changes to capital requirements for sub-prime
originators and investors the effect of which would be to materially impair the
Company's ability to conduct its business; (ii) a material disruption or
material adverse change in the financial or capital markets generally, the
effect of which effectively bars access by financial services entities to said
markets; (iii) an event or events that results in the effective absence of a
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<PAGE>
"repo market" or comparable "lending market" for financing debt obligations
secured by residential mortgage loans or in the inability of mortgage lenders
generally to finance residential mortgage loans through the "repo market" or
"lending market" with traditional counterparties; or (iv) an event or events
that results in the effective absence of a "securities market" for securities
backed by residential mortgage loans or in mortgage lenders generally not being
able to sell securities backed by residential mortgage loans.
(h) "MERGER SUB MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition of Merger Sub and its subsidiaries, taken as a whole, or any
event, matter, condition or effect which precludes Merger Sub from performing
its material obligations under this Agreement or the consummation of the
transactions contemplated herein
(i) "OPTION" means any stock option, stock appreciation right or any other award
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary of the Company.
(j) "PERSON" means any person or any corporation, partnership, limited liability
company or other legal entity.
(k) "SUBSIDIARY" or "SUBSIDIARIES" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary) owns, directly or
indirectly, at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization.
SECTION 9.04. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. Entire Agreement. This Agreement and the other documents delivered
in connection herewith constitutes the entire agreement of the parties and
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<PAGE>
supersedes all prior agreements and undertakings between the parties with
respect to the subject matter hereof.
SECTION 9.07. Assignment. This Agreement shall not be assigned by operation of
law or otherwise and any purported assignment shall be null and void, provided
that Merger Sub may assign its rights, but not its obligations, under this
Agreement to any of its subsidiaries.
SECTION 9.08. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied (other than the provisions of Section 6.05, which provisions
are intended to benefit and may be enforced by the beneficiaries thereof), is
intended to or shall confer upon any person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 9.09. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without regard to the
conflict of laws rules thereof.
SECTION 9.10. Submission to Jurisdiction; Waiver of Jury Trial. (a) Each party
hereto irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Court of Chancery, or other courts, of the State
of Delaware, and each party hereto hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each party hereto hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (i) the defense of sovereign immunity, (ii) any
claim that it is not personally subject to the jurisdiction of the courts for
any reason other than the failure to serve process in accordance with this
Section 9.10, (iii) that it, or its property, is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (iv) to the fullest extent permitted by applicable law, that (x) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (y)
the venue of such suit, action or proceeding is improper and (z) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts.
(b) The parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement and any document
executed in connection herewith.
SECTION 9.11. Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
34
<PAGE>
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
SECTION 9.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
35
<PAGE>
IN WITNESS WHEREOF, the Company and Merger Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
COMPANY:
BNC MORTGAGE, INC.
By: /s/ Evan R. Buckley
-------------------------------------
Name: Evan R. Buckley
Title: Chief Executive Officer
MERGER SUB:
BNCM ACQUISITION CO.
By: /s/ Kurt Locher
-------------------------------------
Name: Kurt Locher
Title: President
Signature Page For Agreement And Plan Of Merger
EXHIBIT 2
LEHMAN BROTHERS
January 24, 2000
To the Management Group Investors named below
BNC Mortgage, Inc.
1063 McGaw Avenue
Irvine, CA 92614
Ladies and Gentlemen:
BNCM Acquisition Co. ("Acquisition Co."), an entity to be
formed by Mortgage Investco LLC ("Lehman") and Kelly W. Monahan, Peter R. Evans,
Al Lapena, Gary Vander-Haeghen, Marles Crow and Jamie Langford (such
individuals, collectively, the "Management Group Investors"), intends to make an
acquisition proposal to the Board of Directors of BNC Mortgage, Inc. (the
"Company") with respect to the possible acquisition of the Company and its
subsidiaries on the terms and subject to the conditions set forth in the
attached "Term Sheet". We hereby advise you that, subject to the execution of
mutually acceptable documentation, completion of due diligence and satisfaction
of the conditions referred to in the proposal letter to be submitted to the
Special Committee of the Company's Board of Directors substantially in the form
of the draft attached hereto as Annex A (the "Proposal Letter"), Lehman is
prepared to proceed as your equity partner in connection with such acquisition
on the basis set forth in the attached "Term Sheet".
By countersigning below, each Management Group Investor
hereby agrees that, subject to the execution of mutually acceptable
documentation and satisfaction of the conditions referred to in the Proposal
Letter and the Term Sheet, (i) he/she is prepared to proceed as an equity
partner in connection with such acquisition, (ii) he/she will purchase shares of
common stock of Acquisition Co., as described and on the terms set forth in the
attached "Term Sheet", and (iii) he/she will not sell, convey, transfer or
otherwise dispose of any shares of common stock or options to purchase shares of
common stock of the Company currently held by him/her without the prior consent
of Lehman during the period (the "Stand Off Period") from the date hereof until
the earliest to occur of (a) the date Lehman shall have notified him/her that it
has determined not to proceed with the proposed acquisition of the Company; or
(b) unless a definitive agreement (the "Definitive Agreement") has previously
been executed by the Company, February 29, 2000; or (c) the date of termination
of the Definitive Agreement.
Each Management Group Investor further agrees that during
the Stand Off Period he/she will work exclusively with Lehman with respect to
the proposed acquisition of the Company and that unless and until Lehman
notifies such Management Group Investor that it has determined not to proceed
with the proposed acquisition of the Company, neither such Management Group
Investor nor his/her advisors or representatives will (i)
MORTGAGE INVESTCO LLC.
3 WORLD FINANCIAL CENTER, 9TH FLOOR, NEW YORK, NY 10285
TELEPHONE (212) 526-7406 FACSIMILE (212) 526-1607
<PAGE>
solicit or encourage any third party with respect to any such acquisition, (ii )
enter into any discussions or negotiations related to such acquisition, or (iii)
provide any information to any third party with respect to an acquisition unless
and to the extent with respect to clauses (ii) and (iii) such individuals are
directed by the Board of Directors of the Company to do so, in order to permit
the Board to comply with its fiduciary duties under applicable law as advised by
counsel.
This letter is solely for the benefit of the signatories
hereto and no other person shall obtain any rights hereunder or be entitled to
rely or claim reliance upon the terms and conditions hereof or in any documents
delivered pursuant hereto. This letter may not be assigned by any of the
signatories hereto and neither party may transfer any of its rights hereunder
without the prior written consent of the other party.
This letter constitutes a binding agreement in principle of
the signatories hereto and is intended to create a legally binding obligation on
the part of the signatories hereto; provided, however, that if "mutually
acceptable documentation," as referred to in the first and second paragraphs of
this letter cannot be agreed upon for any reason by the end of the Stand Off
Period, neither Lehman nor any Management Group Investor shall be obligated to
proceed with the transaction. This letter is governed by and shall be construed
in accordance with the law of the State of New York applicable to contracts made
and performed in that State.
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<PAGE>
This document may be executed in one or more counterparts,
each of which shall be considered an original, but all of which taken together
shall constitute one and the same document.
Very truly yours,
MORTGAGE INVESTCO LLC
By: /s/ Theodore P. Janulis
---------------------------------
Name: Theodore P. Janulis
Title: Managing Director
Accepted and agreed to as of the date first written above by:
/s/ Kelly W. Monahan
- -------------------------
Kelly W. Monahan
/s/ Peter R. Evans
- -------------------------
Peter R. Evans
/s/ Al Lapena
- -------------------------
Al Lapena
/s/ Gary Vander-Haeghen
- -------------------------
Gary Vander-Haeghen
/s/ Marles Crow
- -------------------------
Marles Crow
/s/ Jamie Langford
- -------------------------
Jamie Langford
3
<PAGE>
Annex A
[Draft Proposal Letter]
DRAFT 01/24/2000
PROJECT BAGPIPE
PROPOSED TERMS OF ACQUISITION
This summary of terms is prepared by Lehman Brothers Holdings Inc. ("Lehman
Brothers"). The terms and conditions are preliminary and are subject to change.
They are intended for discussion purposes only, do not represent a commitment or
agreement by Lehman Brothers or any other person and do not give rise to any
rights, liabilities or obligations on the part of Lehman Brothers or any other
person. Further, this is not intended to define or describe all of the terms and
conditions of the possible transaction described herein. In particular, it is
recognized that future due diligence investigations and discussions may bring to
light new facts and questions that would call for changes in the transaction
(including the structure thereof) or the abandonment of discussions and the
possible transaction. Where discrepancies between this Summary and any
definitive documents exist, the definitive documentation shall govern. [ ]
indicates matters to be finally determined after due diligence and further
discussions. This summary is intended to provide a basis for discussions with
management concerning the feasibility of formulating a bid for the Target
identified below and does not constitute a bid for the Target or an arrangement
or agreement to make a bid with management. Each party acknowledges that certain
information provided in connection with the possible transaction (including this
term sheet, other information about the possible transaction or Lehman Brothers'
business in general and financial and other information provided) is
confidential. Each party agrees that it will not disclose such information to
any other party except as required for the completion or funding of the
transaction or as required by law, regulatory requirements or court order or
discovery procedures.
Target: Bagpipe Mortgage Company ("Bagpipe").
Acquirer: Acquisition Company.
Acquisition Price: $9.50 per outstanding common share, on a
fully diluted basis.
Acquisition Company: An entity to be established by Lehman
Brothers for the purpose of acquiring
Bagpipe. Capitalization of Acquisition
Company will consist of (i) $25,500,000 of
acquisition debt from Lehman Brothers, (ii)
up to $17,575,000 (in aggregate) of
amortizing term debt and preferred stock
from Lehman Brothers (the preferred stock
component of this amount will represent up
to $6,000,000), (iii) contribution by the
retiring CEO ("Retiring CEO") of his Bagpipe
common stock and stock options, representing
an aggregate value of $2,500,000 and (iv)
contribution by the retained management
group ("Management") of their Bagpipe common
stock and stock options, representing an
aggregate value of $2,375,000.
Lehman's preferred stock will be perpetual,
bear an annual cash dividend yield (which
will be cumulative) of 8%, be paid annually,
and will be convertible at any time after
two years (in whole or in part) into 25% of
the fully diluted common stock of New
Bagpipe upon full conversion of the
preferred stock. (See also Conversion of
Lehman Preferred Stock and Exercise of
Warrants below).
<PAGE>
It is intended that the merger of
Acquisition Company with and into Bagpipe
(as described in Acquisition Structure
below) shall be structured so as to be
non-taxable to the shareholders of
Acquisition Company.
The term debt will include the following
features:
o Seven (7) year final maturity with
quarterly principal and interest
payments in arrears.
o A minimum amortization schedule
which will fully amortize the loan
over its term. Additionally, all
cash of New Bagpipe in excess of
five percent (5%) of its current
monthly sub-prime loan origination
volume (after giving effect to any
scheduled principal and interest
payments on the term debt or
working capital line or any
payments on account of preferred
stock which must be paid during
such calendar quarter and any
reserve related to the scheduled
redemption of preferred stock) will
be used to accelerate the
amortization of the term debt. For
purposes of this provision, cash
shall be the amount calculated as
of five (5) business days prior to
each quarterly payment date, and
shall mean all cash, cash
equivalents and marketable
securities (other than mortgage
loans), plus accounts receivable,
plus unutilized, current available
advance capacity under then
existing warehouse lending
facilities minus accounts payable
and minus accrued liabilities.
o Normal and customary financial
covenants will be negotiated and
included in the term loan
documents.
o No dividends (other than those
related to the preferred stock
contemplated herein) will be
allowed while any of the amortizing
term debt is outstanding.
o The interest rate on the amortizing
term debt will be 30-day LIBOR plus
4%. LIBOR shall be reset on the
first business day of each month.
o Detachable ten year maturity
warrants which will be exercisable
by Lehman Brothers after two years
(in whole or in part and for a
nominal exercise price), into the
number of New Bagpipe common shares
sufficient to produce for Lehman
Brothers a 50% ownership of the
aggregate post-conversion New
Bagpipe common shares on a fully
diluted basis. (See also Conversion
of Lehman Preferred Stock and
Exercise of Warrants below).
2
<PAGE>
Management shall be required to contribute
no less than a percentage of his/her current
Bagpipe common share and stock option
holdings as more fully described in
Attachment B hereto. All "in the money"
stock options held by employees or directors
of Bagpipe or other parties, if any, will be
exercised so that such persons receive
shares in Bagpipe which shall then be
redeemed for cash by Bagpipe or, in the case
of certain members of Management, exchanged
for shares of Acquisition Company. All "out
of the money" stock options shall be
cancelled.
Management will receive 100% of Acquisition
Company's common shares in exchange for
their Bagpipe common stock and "in the
money" options. No party other than
Management shall be permitted to exchange
their Bagpipe common stock and/or options
for stock in Acquisition Company.
The retiring CEO will receive $2,500,000 of
Acquisition Company non-voting preferred
stock.
Notwithstanding the above, in the event the
Acquisition Price is adjusted to be higher
or lower than $9.50, the aggregate value of
Management's contribution of $2,375,000 of
Bagpipe common stock and stock options shall
also be adjusted up or down on the same
percentage basis.
Conversion of Lehman The conversion of Lehman's preferred stock
Preferred Stock and and exercise of its Warrants (if occurring,
Exercise of Warrants: and whether simultaneously or at different
times) shall result in Lehman's ownership of
75% of the common stock of New Bagpipe on a
fully diluted basis. The Lehman Preferred
Stock and Warrants shall be dilutable
pro-rata in the event the BOD elects to
raise equity or issue options, warrants or
like equity instruments following the
closing of the transaction contemplated
herein.
Acquisition Structure: The acquisition of Bagpipe will be effected
either (1) through a reverse merger of the
Acquisition Company with and into Bagpipe,
with Bagpipe being the surviving entity of
the merger (such surviving entity sometimes
referred to herein as "New Bagpipe") or (2)
through a tender offer by Acquisition
Company for at least 90% of the common stock
of Bagpipe, followed by a squeeze out merger
with and into Bagpipe, with Bagpipe as the
surviving entity. In the merger, all
outstanding Bagpipe common shares not
exchanged for Acquisition Company common or
preferred shares will be redeemed for cash.
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All "in-the-money" stock options must be
exercised and the resulting stock in Bagpipe
will then be redeemed for cash or, in the
case of Management, may be exchanged for
shares in Acquisition Company. All "out of
the money" stock options will be cancelled.
The Bagpipe common shares held by
Acquisition Company will then be cancelled.
The outstanding common shares of Acquisition
Company (held 100% by Management) will be
converted into 100% of the outstanding
common shares of New Bagpipe. The retiring
CEO's non-voting preferred shares in
Acquisition Company will be converted to New
Bagpipe non-voting preferred shares. Lehman
Brothers' amortizing term debt will be
assumed by New Bagpipe.
New Bagpipe will immediately pay to Lehman
Brothers the full balance of the acquisition
debt (plus accrued interest at 30 day LIBOR
plus 2%) using available cash.
In addition, following the completion of the
transaction, the parties will investigate
the advantages of converting New Bagpipe
into a limited liability company or other
tax pass-through entity.
New Bagpipe Non-Voting,
Non-Convertible,
Redeemable Preferred Shares: The non-voting, non-convertible, redeemable
preferred shares held by the Retiring CEO
will bear a cumulative cash dividend yield,
payable annually. The cash dividend yield
will be equal to 8%. The non-voting,
non-convertible, preferred shares shall be
redeemed at par (plus accrued dividends) by
New Bagpipe, unless otherwise agreed to by
the Retiring CEO and New Bagpipe, pursuant
to the following principal redemption
schedule, or sooner at the option of New
Bagpipe:
o $833,000 following the first
anniversary of the Closing Date;
o $833,000 following the second
anniversary of the Closing Date;
and
o $834,000 following the third
anniversary of the Closing Date.
Dividends and principal redemption of the
preferred stock is subordinate in right to
interest and the minimum principal
amortization requirement of the amortizing
term debt described herein.
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Each such redemption shall occur within 90
days following the related anniversary of
the Closing Date.
Employment Contracts: Management will enter into employment and
non-competition and non-solicitation
contracts with New Bagpipe as described in
Attachment B hereto.
The Retiring CEO will enter into a one year
consulting contract with New Bagpipe for
$100,000. The Retiring CEO will be required
to spend 40 business hours per month on New
Bagpipe's premises during the first three
months of the term of the consulting
agreement. Thereafter, the Retiring CEO will
spend up to 40 business hours per month on
New Bagpipe business matters as directed by
the CEO, BOD or Executive Committee of New
Bagpipe. The Retiring CEO will also be
prohibited from competition and solicitation
of employees for a period of three years.
The Retiring CEO's consulting,
non-solicitation and non-competition
agreement(s) shall be subject to Lehman
approval.
Purchase of Management's
New Bagpipe Common Shares: New Bagpipe Management will have the right
to "put" 50% of their common stock received
at closing to Lehman based on the fair
market value of New Bagpipe at the end of
the third year and 100% (all or none) of
their remaining stock at the end of the
seventh year. Management's "put" shall be
exercisable at any time during an agreed
upon 30-day period following the end of each
the third year and seventh year.
Lehman would also have the right to "call"
up to 50% of Management's stock in New
Bagpipe at any time after 42 months and up
to 100% of Management's remaining stock
after 90 months. The purchase price would be
based on the fair market value of New
Bagpipe at the time of the "call", subject
to a minimum price equal to the pro-rata
share of Management's cumulative basis in
the stock plus a non-compounded return on
such amount equal to 10% per annum. (For
purposes of this calculation, Management's
basis shall equal their contribution amount
of Bagpipe common stock and stock options of
$2,375,000, as described in Acquisition
Company above. Assuming exercise of the
"call" by Lehman for 50% of Management's
interest at 42 months, the minimum purchase
price shall be ($2,375,000 x 50%) x (1 +
(10% x 3.5 years) = $1,603,125).
Additionally, in the event within six months
of the date Lehman exercises its "call"
option to purchase Management's stock, as
described in this paragraph, (i) Lehman
sells 10% or more of its New Bagpipe stock
to an entity other than an affiliate of
Lehman, or (ii) New Bagpipe completes and
IPO, then the purchase price paid by Lehman
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for the stock it purchased from Management
shall be adjusted to reflect the valuation
of New Bagpipe based on such sale or IPO
(adjustment shall occur only in the event
such valuation is higher than the valuation
related to the exercise of the "call" and
after taking into account any additional
capital contributed to New Bagpipe, if any,
during the interim period).
If the stockholders and Lehman cannot agree
to the fair market valuation of New Bagpipe,
each shall appoint a nationally recognized
independent appraiser with expertise in New
Bagpipe's business (or as otherwise agreed
to by the parties) to determine the value of
New Bagpipe. If the valuation of the lower
appraisal is at least 90% of the valuation
of the higher of the appraisals, then the
midpoint valuation will be used. If not, the
two appraisers shall select a third who
shall then pick the valuation determined by
one of the two appraisers as the fair market
value of New Bagpipe. Each appraisal
submitted shall be based on a "going
concern" valuation of New Bagpipe (versus a
liquidation or asset valuation).
Additionally, any special arrangements with
Lehman (or affiliates of Lehman) which are
not reflective of then current market
standards, practices or pricing for
arrangements between independent companies,
shall be identified and the appraisals shall
assume such special considerations do not
exist or are modified to reflect market
terms. The appraisals shall apply no premium
or discount to the valuation of New Bagpipe
due to Lehman's ownership position and/or
ownership rights in New Bagpipe. Any
non-cash charge incurred by New Bagpipe due
to the exercise of the Warrants shall be
excluded from the determination of the value
of New Bagpipe as contemplated herein.
The allocation of stock eligible for sale by
Management pursuant to a "put" or "call"
shall first be available, on a pro rata
basis, to holders based on each holder's
relative basis in their shares. Any
remaining allotment shall then be allocated,
on a pro rata basis, to holders based on
their percentage ownership.
Board of Directors: A total of 4 members comprised of 2 Lehman
Brothers' appointees and 2 Management
appointees. In the event of a deadlock
between the Lehman designees and the
Management designees on a major decision (as
described below), the then existing budget
and business plan will continue in effect
until such deadlock is resolved. Upon the
occurrence of a deadlock, the parties shall
negotiate in good faith for an agreed upon
minimum period of time, employing their
respective reasonable efforts to resolve
such deadlock. The BOD shall agree to
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reconvene to address any deadlock in person
prior to the end of such period of
negotiation.
If prior to the end of such period of
negotiation the parties are unable to
resolve the deadlock of a major decision as
described in (i), (iii), (iv), (v), (vi) or
(xiv) below, then the parties hereby agree
to pursue a mediation of such deadlock,
utilizing a mediator with experience in
dealing with financial services companies.
The parties also agree that such mediation
shall be completed on an expedited basis,
but in no event take more than 60 days. In
the event mediation is unsuccessful in
resolving such deadlock, then such deadlock
may be resolved through a buy/sell
mechanism. A buy/sell must be initiated by
either party within 30 days of the
completion of mediation. The party effecting
the buy/sell mechanism must provide notice
to the other party of the buy-sell price,
permitting 30 days to respond to the
buy-sell request, and an additional 60 days
(or such other amount of time as is
reasonably necessary to obtain any required
state or other licenses to effect such
transaction) to arrange and complete the
buy-sell closing.
Upon acquisition of a majority of the New
Bagpipe shares for any reason, Lehman
Brothers will have the right, but not the
obligation, to appoint a majority of the
members of the Board of Directors.
Management shall be responsible for the
operation of New Bagpipe (including the
hiring and firing of personnel) consistent
with the provisions of the New Bagpipe
budget most recently approved by the BOD.The
BOD shall have the right to make certain
major decisions affecting New Bagpipe (or
upon the appointment of an Executive
Committee, have the right to have the
Executive Committee make certain decisions
on its behalf) as described below.
Major decisions include, but are not limited
to:
(i)Amending New Bagpipe's charter,
shareholder's agreement or other similar
agreement, or changing the purpose of New
Bagpipe;
(ii) Any indebtedness to any single
counterparty (including its affiliates) in
excess of $500,000 or prepayment of
indebtedness in excess of $500,000, other
than the indebtedness contemplated herein;
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(iii) Issuing additional equity or options;
(iv) Redeeming or otherwise purchasing the
equity of any holder other than as
contemplated herein;
(v) Any mergers or acquisitions;
(vi) The business plan, including the annual
and quarterly budgets;
(vii) Amending the existing bonus/incentive
plan guidelines or establishing new
bonus/incentive plans;
(viii) Settling claims of New Bagpipe in
excess of $100,000;
(ix) New loan product offerings or the
termination of existing loan product
offerings;
(x) Entering into any binding option,
underwriting agreement or contract to
dispose of assets, including the sale or
securitization of loans, in excess of
$10,000,000 during any month;
(xi) Establishing or using reserves other
than pursuant to an approved budget;
(xii) Hiring of any employees other than
Account Executives, with a total
compensation package reasonably anticipated
to be in excess of $200,000 per year
including salary, bonus, commissions or
other taxable benefit, or firing of any
member of Management or any employee
(including Account Executives) with total
annual compensation in excess of $200,000;
(xiii) Hiring of any Account Executive with
a compensation package (including salary,
bonus, commissions or other taxable benefit)
that is either (i) materially different from
the standard compensation package provided
by New Bagpipe (and approved by the BOD) to
its Account Executives, or (ii) reasonably
anticipated to be in excess of $350,000 per
year; and
(xiv) Entering into any guarantee or
recourse agreement.
Working Capital: Lehman Brothers will provide a three year,
$5,000,000 working capital line of credit
(with an interest rate of 30 day LIBOR plus
6%) to be utilized for general corporate
purposes (other than repaying other
indebtedness) as forecasted in New Bagpipe's
budget approved by the BOD and Lehman.
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Repayment of working capital advances shall
be prioritized over the acceleration of the
term debt. The working capital line shall
include appropriate financial covenants.
Underwriting Guidelines: New Bagpipe will originate loan product in
accordance with underwriting guidelines
approved by the Board of Directors, which
initially are expected to be substantially
similar to those now used. Going forward,
any material modifications to the
underwriting guidelines for existing loan
product offerings shall be determined by
Management, subject to subsequent review by
the Executive Committee. Any new loan
product offerings not previously committed
for sale to Lehman shall require the
approval of the Executive Committee.
However, the parties hereto acknowledge that
New Bagpipe shall, from time to time, create
new loan programs with the intent to
originate such loans for sale to third party
investors.
Loan Servicing: All loans sold by New Bagpipe pursuant to
the Flow Purchase Commitment are expected to
be sold on a servicing released basis. Loans
originated and not yet sold pursuant to the
Flow Purchase Commitment will be serviced on
an interim basis by a servicer designated by
Lehman Brothers in order to reduce servicing
transfer and boarding costs and provide
access to Lehman Brothers level servicing
pricing for New Bagpipe loans and related
securitizations. Other loans will be
serviced by a servicer selected by
management and approved by the Board of
Directors.
Stock Options: Management compensation and incentives are
expected to be achieved principally through
the base salaries and performance- based
bonus pool described above. No stock option
plans are anticipated until such time, if
any, as New Bagpipe completes an IPO.
Warehouse Lines: Lehman Brothers will initially establish
with New Bagpipe a $150,000,000 warehouse
line to finance the origination of prime and
subprime mortgage loans. The parties intend
that the maximum amount available under the
warehouse line will be increased from time
to time, as appropriate and in the sole
discretion of Lehman as lender pursuant
thereto, as New Bagpipe's origination volume
increases. The term of the warehouse line
will be three years. The advance rate shall
be 100% of par for "current" loans (less
than 31 days past due). The facility shall
also include a $15,000,000 sub-limit to
finance delinquent or defaulted loans
(including bankruptcies) at 90% of fair
market value, and a $50,000,000 sub-limit to
finance "wet" loans. Pricing shall be at
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<PAGE>
current market rates or as otherwise agreed
to by the parties. The warehouse line shall
include appropriate financial covenants.
It is anticipated that New Bagpipe also will
maintain one or more third party warehouse
lines. Each warehouse line of New Bagpipe
shall be entitled to a first priority
security interest in the mortgage loans
financed therein and shall be senior in
priority to the term debt and working
capital line of credit provided by Lehman
Brothers.
Lehman Advisory
Agreement: In the event New Bagpipe elects to engage an
outside party for capital markets
underwritings or placements, financial
advisory or any other services which are
provided by Lehman Brothers, including
services in connection with the origination,
financing, sale, disposition and
securitization of New Bagpipe's loan
products, Lehman Brothers shall be offered
the right of first refusal to provide such
services on terms and at the fees customary
in the market at such time for firms
comparable to Lehman Brothers.
Notwithstanding the preceding sentence, New
Bagpipe shall not engage an entity other
than Lehman at a price or for a fee equal to
or greater than that offered to or by
Lehman.
Flow Purchase Commitment: New Bagpipe will sell subprime loans to
Lehman Brothers each month at agreed upon
market prices which will be adjusted
periodically pursuant to a flow purchase
agreement between the parties. Lehman
Brothers will be offered a first look and
right of first refusal on all loans
originated by New Bagpipe (to be exercised
within 15 days of first look), other than
specified types of loans identified by
Lehman Brothers from time to time, which may
be offered to other parties.
Loan Origination Procedure: After closing, it is contemplated that up to
100% of the subprime mortgage loans sourced
by New Bagpipe will be closed directly
through a Lehman Brothers affiliate, herein
referred to as Bagpipe Funding (see
Attachment A). In order to effect the
creation of Bagpipe Funding and facilitate
its role as originator of certain subprime
loans sourced by New Bagpipe, certain
employees of New Bagpipe shall be required
to become employees of Bagpipe Funding. The
compensation and benefits of Bagpipe Funding
employees shall be comparable to those
provided to like employees of New Bagpipe.
Additionally, certain members of Bagpipe
management shall become dual officers of
Bagpipe and Bagpipe Funding. Bagpipe Funding
will pay New Bagpipe certain fees for
sourcing the mortgage loans closed by
Bagpipe Funding. It is intended that such
fees shall offset the costs incurred by New
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Bagpipe in sourcing such mortage loans.
Bagpipe Funding will maintain its own
warehouse funding line to fund the mortgage
loans it closes. Any economic benefit or
cost of Bagpipe Funding that would otherwise
have been realized by New Bagpipe if not for
such structure (including any net income
amounts or any value attributable to the
operations or infrastructure of Bagpipe
Funding) shall be incorporated into or
consolidated with New Bagpipe's reported
results from operations utilized for the
valuation purposes contemplated in Purchase
of Management's New Bagpipe Common Shares
above.
Transaction Expenses: To be paid by New Bagpipe, and estimated as
follows:
o $250,000 - Fairness Opinion for
Bagpipe BOD;
o $100,000 - Legal fees of Bagpipe
BOD counsel;
o $1,000,000 - Legal fees of
Lehman/New Bagpipe/Management
counsel;
o $650,000 - Lehman M&A advisory fee;
o $350,000 - Acquisition Debt
commitment fee;
o $150,000 - Accountants fees; and
o $50,000 - Miscellaneous fees.
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EXHIBIT 3
VOTING AGREEMENT
----------------
VOTING AGREEMENT, dated as of February __, 2000 (this "AGREEMENT"),
by and among BNCM Acquisition Co., a Delaware corporation ("MERGER SUB") and
[NAME OF EXECUTIVE] (the "STOCKHOLDER").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Merger Sub and BNC Mortgage, Inc., a
Delaware corporation (the "COMPANY"), are entering into an Agreement and Plan of
Merger (as such agreement may hereafter be amended from time to time, the
"MERGER AGREEMENT"; capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement) pursuant to which
Merger Sub will be merged with and into the Company, with the Company as the
Surviving Corporation (the "MERGER");
WHEREAS, the Stockholder owns, beneficially and of record, [______]
shares (the "SHARES") of Common Stock of the Company; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Merger Sub has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement; and further the
Stockholder has agreed to enter into this Agreement strictly in his capacity as
a beneficial owner of the Shares and not in his capacity as a
[director][officer] of the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Provisions Concerning the Shares. (a) The Stockholder hereby
agrees that during the period commencing on the date hereof and continuing until
this provision terminates pursuant to Section 5 hereof, at any meeting of the
holders of shares of Common Stock of the Company, however called, or in
connection with any written consent of the holders of shares of Common Stock of
the Company, the Stockholder shall vote, (or cause to be voted) the Shares held
of record or Beneficially Owned (as defined below) by the Stockholder, whether
heretofore owned or hereafter acquired, in favor of the Merger and the adoption
of the Merger Agreement and any actions required in furtherance thereof and
hereof.
(b) The Stockholder shall not enter into any agreement or
understanding with any Person (as defined below) the effect of which would be
inconsistent or violative of the provisions of this Agreement.
(c) For purposes of this Agreement:
<PAGE>
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing; without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act; and
"MANAGEMENT GROUP MEMBERS" shall mean Kelly W. Monahan, Peter R.
Evans, Al Lapena, Gary Vander-Haeghen, Marles Crow and Jamie Langford.
"PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(d) In the event of a stock dividend or distribution, or any change
in the Common Stock of the Company by reason of any stock dividend, stock split,
recapitalization, reclassification, combination, exchange of shares, merger or
the like, the term "SHARES" as used in this Agreement shall be deemed to refer
to and include the Shares as well as all such stock dividends and distributions
and any shares or other securities into which or for which any or all of the
Shares may be converted, changed or exchanged.
2. Representations and Warranties. As of the date hereof, the
Stockholder hereby represents and warrants to Merger Sub as follows:
(a) Ownership of Shares. The Stockholder is the record and Beneficial
Owner of all of the Shares. On the date hereof, the Shares constitute all of the
shares of Common Stock of the Company owned of record by the Stockholder and
except for shares owned by any of the other Management Group Members that are
deemed to be Beneficially Owned by the Stockholder as a result of the Management
Group Members constituting a "group" within the meaning of Section 13(d)(3) of
the Exchange Act, the Shares constitute all of the shares of Common Stock of the
Company Beneficially Owned by the Stockholder. The Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set forth
in Section 1 hereof, shared power of disposition and sole power to agree to all
of the matters set forth in this Agreement, in each case with respect to all of
the Shares, with no limitations, qualifications or restrictions on such rights
(subject to applicable securities laws).
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. This Agreement has been duly and validly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding agreement of
the Stockholder, enforceable against the Stockholder in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to
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enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity). There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which the Stockholder is settlor or trustee or any other person whose
consent is required for the execution and delivery of this Agreement or the
consummation by the Stockholder of the transactions contemplated hereby.
(c) No Conflicts. (i) Except for filings under the HSR Act, if any,
and filings under the Exchange Act, no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by the Stockholder
and the consummation by the Stockholder of the transactions contemplated hereby
and (ii) none of the execution and delivery of this Agreement by the
Stockholder, the consummation by the Stockholder of the transactions
contemplated hereby or compliance by the Stockholder with any of the provisions
hereof will (A) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any declaration of trust,
note, bond, mortgage, indenture, security or pledge agreement, voting agreement,
stockholders' agreement or voting trust, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the Stockholder or any of
the Stockholder's properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of the Stockholder's properties or assets.
(e) Reliance by Merger Sub. The Stockholder understands and
acknowledges that Merger Sub is entering into the Merger Agreement in reliance
upon execution and delivery of this Agreement by the Stockholder.
(f) Sophistication. The Stockholder acknowledges being an informed
and sophisticated investor and, together with the Stockholder's advisors, has
undertaken such investigation as they have deemed necessary, including the
review of the Merger Agreement and this Agreement, to enable the Stockholder to
make an informed and intelligent decision with respect to the Merger Agreement
and this Agreement and the transactions contemplated thereby and hereby.
(g) No Broker. No broker, investment banker, financial adviser or
other Person is entitled to any commission, broker's fee, finder's fee,
adviser's fee or similar fee in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Stockholder.
3. No Solicitation. (a) From and after the date hereof and continuing
until this provision terminates pursuant to Section 5 hereof, the Stockholder
shall not directly or indirectly, initiate, solicit or encourage (including by
way of furnishing non-public information or assistance), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to,
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any Takeover Proposal with respect to the Company or enter into or maintain or
continue discussions or negotiate with any Person in furtherance of such
inquiries or to obtain such a Takeover Proposal or agree to or endorse any such
Takeover Proposal, and the Stockholder shall promptly notify Merger Sub orally
(in all events within 24 hours) and in writing (as promptly thereafter as
practicable) of the material terms and status of all inquiries and proposals
which the Stockholder or any agent of the Stockholder may receive after the date
hereof relating to any of such matters and, if such inquiry or proposal is in
writing, the Stockholder shall deliver to Merger Sub a copy of such inquiry or
proposal promptly; provided, however, that, notwithstanding any other provision
of this Agreement, the Stockholder may take any action in his capacity as a
director or officer of the Company as the board of directors of the Company
directs him to take in compliance with Section 6.04 of the Merger Agreement or
in order to permit the Board to comply with its fiduciary duties under
applicable law as advised by counsel. The Stockholder will immediately cease and
cause to be terminated any existing activities, discussions or negotiations,
with any parties conducted heretofore with respect to any of the foregoing.
(b) Merger Sub acknowledges that this Agreement is entered into by
the Stockholder in such Stockholder's capacity as a beneficial owner of the
Shares, and that nothing in this Agreement shall in any way restrict or limit
the Stockholder from taking any action in his capacity as a director or officer
of the Company or otherwise fulfilling his fiduciary obligations as a director
or officer of the Company, notwithstanding that any such action would be
inconsistent with or violative of the Stockholder's obligations under this
Agreement if taken in his capacity as a beneficial owner of the Shares.
4. Restriction on Transfer; Proxies; Non-Interference; Stop
Transfers; etc.
(a) The Stockholder shall not, directly or indirectly, during the
period commencing on the date hereof and continuing until this provision
terminates pursuant to Section 5 hereof: (i) except as contemplated by the
Merger Agreement offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or grant or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shares or any interest therein; (ii) except as
contemplated by this Agreement, grant any proxies or powers of attorney, deposit
any Shares into a voting trust or enter into a voting agreement with respect to
any Shares; or (iii) take any action that would make any of the Stockholder's
representations or warranties contained herein untrue or incorrect or have the
effect of preventing or disabling the Stockholder from performing his/her
respective obligations under this Agreement; provided that the foregoing shall
not prevent the Stockholder from pledging any of the Shares to a bank or other
financial institution or to prevent such bank or financial institution from
selling the Shares on foreclosure so long as the Stockholder retains the right
to vote such Shares if the pledge has not been foreclosed upon.
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(b) Without limiting the generality of Section 4(a) above, the
Stockholder agrees with, and covenants to, Merger Sub that the Stockholder shall
not, during the period set forth in Section 4(a), request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing the Shares, unless such transfer is made in
compliance with this Agreement.
5. Termination. Except as otherwise provided herein, the covenants
and agreements contained in Sections 1, 3 and 4 hereof shall terminate (i) in
the event the Merger Agreement is terminated in accordance with the terms
thereof, upon such termination, and (ii) in the event the Merger is consummated,
upon the Effective Time. Notwithstanding anything to the contrary herein no
termination of this Agreement shall relieve any party of liability for a breach
hereof prior to termination.
6. Further Assurances. From time to time, at the other party's
request and without further consideration, the Stockholder and Merger Sub shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
7. Entire Agreement. This Agreement, the Merger Agreement and that
certain letter agreement dated January 24, 2000, among Mortgage Investco LLC,
the Stockholder and the other Management Group Investors named therein and the
related expense reimbursement letter agreement among the same parties dated
January 24, 2000, constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, between the parties with respect to
the subject matter hereof.
8. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
Person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise, including, without limitation,
the Stockholder's heirs, executors, guardians, administrators, trustees or
successors. Notwithstanding any transfer of Shares, the transferor shall remain
liable for the performance of all obligations of the transferor under this
Agreement.
9. Assignment. This Agreement shall not be assigned by any party
hereto, by operation of law or otherwise, without the prior written consent of
the other party, and any purported assignment without such consent shall be null
and void; provided, however, that Merger Sub may assign, in its sole discretion,
its rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Merger Sub without the consent of the Stockholder. All covenants
and agreements contained in this Agreement by or on behalf of the parties hereto
shall be binding on and inure to the benefit of the respective successors, heirs
and permitted assigns of the parties hereto.
10. Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated except
5
<PAGE>
upon the execution and delivery of a written agreement executed by each of the
parties hereto.
11. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses: (i) if to Merger Sub, to its
address set forth in the Merger Agreement; and (ii) if to the Stockholder, to
the address set forth under the Stockholder's signature on the signature page
hereto; or, in each case, to such other address as the Person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.
12. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
13. Specific Performance. The Stockholder recognizes and acknowledges
that a breach by it of any covenants or agreements contained in this Agreement
will cause Merger Sub to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore the Stockholder agrees that in
the event of any such breach Merger Sub party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which Merger Sub may be
entitled, at law or in equity.
14. Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
15. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
6
<PAGE>
16. No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any Person who or which
is not a party hereto other than Mortgage Investco LLC who shall be a third
party beneficiary of the rights of Merger Sub hereunder.
17. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
18. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under this
Agreement and any document executed in connection herewith.
19. Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
[signature page follows]
7
<PAGE>
IN WITNESS WHEREOF, Merger Sub and the Stockholder have executed and
delivered this Agreement as of the day and year first above written.
BNCM ACQUISITION CO.
By:
---------------------------------------
Name:
Title:
--------------------------
[Name of Executive]
[Address]
8
EXHIBIT 4
MANAGEMENT STOCK PURCHASE AGREEMENT
-----------------------------------
THIS AGREEMENT is made as of February 3, 2000 (the "AGREEMENT"), by
and among BNCM ACQUISITION CO., a Delaware corporation (the "COMPANY"), and
Kelly W. Monahan, Peter R. Evans, Al Lapena, Gary Vander-Haeghen, Marles M. Crow
and Jamie Langford (collectively, the "PURCHASERS" and, each individually, a
"PURCHASER").
W I T N E S S E T H :
WHEREAS, on the terms and subject to the conditions set forth herein,
each Purchaser desires to subscribe for and purchase, and the Company desires to
sell to each Purchaser, the number of shares of common stock, par value $0.01
per share, of the Company (the "SHARES") set forth in Column A of Schedule I
hereto opposite the name of such Purchaser in exchange for (i) the transfer,
assignment and conveyance of the number of shares of common stock, par value
$0.001 per share, of BNC Mortgage, Inc. ("CONTRIBUTED SHARES") set forth in
Column B of Schedule I hereto opposite the name of such Purchaser (herein
referred to, with respect to any particular Purchaser, as such "PURCHASER'S
CONTRIBUTED SHARES"); (ii) at Purchaser's election, an amount in cash equal to
$10.00 in lieu of each Contributed Share, or (iii) at Purchaser's election, in a
combination of Contributed Shares and cash.
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representation, warranties, covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Purchase and Sale of the Shares. (a) At the Closing referred to in
Section 2 below, subject to the terms and conditions set forth herein, the
Company shall sell to each Purchaser, and each Purchaser shall purchase from the
Company, the number of Shares set forth opposite the name of such Purchaser on
Schedule I in exchange for the number of Purchaser's Contributed Shares set
forth opposite the name of such Purchaser on Schedule I (and/or cash in lieu of
Contributed Shares as permitted by the first recital of this Agreement).
(b) In the event any Purchaser, other than Kelly W. Monahan, fails to
purchase the Shares in accordance with Section 1(a) hereof (such Shares
hereinafter referred to as the "DEFAULTED SHARES"), the remaining Purchasers
may, at his or her option, subscribe for and purchase some or all of such
Defaulted Shares; provided, however, in the event the aggregate number of
Defaulted Shares is not greater than 12,000 Shares, the remaining Purchasers
shall be required to subscribe for and purchase such Defaulted Shares on a pro
rata basis or as otherwise agreed upon by the remaining Purchasers.
<PAGE>
2. The Closing. (a) The closing (the "CLOSING") of the purchase and
sale of the Shares shall take place at the offices of Weil, Gotshal & Manges
LLP, 767 Fifth Avenue, New York, New York immediately prior to the Closing
contemplated by the Merger Agreement (as defined below) or at such other place
or on such other date as shall be mutually agreeable to the parties hereto.
(b) At the Closing, the Company shall deliver to each Purchaser a
certificate representing the Shares issued to such Purchaser, upon delivery by
such Purchase of his Purchaser's Contributed Shares duly endorsed to the
Company.
3. Conditions of the Purchasers' Obligation at the Closing. The
obligation of the Purchaser to purchase the Shares and to deliver the
Purchaser's Contributed Shares at the Closing is subject to the satisfaction as
of the Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties contained in Section 4 hereof shall be true and correct in all
material respects at and as of the Closing as though then made.
(b) Merger Agreement. Each of the conditions precedent set forth in
Article VII of the Agreement and Plan of Merger, dated as of even date herewith
(the "MERGER AGREEMENT"), between the Company and BNC Mortgage, Inc., a Delaware
corporation ("BNC MORTGAGE"), shall have been satisfied or waived (provided,
such waiver has been approved by the "Stockholders' Representative" (as defined
in the Stockholders' Agreement referred to below) and, upon consummation of the
merger of the Company with and into BNC Mortgage, the Shares shall become shares
of common stock of BNC Mortgage, as the surviving corporation of such merger.
(c) Stockholders' Agreement. The Company, Mortgage Investco LLC
("MORTGAGE INVESTCO") and each Purchaser shall have entered into a stockholders'
agreement (the "STOCKHOLDERS' AGREEMENT") on terms substantially similar to the
form attached as Exhibit A hereto, and the Stockholders' Agreement shall be in
full force and effect as of the Closing.
(d) Proceedings. All corporate and other proceedings taken or
required to be taken in connection with the transactions contemplated hereby to
be consummated at or prior to the Closing and all documents incident thereto
shall be satisfactory in form and substance to the Purchaser.
(e) Employment Agreements. The Employment Agreements entered into
between the Company and each of the Purchasers, dated as of even date herewith,
shall be in full force and effect as of the Closing.
Any condition specified in this Section 3 may be waived and any
agreement contemplated may be amended if consented to by all of the Purchasers;
provided, however, that no such waiver shall be effective against any such
Purchaser
2
<PAGE>
unless it is set forth in a writing executed by such Purchaser; and provided,
further, that, notwithstanding the foregoing, each Purchaser may waive
provisions of Section 3(e) with respect to his/her Employment Agreement without
all Purchasers consenting to such waiver.
4. Representations and Warranties of the Company. The Company
represents and warrants to each Purchaser as follows:
(a) the Company has full corporate power and authority to execute and
deliver this Agreement and all other agreements and instruments contemplated
hereby to which the Company is a party and to perform its obligations hereunder
and thereunder, and this Agreement and all such other agreements and instruments
have been duly authorized, executed and delivered by the Company and, assuming
the due execution and delivery of this Agreement and all such other agreements
and instruments by the other parties hereof and thereof, are valid, binding and
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity);
(b) except as set forth in the Merger Agreement, no consent or
authorization of, filing with or other act by or in respect of any governmental
authority is required to be obtained or made by the Company in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement and all other agreements and instruments contemplated hereby to which
the Company is a party;
(c) the Shares to be issued to each Purchaser pursuant to this
Agreement, when issued and delivered in accordance with the terms hereof and
thereof, will be duly and validly issued and will be fully paid and
nonassessable; and
(d) acceptance of the Purchaser's Contributed Shares (and/or cash in
lieu of Contributed Shares as permitted by the first recital of this Agreement)
from each Purchaser shall constitute confirmation from the Company that all of
the conditions in Section 3 shall have been satisfied in all material respects.
5. Representations and Warranties of the Purchasers. Each Purchaser
hereby represents and warrants, severally and not jointly, to the Company that:
(a) the Agreement and all other agreements and instruments
contemplated hereby to which such Purchaser is a party have been duly executed
and delivered by or on behalf of such Purchaser;
(b) assuming due authorization, execution and delivery of this
Agreement and all other agreements and instruments contemplated hereby to which
such Purchaser is a party by the other parties hereto and thereto, this
Agreement and all such
3
<PAGE>
other agreements and instruments constitute the legal, valid and binding
obligations of such Purchaser, enforceable against such Purchaser in accordance
with their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity);
(c) there is no action, suit, investigation or proceeding of or
before any arbitrator or governmental authority now pending or, to the knowledge
of such Purchaser, threatened against or affecting such Purchaser or against any
of the Purchaser's properties or income that would have a material adverse
effect on, or which questions or challenges, this Agreement or any other
agreement or instrument contemplated hereby to which such Purchaser is a party
or any of the transactions contemplated hereby or thereby;
(d) no consent or authorization of, filing with or other act by or in
respect to any governmental authority is required to be obtained or made by such
Purchaser in connection with the execution, delivery, performance, validity or
enforceability of this Agreement and all other agreements and instruments
contemplated hereby to which such Purchaser is a party;
(e) such Purchaser has full legal capacity to execute and deliver
this Agreement and all other agreements and instruments contemplated hereby to
which such Purchaser is a party and to make, deliver and perform his obligations
hereunder and thereunder;
(f) the execution, delivery and performance of this Agreement and all
other agreements and instruments contemplated hereby to which such Purchaser is
a party by such Purchaser and the fulfillment of and compliance with the
respective terms hereof and thereof by the Purchaser, do and will not (x)
violate any requirements of any material obligation of such Purchaser, (y)
result in or constitute (with or without the giving of notice, lapse of time or
both) any default or event of default under any such material obligation of the
Purchaser, or give rise to a right of termination of, or accelerate the
performance required by, any terms of any such material obligation, or (z)
violate any statute, law, ordinance, rule, regulation or order of any court or
governmental authority or any judgment, order or decree (federal, state, local
or foreign) applicable to such Purchaser, in each of the foregoing events, where
such violation, default, termination or acceleration could have a material
adverse effect on such Purchaser; and
(g) each Purchaser has good and marketable title to such Purchaser's
Contributed Shares, free and clear of all Liens except as set forth in the
Voting Agreement dated as of even date herewith between the Company and such
Purchaser.
6. Investment Representations. (a) Each Purchaser hereby represents
and warrants that such Purchaser is acquiring its respective Shares for
investment purposes only and not with a view to the sale or distribution
thereof.
4
<PAGE>
Each Purchaser hereby represents that (i) at the Closing such Purchaser
is an "accredited investor" as defined in Rule 501(a) under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), (ii) such Purchaser's financial
situation is such that he can afford to bear the economic risk of holding the
Shares for an indefinite period of time and suffer complete loss of his
investment in the Shares; (iii) such Purchaser's knowledge and experience in
financial and business matters are such that he is capable of evaluating the
merits and risks of his investment in the Shares as contemplated by this
Agreement; (iv) such Purchaser understands that the Shares are a speculative
investment that involve a high degree of risk of loss of his investment therein,
that there are substantial restrictions on the transferability of the Shares and
that on the date of the Closing and for an indefinite period thereafter there
will be no public market for the Shares and, accordingly, it may not be possible
to liquidate such Purchaser's investment in the Company or, after the closing of
the transactions contemplated by the Merger Agreement (the "MERGER AGREEMENT
CLOSING"), BNC Mortgage; (v) in making his decision to invest in the Shares
hereunder, such Purchaser has relied upon independent investigations made by
such Purchaser and, to the extent believed by such Purchaser to be appropriate,
such Purchaser's representatives, including such Purchaser's own professional,
tax and other advisors; and (vi) such Purchaser and his representatives have
been given the opportunity to examine all documents and to ask questions of, and
to receive answers from, the Company and their respective representatives
concerning the terms and conditions of the investment in the Shares. Each
Purchaser hereby represents and warrants that his true and correct residence
address is set forth under his signature on the signature page hereto.
(b) Each Purchaser hereby acknowledges that he is fully familiar with
the Company and BNC Mortgage, and that no other representations or warranties,
express or implied, regarding the Company and BNC Mortgage, and their respective
businesses, operations, plans or prospects have been made to it by the Company,
Mortgage Investco or any affiliate of Mortgage Investco, BNC Mortgage or any
other third party.
(c) Each Purchaser acknowledges that he has been advised that (i) the
Shares have not been registered under the Securities Act; (ii) the Shares must
be held indefinitely and he must continue to bear the economic risk of the
investment in the Shares unless they are subsequently registered under the
Securities Act or an exemption from such registration is available; (iii) it is
not anticipated that there will be any public market for the Shares; (iv) Rule
144 promulgated under the Securities Act ("RULE 144") is not currently available
with respect to the sales of any securities of the Company and following the
Merger Agreement Closing will not be available with respect to the sales of any
securities of BNC Mortgage, and neither the Company nor BNC Mortgage has made
any covenant to make such Rule 144 available; (v) if and when the Shares may be
disposed of without registration in reliance on Rule 144, such disposition can
be made only in limited amounts in accordance with the terms and conditions of
such rule; (vi) if the Rule 144 exemption is not available, public offer of sale
without registration will require the availability of an exemption under the
Securities Act; (vii) a restrictive legend or legends in a form to be set forth
in the Stockholders' Agreement shall be placed on the
5
<PAGE>
certificates representing the Shares; and (viii) a notation shall be made in the
appropriate records of the Company or, following the Merger Agreement Closing,
BNC Mortgage, indicating that each of the Shares is subject to restrictions on
transfer and, if the Company or, following the Merger Agreement Closing, BNC
Mortgage, should at some time in the future engage the services of a securities
transfer agent, appropriate stop-transfer instructions will be issued to such
transfer agent with respect to the Shares.
7. Survival of Representations and Warranties. All representations
and warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement, regardless
of any investigation made by each Purchaser or on his behalf.
8. Non-Competition. Mr. Kelly R. Monahan acknowledges and recognizes
the highly competitive nature of the business of BNC Mortgage and its affiliates
as well as his extensive participation in the ownership of the common stock of
BNC Mortgage. Mr. Monahan accordingly agrees that if his employment with the
company is terminated for any reason, then until the Restricted Date (as defined
in the employment agreement between the Company and Mr. Monahan referred to in
Section 3(e)) he will not directly or indirectly engage (as owner, stockholder,
partner or otherwise, except as a passive holder of fewer than 5% of the
outstanding shares or other equity interests (and without any role in management
or as a director officer, partner or similar position) of a company whose shares
or other equity interests are publicly traded), in any business which directly
or indirectly competes with the business of BNC Mortgage or any of its
subsidiaries within the same jurisdictions in which BNC Mortgage or any of its
subsidiaries engages in business at the time of his termination or resignation,
as the case may be.
9. Termination. This Agreement shall automatically terminate in the
event the Merger Agreement is terminated in accordance with the terms thereof.
Notwithstanding anything to the contrary herein, no termination of this
Agreement shall relieve any party of liability for a breach hereof prior to
termination.
10. Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on behalf
of any of the parties hereto shall be binding on and inure to the benefit of the
respective successors and assigns of the parties hereto. It is hereby understood
and agreed that, concurrently with the closing under the Merger Agreement, the
rights and obligations of the Company hereunder shall be assigned by operation
of law to BNC Mortgage.
11. Assignment. The Purchasers may assign their right to purchase the
Shares hereunder to any entity, all of the equity interests of which are owned
by the Purchasers; provided, however, such entity shall become a party to the
Stockholders' Agreement as a "MANAGEMENT STOCKHOLDER"; and provided, further,
such assignment shall not relieve any Purchaser of his/her obligations
hereunder.
6
<PAGE>
12. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
13. Counterparts. This Agreements may be executed in two or more
counterparts, each of which shall be considered an original, but all of which
taken together shall constitute one and the same Agreement.
14. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
15. Governing Law. All questions concerning the construction,
validity and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by the internal laws, and not the conflicts of laws, of
the State of Delaware.
16. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under this
Agreement and any document executed in connection herewith.
17. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered, telecopied
or mailed, certified or registered mail, return receipt requested:
(a) If to any Purchaser, to the
address set forth under such
Purchaser's signature on the
signature page hereto.
(b) If to the Company or, following the Merger Agreement
Closing, to BNC Mortgage:
BNC Mortgage, Inc.
1063 McGaw Avenue
Irvine, CA 92614-5532
Attention: Kelly W. Monahan
Telecopy No.: (949) 260-6085
7
<PAGE>
with a copy to
--------------
Mortgage Investco LLC
c/o Lehman Brothers Inc.
3 World Financial Center
New York, NY 10285
Attention: Michael McCully, Senior Vice President
Karen Manson, Senior Vice President
Telecopy No. (212) 526-0035
Such names and address may be changed by written notice to each person listed
above. All notices are effective upon receipt or upon refusal if properly
delivered.
18. Specific Performance. Each Purchaser recognizes and acknowledges
that a breach by it of any covenants or agreements contained in this Agreement
will cause the Company to sustain damages for which it would not have an
adequate remedy at law for money damages, and therefore each Purchaser agrees
that in the event of any such breach the Company party shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which the Company
may be entitled, at law or in equity.
19. Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
20. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
21. No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any Person who or which
is not a party hereto other than Mortgage Investco, who shall be a third party
beneficiary of the rights of the Company hereunder.
[The remainder of this page has been intentionally left blank.]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first written above.
BNCM ACQUISITION CO.
By: /s/ Kurt Locher
---------------------------
Name: Kurt Locher
Title: President
/s/ Kelly W. Monahan
------------------------------
Kelly W. Monahan
Address: 14 Coffeeberry
Aliso Viejo, CA 92656
/s/ Peter R. Evans
------------------------------
Peter R. Evans
Address: 34 Versailles
Newport Coast, CA 92657
/s/ Al Lapena
------------------------------
Al Lapena
Address: 36 Bearpaw #66C
Irvine, CA 92604
/s/ Gary Vander-Haeghen
------------------------------
Gary Vander-Haeghen
Address: 620-B Jasmine Avenue
Corona del Mar, CA 92625
/s/ Marles M. Crow
------------------------------
Marles M. Crow
Address: 2365 Littleton Circle
Costa Mesa, CA 92626
/s/ Jamie Langford
------------------------------
Jamie Langford
Address: 1317 W. Tonia Lane
Anaheim, CA 92802
9
<PAGE>
SPOUSAL CONSENT
Each of the undersigned hereby acknowledges that he or she has read
the foregoing Management Stock Purchase Agreement, dated as of February 3, 2000
(the "Agreement"), and knows the contents thereof. Each of the undersigned is
aware that pursuant to the Agreement, each Purchaser (as defined in the
Agreement) is exchanging shares of common stock of BNC Mortgage, Inc. (including
any interest that the undersigned may have in such shares (marital or
otherwise), if any, which would be equivalent to a spousal interest by virtue of
the undersigned's relationship with a Purchaser) for shares of common stock of
BNCM Acquisition Co., a Delaware corporation, and the undersigned hereby
consents to such exchange and to be bound by each and every provision of the
Agreement.
/s/ Melissa J. Monahan
------------------------------
Name: Melissa J. Monahan
/s/ Angela D. Evans
------------------------------
Name: Angela D. Evans
/s/ Stephen J. Langford
------------------------------
Name: Stephen J. Langford
/s/ Al Lapena
------------------------------
Name: Al Lapena as Attorney-In-Fact
for Grace L. Lapena
------------------------------
Name:
------------------------------
Name:
10
<PAGE>
SCHEDULE 1
----------
NUMBER OF SHARES OF NUMBER OF PURCHASER'S
PURCHASER COMMON STOCK CONTRIBUTED SHARES
- --------- ------------ ------------------
Kelly W. Monahan 240,000 200,000
Peter R. Evans 9,000 7,500
Al Lapena 18,000 15,000
Gary Vander-Haeghen 18,000 15,000
Marles M. Crow 6,000 5,000
Jamie Langford 9,000 7,500
------- -------
Total 300,000 250,000
11
EXHIBIT 5
EXECUTION COPY
BUCKLEY STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of February 3, 2000 (the
"AGREEMENT"), by and among BNCM ACQUISITION CO., a Delaware corporation (the
"COMPANY"), and Evan R. Buckley ("BUCKLEY") and the Buckley Family Trust (the
"TRUST") (individually, a "PURCHASER" and together with Buckley, the
"PURCHASERS").
W I T N E S S E T H :
WHEREAS, on the terms and subject to the conditions set
forth herein, the Purchaser desires to subscribe for and purchase, and the
Company desires to sell to the Purchaser, the 250 shares of Series A 8%
Cumulative Preferred Stock of the Company, having the terms set forth in the
Certificate of Designation (the "Certificate of Designation") in the form
attached hereto as Exhibit A (the "SHARES") in exchange for the transfer,
assignment and conveyance of 250,000 shares of common stock, par value $0.001
per share, of BNC Mortgage, Inc. ("CONTRIBUTED SHARES").
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representation, warranties, covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Purchase and Sale of the Shares. At the Closing referred
to in Section 2 below, subject to the terms and conditions set forth herein, the
Company shall sell to the Purchasers, and the Purchasers shall purchase from the
Company, 250 Shares in exchange for 250,000 Contributed Shares.
2. The Closing. (a) The closing (the "CLOSING") of the
purchase and sale of the Shares shall take place at the offices of Weil, Gotshal
& Manges LLP, 767 Fifth Avenue, New York, New York immediately prior to the
Closing contemplated by the Merger Agreement (as defined below) or at such other
place or on such other date as shall be mutually agreeable to the parties
hereto.
(b) At the Closing, the Company shall deliver to the
Purchasers a certificate representing the Shares issued to the Purchasers, upon
delivery by the Purchasers of the Contributed Shares duly endorsed to the
Company.
3. Conditions of the Purchasers' Obligation at the Closing.
The obligation of the Purchasers to purchase the Shares and to deliver the
Contributed Shares at the Closing is subject to the satisfaction as of the
Closing of the following conditions:
(a) Representations and Warranties. The representations and
warranties contained in Section 4 hereof shall be true and correct in all
material respects at and as of the Closing as though then made.
NY2:\871453\08\$_F108!.DOC\73683.0298
<PAGE>
(b) Merger Agreement. Each of the conditions precedent set
forth in Article VII of the Agreement and Plan of Merger, dated as of February
3, 2000 (the "MERGER AGREEMENT"), between the Company and BNC Mortgage, Inc., a
Delaware corporation ("BNC MORTGAGE") (other than any condition relating to the
performance by the Purchasers under this Agreement), shall have been satisfied
or waived and, upon consummation of the merger of the Company with and into BNC
Mortgage, the Shares shall become shares of Series A 8% Cumulative Preferred
Stock of BNC Mortgage, as the surviving corporation of such merger.
(c) Proceedings. All corporate and other proceedings taken
or required to be taken in connection with the transactions contemplated hereby
to be consummated at or prior to the Closing and all documents incident thereto
shall be satisfactory in form and substance to the Purchasers.
(d) Consulting Agreement. The Company shall have entered
into the Buckley Consulting Agreement (as defined in the Merger Agreement) with
Buckley as required by the Merger Agreement.
Any condition specified in this Section 3 may be waived and
any agreement contemplated may be amended by the Purchasers; provided, however,
that no such waiver shall be effective against the Purchasers unless it is set
forth in a writing executed by the Purchasers.
4. Representations and Warranties of the Company. The
Company represents and warrants to the Purchasers as follows:
(a) the Company has full corporate power and authority to
execute and deliver this Agreement and all other agreements and instruments
contemplated hereby to which the Company is a party and to perform its
obligations hereunder and thereunder, and this Agreement and all such other
agreements and instruments have been duly authorized, executed and delivered by
the Company and, assuming the due execution and delivery of this Agreement and
all other agreements and instruments contemplated hereby to which the Company is
a party by the other parties hereof and thereof, are valid, binding and
enforceable against the Company in accordance with their terms;
(b) except as set forth in the Merger Agreement, no consent
or authorization of, filing with or other act by or in respect of any
governmental authority is required to be obtained or made by the Company in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement and all other agreements and instruments contemplated hereby
to which the Company is a party;
(c) the Shares to be issued to the Purchasers pursuant to
this Agreement, when issued and delivered in accordance with the terms hereof
and thereof, will be duly and validly issued and will be fully paid and
nonassessable; and
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(d) acceptance of the Contributed Shares from the
Purchasers shall constitute confirmation from the Company that all of the
conditions in Section 3 shall have been satisfied in all material respects.
(e) there is no action, suit, investigation or proceeding
of or before any arbitrator or governmental authority now pending or, to the
knowledge of the Company, threatened against or affecting the Company or against
any of the Company's properties or income that would have a material adverse
effect on, or which questions or challenges, this Agreement or any other
agreement or instrument contemplated hereby to which the Company is a party or
any of the transactions contemplated hereby or thereby;
(f) the execution, delivery and performance of this
Agreement and all other agreements and instruments contemplated hereby to which
the Company is a party by the Company and the fulfillment of and compliance with
the respective terms hereof and thereof by the Company, do and will not (x)
violate and requirements of any material obligation of the Company, (y) result
in or constitute (with or without the giving of notice, lapse of time or both)
any default or event of default under any such material obligation of the
Purchaser, or give rise to a right of termination of, or accelerate the
performance required by, any terms of any such material obligation, or (z)
violate any statute, law, ordinance, rule, regulation or order of any court or
governmental authority or any judgment, order or decree (federal, state, local
or foreign) applicable to the Company, in each of the foregoing events, where
such violation, default, termination or acceleration could have a material
adverse effect on the Company.
(g) no agreement or instrument to be entered into by the
Company in connection with the Merger (including any credit or financing
agreement) will prohibit, or permit any third party to prohibit, the declaration
of dividends on the Shares or the redemption of the Shares other than as a
result of a default or event of default thereunder.
(h) The Company will use reasonable efforts to terminate or
transfer prior to the effective date of the Merger, any and all accounts, credit
arrangements, licenses, permits or authorizations using Buckley's name or
personal information. To the extent not terminated or transferred prior to the
effective date of the Merger, the Company will continue such efforts. The
Company hereby covenants and agrees to indemnify Buckley for any and all costs,
expenses and claims incurred by Buckley resulting from any such termination or
transfer or from Buckley's liability under any such arrangement.
5. Representations and Warranties of the Purchasers.
(a) Each Purchaser hereby represents and warrants to the
Company that:
(i) the Agreement and all other agreements and instruments
contemplated hereby to which such Purchaser is a party have been duly executed
and delivered by or on behalf of such Purchaser;
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(ii) assuming due authorization, execution and delivery of
this Agreement and all other agreements and all other agreements and instruments
contemplated hereby to which such Purchaser is a party by the other parties
hereto and thereto, this Agreement and all other agreements and instruments
contemplated hereby to which such Purchaser is a party constitute the legal,
valid and binding obligations of such Purchaser, enforceable against such
Purchaser in accordance with their terms;
(iii) there is no action, suit, investigation or proceeding
of or before any arbitrator or governmental authority now pending or, to the
knowledge of such Purchaser, threatened against or affecting such Purchaser or
against any of the Purchaser's properties or income that would have a material
adverse effect on, or which questions or challenges, this Agreement or any other
agreement or instrument contemplated hereby to which such Purchaser is a party
or any of the transactions contemplated hereby or thereby;
(iv) no consent or authorization of, filing with or other
act by or in respect to any governmental authority is required to be obtained or
made by the Purchaser in connection with the execution, delivery, performance,
validity or enforceability of this Agreement and all other agreements and
instruments contemplated hereby to which such Purchaser is a party;
(v) such Purchaser has full legal capacity to execute and
deliver this Agreement and all other agreements and instruments contemplated
hereby to which such Purchaser is a party and to make, deliver and perform his
obligations hereunder and thereunder; and
(vi) the execution, delivery and performance of this
Agreement and all other agreements and instruments contemplated hereby to which
such Purchaser is a party by such Purchaser and the fulfillment of and
compliance with the respective terms hereof and thereof by the Purchaser, do and
will not (x) violate and requirements of any material obligation of such
Purchaser, (y) result in or constitute (with or without the giving of notice,
lapse of time or both) any default or event of default under any such material
obligation of the Purchaser, or give rise to a right of termination of, or
accelerate the performance required by, any terms of any such material
obligation, or (z) violate any statute, law, ordinance, rule, regulation or
order of any court or governmental authority or any judgment, order or decree
(federal, state, local or foreign) applicable to such Purchaser, in each of the
foregoing events, where such violation, default, termination or acceleration
could have a material adverse effect on such Purchaser.
(vii) each Purchaser has good and marketable title to the
Contributed Shares, free and clear of all liens, claims, charges or encumbrances
of any kind whatsoever.
6. Investment Representations. (a) Each Purchaser hereby
represents and warrants that he or it is acquiring the Shares for investment
purposes only and not with a view to the sale or distribution thereof. Each
Purchaser hereby represents that (i) such Purchaser is an "accredited investor"
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as defined in Rule 501(a) under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), (ii) such Purchaser's financial situation is such that he or
it can afford to bear the economic risk of holding the Shares for an indefinite
period of time and suffer complete loss of his investment in the Shares; (iii)
such Purchaser's knowledge and experience in financial and business matters are
such that he is capable of evaluating the merits and risks of his investment in
the Shares as contemplated by this Agreement; (iv) such Purchaser understands
that the Shares are a speculative investment that involve a high degree of risk
of loss of his or its investment therein, that there are substantial
restrictions on the transferability of the Shares and that on the date of the
Closing and for an indefinite period thereafter there will be no public market
for the Shares and, accordingly, it may not be possible to liquidate such
Purchaser's investment in the Company or, after the closing of the transactions
contemplated by the Merger Agreement (the "MERGER AGREEMENT CLOSING"), BNC
Mortgage; (v) in making the decision to invest in the Shares hereunder, such
Purchaser has relied upon independent investigations made by such Purchaser and,
to the extent believed by such Purchaser to be appropriate, such Purchaser's
representatives, including such Purchaser's own professional, tax and other
advisors; and (vi) such Purchaser and his representatives have been given the
opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and their respective representatives concerning the
terms and conditions of the investment in the Shares. Each Purchaser hereby
represents and warrants that his or its true and correct residence or business
address is set forth under his signature on the signature page hereto.
(b) Each Purchaser hereby acknowledges that he or it is
fully familiar with the Company and BNC Mortgage, and that no other
representations or warranties, express or implied, regarding the Company and BNC
Mortgage, and their respective businesses, operations, plans or prospects have
been made to it by the Company, Mortgage Investco LLC or any of its affiliates,
BNC Mortgage or any other third party.
(c) Each Purchaser acknowledges that he has been advised
that (i) the Shares have not been registered under the Securities Act; (ii) the
Shares must be held indefinitely and he or it must continue to bear the economic
risk of the investment in the Shares unless they are subsequently registered
under the Securities Act or an exemption from such registration is available;
(iii) it is not anticipated that there will be any public market for the Shares;
(iv) Rule 144 promulgated under the Securities Act ("RULE 144") is not currently
available with respect to the sales of any securities of the Company and
following the Merger Agreement Closing will not be available with respect to the
sales of any securities of BNC Mortgage, and neither the Company nor BNC
Mortgage has made any covenant to make such Rule 144 available; (v) if and when
the Shares may be disposed of without registration in reliance on Rule 144, such
disposition can be made only in limited amounts in accordance with the terms and
conditions of such rule; (vi) if the Rule 144 exemption is not available, public
offer of sale without registration will require the availability of an exemption
under the Securities Act; (vii) a restrictive legend or legends in a form to be
set forth in Section 11 below shall be placed on the certificates representing
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<PAGE>
the Shares; and (viii) a notation shall be made in the appropriate records of
the Company or, following the Merger Agreement Closing, BNC Mortgage, indicating
that each of the Shares is subject to restrictions on transfer and, if the
Company or, following the Merger Agreement Closing, BNC Mortgage, should at some
time in the future engage the services of a securities transfer agent,
appropriate stop-transfer instructions will be issued to such transfer agent
with respect to the Shares.
7. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement, regardless of any investigation made by each Purchaser or on his or
its behalf.
8. Non-Competition. Buckley acknowledges and recognizes the
highly competitive nature of the business of BNC Mortgage and its affiliates as
well as his extensive participation in BNC Mortgage's business and operations.
In consideration of entering into this Agreement and in order to induce BNC
Mortgage and the Company to enter into the Merger Agreement and to consummate
the transactions contemplated hereby and thereby, each of Buckley and the Trust
accordingly agrees that until the third anniversary of the Closing:
(a) He or it will not directly or indirectly engage (as
owner, consultant, trustee, employee, stockholder, partner or otherwise, except
as a passive holder of fewer than 5% of the outstanding shares or other equity
interests of a company) in the business of origination, funding or financing of
prime or sub-prime residential mortgage loans anywhere in the United States;
provided, however, that the foregoing covenant is not intended, and shall not be
construed, to prevent Buckley from engaging in activities customary of an expert
in the mortgage lending business, including but not limited to speaking at
industry related events and corresponding with and providing general advice to
other participants in the mortgage lending industry, so long as Buckley does not
engage in any such activities specifically on behalf of a competitor of the
Company or financially benefit from any such activities (other than de minimus
appearance fees or the like).
(b) He or it will not directly or indirectly induce any
employee of the BNC Mortgage or any of its affiliates to engage in any activity
in which the Purchaser is prohibited from engaging in pursuant to paragraph (a)
above or to terminate his employment with the BNC Mortgage or any of its
affiliates, and will not directly or indirectly employ or offer employment to
any person who was employed by the BNC Mortgage or any of its affiliates unless
such person shall have been involuntarily terminated without cause or ceased to
be employed by any such entity for a period of at least 12 months before the
Purchaser engages in activities otherwise prohibited by hereby. Notwithstanding
the foregoing, nothing in this Section 8 shall prohibit Buckley from hiring
Darlene Overton, his long-time secretary with the Company, whether or not she is
employed by the Company at the time of such hiring.
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(c) He or it will not on behalf of himself or any other
person or entity or directly or indirectly make any statement or take any action
that could reasonably be expected to harm or lead to unfavorable publicity to
the BNC Mortgage or any of its subsidiaries or make any statement or take any
action that could reasonably be expected to impair the goodwill or the business
reputation of the BNC Mortgage or any of it affiliates, or to be otherwise
detrimental to the interests of the BNC Mortgage or any of its affiliates, or
their respective officers, directors, or employees including any act or
statement intended, directly or indirectly, to benefit a competitor of the BNC
or any of its affiliates.
(d) In the event the Company defaults in its obligations to
redeem the Shares and the Purchasers elect not to exercise their right to
require the Company to increase the Board of Directors of the Company pursuant
to Section 5(c) of the Certificate of Designations, then the provisions of
Section 8(a) hereof shall, upon notice to the Company by the Purchasers,
terminate and the Purchasers shall have no further rights under Section 5(c) of
the Certificate of Designations.
(e) Buckley and the Trust have agreed to the foregoing
restrictions of this Section 8 in connection with their sale or disposition of
shares in a corporation and each desires to refrain from carrying on a business
similar to that of the Company on the terms set forth herein. Therefore, it is
expressly understood and agreed that although the Purchasers and BNC Mortgage
consider the restrictions contained in this Section 8 to be reasonable, if a
final judicial determination is made by a court of competent jurisdiction that
the time or territory or any other restriction contained in this Agreement are
unenforceable restrictions against each of the Purchasers, the provisions of
this Agreement shall not be rendered void but shall be deemed amended to apply
as to such maximum time and territory and to such maximum extent as such court
may judicially determine or indicate to be enforceable. Alternatively, if any
court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
(f) In the event of a breach by Buckley or the Trust of the
provisions of this Section 8, in addition to any other relief or remedy
(including pursuant to Section 23 hereof), the Company shall not be entitled to
withhold any dividend or redemption payment on the Shares to which the
Purchasers may be entitled as an offset of any asserted damages relating to such
breach; provided, however, that the Company may elect to deposit such dividend
or redemption payment into escrow with an independent third party, and on terms,
reasonably acceptable to the Purchasers until such time as any dispute regarding
such breach or the amount of such damages shall be resolved in accordance with
Section 27 hereof.
9. No Right of Employment. Neither this Agreement nor any
purchase of Shares pursuant hereto shall create, or be construed or deemed to
create, any right of employment in favor of the Purchaser or any other person by
the Company, or BNC Mortgage or any of it subsidiaries.
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10. Transfer of Shares. Each Purchaser shall not transfer,
assign, pledge hypothecate or otherwise dispose of the Shares without prior
written consent from the Company and Mortgage Investco LLC.
11. Legend. Each Purchaser agrees that each certificate
representing the Shares now or hereafter held by such Purchaser shall be
endorsed with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A CERTAIN BUCKLEY STOCK PURCHASE AGREEMENT,
DATED AS OF FEBRUARY 3, 2000, WHICH PROVIDES FOR, AMONG
OTHER THINGS, CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH
SHARES. A COPY OF SUCH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF BNCM ACQUISITION CO. AND WILL BE
FURNISHED UPON REQUEST TO ANY HOLDER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE."
12. Covenant Regarding Dividends and Redemptions. From and
after the Closing Date, so long as any Shares are outstanding the Company shall
not enter into any agreement prohibiting, or granting a third party the right to
prohibit, the declaration of dividends on the Shares or the redemption of the
Shares (other than as a result of default or event of default) without the prior
written consent of Buckley, which consent may be withheld in his sole and
absolute discretion.
13. Termination. This Agreement shall automatically
terminate in the event the Merger Agreement is terminated in accordance
with the terms thereof. Notwithstanding anything to the contrary
herein, no termination of this Agreement shall relieve any party of liability
for a breach hereof prior to termination.
14. Successors and Assigns. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall be binding on and inure to the
benefit of the respective successors and assigns of the parties hereto. It is
hereby understood and agreed that, concurrently with the closing under the
Merger Agreement, the rights and obligations of the Company hereunder shall be
assigned by operation of law to BNC Mortgage.
15. Joint and Several Obligations. Each Purchaser hereby
acknowledges that each Purchases shall be jointly and severally liable for all
obligations of the purchases hereunder.
16. Assignment. The Purchaser may assign his right to
purchase the Shares hereunder to any entity, all of the equity interests of
which are owned by the Purchasers or to each other; provided, however, such
assignment shall not relieve any Purchaser of his or its obligations hereunder.
17. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
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substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
18. Counterparts. This Agreements may be executed in two or
more counterparts, each of which shall be considered an original, but all of
which taken together shall constitute one and the same Agreement.
19. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
20. Governing Law. All questions concerning the
construction, validity and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by the internal laws, and not the conflicts
of laws, of the State of Delaware.
21. WAIVER OF JURY TRIAL. THE PARTIES HERETO WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT AND ANY DOCUMENT EXECUTED IN CONNECTION HEREWITH.
22. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered,
telecopied or mailed, certified or registered mail, return receipt requested:
(a) If to any Purchaser, to the
address set forth under such Purchaser's
Purchaser's signature on the
signature page hereto.
(b) If to the Company or, following the Merger
Agreement Closing, to BNC Mortgage:
BNC Mortgage, Inc.
1063 McGaw Avenue
Irvine, California 92614-5532
Attention: Kelly W. Monahan
Telecopier No.: (949) 475-5027
(with a copy to)
Lehman Brothers Inc.
3 World Financial Center
New York, New York 10285
Attention: Michael McCully, Senior Vice President
Karen Manson, Senior Vice President
Telecopier No.: (212) 526-0035
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Such names and address may be changed by written notice to each person listed
above. All notices are effective upon receipt or upon refusal if properly
delivered.
23. Specific Performance. Each Purchaser recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the Company to sustain damages for which it would not
have an adequate remedy at law for money damages, and therefore each Purchaser
agrees that in the event of any such breach the Company party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
the Company may be entitled, at law or in equity.
24. Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
25. No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
26. No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any Person
who or which is not a party hereto other than Mortgage Investco LLC who shall be
a third party beneficiary of the rights of the Company hereunder.
27. Arbitration. Any dispute or disagreement between
Buckley and the Company concerning Buckley's asserted compliance or
non-compliance with the terms and conditions of this Agreement shall be resolved
in accordance with the arbitration procedures of the American Arbitration
Association and such arbitration shall be conducted in Los Angeles, California,
United States of America; provided, however, that notwithstanding the foregoing
the Company may also seek specific performance against the Purchasers pursuant
to Section 23 hereof of their obligations under Section 8 hereof.
28. Expenses. Each party shall bear its own expenses in connection with the
preparation of this Agreement and the transactions contemplated hereby;
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provided, however, that the Company shall reimburse the Purchasers for their
reasonable legal fees and expenses in connection with this Agreement and the
transactions contemplated hereby and by the Merger Agreement in an amount not to
exceed $10,000, whether or not such contemplated transactions are consummated.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
BNCM ACQUISITION CO.
By: /s/ Kurt Locher
---------------------------------
Name: Kurt Locher
Title: President
/s/ Evan R. Buckley
-------------------------------------
Evan R. Buckley
20082 Tranquil Lane
Huntington Beach, CA 92646
Buckley Family Trust
By: /s/ Evan R. Buckley
---------------------------------
Evan R. Buckley,, as co-trustee
By: /s/ Karen Buckley
---------------------------------
Karen Buckley, as co-trustee
20082 Tranquil Lane
Huntington Beach, CA 72646
Buckley Stock Purchase Agreement
EXHIBIT 6
BUCKLEY VOTING AGREEMENT
------------------------
VOTING AGREEMENT, dated as of February 3, 2000 (this "AGREEMENT"), by
and among BNCM Acquisition Co., a Delaware corporation ("MERGER SUB"), the
Buckley Family Trust (the "STOCKHOLDER") and, for the purposes of Section 3
hereof, Evan R. Buckley ("BUCKLEY").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Merger Sub and BNC Mortgage, Inc., a
Delaware corporation (the "COMPANY"), are entering into an Agreement and Plan of
Merger (as such agreement may hereafter be amended from time to time, the
"MERGER AGREEMENT"; capitalized terms used and not defined herein have the
respective meanings ascribed to them in the Merger Agreement) pursuant to which
Merger Sub will be merged with and into the Company, with the Company as the
Surviving Corporation (the "MERGER");
WHEREAS, the Stockholder owns, beneficially and of record, 1,549,717
shares (the "SHARES") of Common Stock of the Company; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Merger Sub has required that the Stockholder agree, and the
Stockholder has agreed, to enter into this Agreement; and further the
Stockholder has agreed to enter into this Agreement strictly in its capacity as
a beneficial owner of the Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, and intending to be legally bound hereby, the parties hereto hereby
agree as follows:
1. Provisions Concerning the Shares. (a) The Stockholder hereby
agrees that during the period commencing on the date hereof and continuing until
this provision terminates pursuant to Section 5 hereof, at any meeting of the
holders of shares of Common Stock of the Company, however called, or in
connection with any written consent of the holders of shares of Common Stock of
the Company, the Stockholder shall vote (or cause to be voted) the Shares held
of record or Beneficially Owned (as defined below) by the Stockholder, whether
heretofore owned or hereafter acquired, in favor of the Merger and the adoption
of the Merger Agreement and any actions required in furtherance thereof and
hereof.
(b) The Stockholder shall not enter into any agreement or
understanding with any Person (as defined below) the effect of which would be
inconsistent or violative of the provisions of this Agreement.
(c) For purposes of this Agreement:
<PAGE>
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing; without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" within the meaning of Section 13(d)(3) of the
Exchange Act; and
"PERSON" shall mean an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(d) In the event of a stock dividend or distribution, or any change
in the Common Stock of the Company by reason of any stock dividend, stock split,
recapitalization, reclassification, combination, exchange of shares, merger or
the like, the term "SHARES" as used in this Agreement shall be deemed to refer
to and include the Shares as well as all such stock dividends and distributions
and any shares or other securities into which or for which any or all of the
Shares may be converted, changed or exchanged.
2. Representations and Warranties. As of the date hereof, the
Stockholder hereby represents and warrants to Merger Sub as follows:
(a) Ownership of Shares. The Stockholder is the record and Beneficial
Owner of all of the Shares. On the date hereof, the Shares constitute all of the
shares of Common Stock of the Company owned of record or Beneficially Owned by
the Stockholder, the Shares constitute all of the shares of Common Stock of the
Company Beneficially Owned by the Stockholder. The Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set forth
in Section 1 hereof, shared power of disposition and sole power to agree to all
of the matters set forth in this Agreement, in each case with respect to all of
the Shares, with no limitations, qualifications or restrictions on such rights
(subject to applicable securities laws).
(b) Power; Binding Agreement. The Stockholder has the legal capacity,
power and authority to enter into and perform all of its obligations under this
Agreement. This Agreement has been duly and validly authorized, executed and
delivered by the Stockholder and constitutes a valid and binding agreement of
the Stockholder, enforceable against the Stockholder in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity). There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which the Stockholder is settlor or trustee or
any other person whose consent is required for the execution and delivery of
this
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Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(c) No Conflicts. (i) Except for filings under the HSR Act, if any,
and filings under the Exchange Act, no filing with, and no permit,
authorization, consent or approval of, any state or federal public body or
authority is necessary for the execution of this Agreement by the Stockholder
and the consummation by the Stockholder of the transactions contemplated hereby
and (ii) none of the execution and delivery of this Agreement by the
Stockholder, the consummation by the Stockholder of the transactions
contemplated hereby or compliance by the Stockholder with any of the provisions
hereof will (A) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any declaration of trust,
note, bond, mortgage, indenture, security or pledge agreement, voting agreement,
stockholders' agreement or voting trust, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the Stockholder or any of
the Stockholder's properties or assets may be bound, or (B) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of the Stockholder's properties or assets.
(e) Reliance by Merger Sub. The Stockholder understands and
acknowledges that Merger Sub is entering into the Merger Agreement in reliance
upon execution and delivery of this Agreement by the Stockholder.
(f) Sophistication. The Stockholder acknowledges being an informed
and sophisticated investor and, together with the Stockholder's advisors, has
undertaken such investigation as they have deemed necessary, including the
review of the Merger Agreement and this Agreement, to enable the Stockholder to
make an informed and intelligent decision with respect to the Merger Agreement
and this Agreement and the transactions contemplated thereby and hereby.
(g) No Broker. No broker, investment banker, financial adviser or
other Person is entitled to any commission, broker's fee, finder's fee,
adviser's fee or similar fee in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Stockholder.
3. No Solicitation. (a) From and after the date hereof and continuing
until this provision terminates pursuant to Section 5 hereof, neither the
Stockholder nor Buckley shall directly or indirectly, initiate, solicit or
encourage (including by way of furnishing non-public information or assistance),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal with respect to the Company or enter into or maintain or
continue discussions or negotiate with any Person in furtherance of such
inquiries or to obtain such a Takeover Proposal or agree to or endorse any such
Takeover Proposal, and the Stockholder or Buckley shall promptly notify Merger
Sub orally (in all events within 24 hours) and in writing (as promptly
thereafter as practicable)
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of the material terms and status of all inquiries and proposals which the
Stockholder or Buckley or any agent of the Stockholder or Buckley may receive
after the date hereof relating to any of such matters and, if such inquiry or
proposal is in writing, the Stockholder or Buckley shall deliver to Merger Sub a
copy of such inquiry or proposal promptly; provided, however, that,
notwithstanding any other provision of this Agreement, Buckley may take any
action in his capacity as a director or officer of the Company as the board of
directors of the Company directs him to take in compliance with Section 6.04 of
the Merger Agreement or in order to permit the Board to comply with its
fiduciary duties under applicable law as advised by counsel. The Stockholder and
Buckley will immediately cease and cause to be terminated any existing
activities, discussions or negotiations, with any parties conducted heretofore
with respect to any of the foregoing.
(b) Merger Sub acknowledges that this Agreement is entered into by
the Stockholder and Buckley in their capacity as a beneficial owner of the
Shares, and that nothing in this Agreement shall in any way restrict or limit
Buckley from taking any action in his capacity as a director or officer of the
Company or otherwise fulfilling his fiduciary obligations as a director or
officer of the Company, notwithstanding that any such action would be
inconsistent with or violative of the Stockholders' obligations under this
Agreement if taken in his capacity as a beneficial owner of the Shares.
4. Restriction on Transfer; Proxies; Non-Interference; Stop
Transfers; etc.
(a) The Stockholder shall not, directly or indirectly, during the
period commencing on the date hereof and continuing until this provision
terminates pursuant to Section 5 hereof: (i) except as contemplated by the
Merger Agreement offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or grant or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Shares or any interest therein; (ii) except as
contemplated by this Agreement, grant any proxies or powers of attorney, deposit
any Shares into a voting trust or enter into a voting agreement with respect to
any Shares; or (iii) take any action that would make any of the Stockholder's
representations or warranties contained herein untrue or incorrect or have the
effect of preventing or disabling the Stockholder from performing his/her
respective obligations under this Agreement; provided that the foregoing shall
not prevent the Stockholder from pledging any of the Shares to a bank or other
financial institution or to prevent such bank or financial institution from
selling the Shares on foreclosure so long as the Stockholder retains the right
to vote such Shares if the pledge has not been foreclosed upon.
(b) Without limiting the generality of Section 4(a) above, the
Stockholder agrees with, and covenants to, Merger Sub that the Stockholder shall
not, during the period set forth in Section 4(a), request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing the Shares, unless such transfer is made in
compliance with this Agreement.
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5. Termination. Except as otherwise provided herein, the covenants
and agreements contained in Sections 1, 3 and 4 hereof shall terminate (i) in
the event the Merger Agreement is terminated in accordance with the terms
thereof, upon such termination, and (ii) in the event the Merger is consummated,
upon the Effective Time. Notwithstanding anything to the contrary herein no
termination of this Agreement shall relieve any party of liability for a breach
hereof prior to termination.
6. Further Assurances. From time to time, at the other party's
request and without further consideration, the Stockholder and Merger Sub shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
7. Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
8. Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
Person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise, including, without limitation,
the Stockholder's heirs, executors, guardians, administrators, trustees or
successors. Notwithstanding any transfer of Shares, the transferor shall remain
liable for the performance of all obligations of the transferor under this
Agreement.
9. Assignment. This Agreement shall not be assigned by any party
hereto, by operation of law or otherwise, without the prior written consent of
the other party, and any purported assignment without such consent shall be null
and void; provided, however, that Merger Sub may assign, in its sole discretion,
its rights and obligations hereunder to any direct or indirect wholly owned
subsidiary of Merger Sub without the consent of the Stockholder. All covenants
and agreements contained in this Agreement by or on behalf of the parties hereto
shall be binding on and inure to the benefit of the respective successors, heirs
and permitted assigns of the parties hereto.
10. Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated except upon
the execution and delivery of a written agreement executed by each of the
parties hereto.
11. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses: (i) if to Merger Sub, to its
address set forth in the Merger Agreement; and
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(ii) if to the Stockholder, to the address set forth under the Stockholder's
signature on the signature page hereto; or, in each case, to such other address
as the Person to whom notice is given may have previously furnished to the
others in writing in the manner set forth above.
12. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
13. Specific Performance. The Stockholder recognizes and acknowledges
that a breach by it of any covenants or agreements contained in this Agreement
will cause Merger Sub to sustain damages for which it would not have an adequate
remedy at law for money damages, and therefore the Stockholder agrees that in
the event of any such breach Merger Sub party shall be entitled to the remedy of
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which Merger Sub may be
entitled, at law or in equity.
14. Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
15. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
16. No Third Party Beneficiaries. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any Person who or which
is not a party hereto other than Mortgage Investco LLC who shall be a third
party beneficiary of the rights of Merger Sub hereunder.
17. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
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18. Waiver of Jury Trial. The parties hereto waive all right to trial
by jury in any action or proceeding to enforce or defend any rights under this
Agreement and any document executed in connection herewith.
19. Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
[signature page follows]
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IN WITNESS WHEREOF, Merger Sub and the Stockholder have executed and
delivered this Agreement as of the day and year first above written.
BNCM ACQUISITION CO.
By: /s/ Kurt Locher
----------------------------------------
Name: Kurt Locher
Title: President
BUCKLEY FAMILY TRUST
By: /s/ Evan R. Buckley
----------------------------------------
Evan R. Buckley, as co-trustee
By: /s/ Karen Buckley
----------------------------------------
Karen Buckley, as co-trustee
c/o Evan R. Buckley
20082 Tranquil Lane
Huntington Beach, CA 92646
/s/ Evan R. Buckley
---------------------------
Evan R. Buckley
20082 Tranquil Lane
Huntington Beach, CA 92646
