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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 10, 2000
THE WMF GROUP, LTD.
(Exact name of registrant as specified in its charter)
Delaware 000-22567 54-1647759
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
1593 Spring Hill Road, Suite 400
Vienna, Virginia 22182
(Address of principal executive offices)
(703) 610-1400
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
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ITEM 5. OTHER ITEMS.
On May 10, 2000, The WMF Group, Ltd. (the "Company"), Prudential
Mortgage Capital Company, LLC ("Parent") and Prudential Mortgage Capital
Acquisition Corp., a wholly owned subsidiary of Parent ("Purchaser"), entered
into an Agreement and Plan of Merger, dated as of May 10, 2000 (the "Merger
Agreement"), by and among the Company, Parent and Purchaser. The Merger
Agreement provides for Purchaser to commence a cash tender offer (the "Offer")
by May 24, 2000 for all of the shares of common stock of the Company (the
"Common Stock") at a price of $8.90 per Share, upon the terms and subject to the
conditions contained in the Merger Agreement. The Merger Agreement further
provides that, as soon as practicable after the satisfaction or waiver of the
conditions set forth in the Merger Agreement (including, without limitation, the
consummation of the Offer), and in accordance with the relevant provisions of
the Delaware General Corporation Law, as amended, Purchaser will be merged (the
"Merger") with and into the Company. In connection with the Merger Agreement,
the Company's two largest stockholders and certain members of its Board of
Directors have entered into a Stockholders Agreement whereby such stockholders
have agreed to tender their shares in the Offer and to vote in favor of the
Merger Agreement and the Merger at any meeting of the Company's stockholders
called to vote on such matters. Following the consummation of the Merger, the
Company will continue as the surviving corporation. In the Merger, the holders
of Shares (other than Parent, Purchaser or any subsidiary of any of the
foregoing) will receive the same per Share consideration as is paid to holders
of Shares in the Offer. The foregoing is qualified in its entirety by reference
to the complete text of the Merger Agreement, which is filed as Exhibit 2.2
hereto.
Filed herewith as Exhibit 99.1 is a copy of the joint press release
issued by the Company and the Purchaser on May 10, 2000 announcing the execution
of the Merger Agreement.
The materials filed as exhibits hereto contain forward-looking
statements within the meaning of the safe harbor provisions of the Securities
Exchange Act of 1934 (the "Exchange Act"), including statements regarding the
operations of the Company during the interim period between the execution of the
Merger Agreement and the consummation of the transactions contemplated thereby.
The forward-looking statements are subject to various risks and uncertainties.
Although the Company believes its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not vary materially from its
expectations. Those risks and uncertainties include the failure of the certain
conditions set forth in the Merger Agreement, adverse industry and economic
conditions and adverse changes in interest rates, the secondary mortgage market
or in assets securing mortgages. Other risk factors are detailed from time to
time in the reports under the Exchange Act of the Company.
2
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
2.2 Agreement and Plan of Merger, dated as of May 10, 2000, by and
among the Company, Prudential Mortgage Capital Company, LLC and
Prudential Mortgage Capital Acquisition Corp.
99.1 Joint Press Release of The WMF Group, Ltd. and Prudential
Mortgage Capital Company, LLC, issued on May 10, 2000.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE WMF GROUP, LTD.
Date: May 10, 2000 By: /s/ Shekar Narasimhan
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Name: Shekar Narasimhan
Title: Chief Executive Officer and
Chairman of the Board
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Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 10, 2000, among
Prudential Mortgage Capital Company, LLC, a Delaware limited liability company
(the "Parent"), Prudential Mortgage Capital Acquisition Corp., a Delaware
corporation that is a wholly-owned subsidiary of Parent (the "Purchaser"), and
The WMF Group, Ltd., a Delaware corporation (the "Company") (the "Agreement" or
the "Merger Agreement").
WHEREAS, the sole member or the respective Boards of Directors
of the Parent, the Purchaser and the Company, as the case may be, have approved
the acquisition of the Company;
WHEREAS, in contemplation thereof it is proposed that the
Purchaser will make a tender offer (the "Offer") to purchase for cash all of the
issued and outstanding shares (the "Shares") of common stock, $.01 par value per
share, of the Company (the "Company Common Stock"), subject to the terms and
conditions of this Agreement, at a price of $8.90 per share net to the seller in
cash (such price, or such higher price per share as may be paid in the Offer,
being referred to herein as the "Offer Price");
WHEREAS, to complete such acquisition, the sole member or the
respective Boards of Directors of the Parent, the Purchaser and the Company, as
the case may be, have approved the merger of the Purchaser into the Company (the
"Merger"), pursuant to and subject to the terms and conditions of this
Agreement;
WHEREAS, the Board of Directors of the Company has unanimously
determined that each of the Offer and the Merger are advisable, fair to, and in
the best interests of, the holders of the Shares, approved the Offer and the
Merger and recommended the acceptance of the Offer and approval and adoption of
this Agreement by the stockholders of the Company; and
WHEREAS, certain principal stockholders of the Company (the
"Stockholders") are entering contemporaneously herewith into a Stockholders
Agreement dated the date hereof (the "Stockholders Agreement") providing that,
among other things, each such Stockholder will tender all shares of Company
Common Stock owned by such Stockholder at the Offer Price pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements herein contained,
the parties hereto agree as follows:
ARTICLE I
THE TENDER OFFER
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1.1. THE OFFER. (a) Provided that this Agreement shall not
have been terminated in accordance with Article IX hereof and no event shall
have occurred which would result in a failure to satisfy any of the
conditions set forth in Annex A hereto (the "Offer Conditions") within a
reasonable time (but not more than ten business days) after the public
announcement of the execution of this Agreement, the Purchaser shall, and the
Parent shall cause the Purchaser to, commence the Offer. The Offer shall be
made by means of an offer to purchase (the "Offer to Purchase") containing
the terms set forth in this Agreement and the conditions set forth in Annex A
hereto. The obligations of the Purchaser and the Parent to consummate the
Offer and to accept for payment and pur chase the Shares tendered shall be
subject only to the Offer Conditions. The initial expiration date of the
Offer shall be the 20th business day following commencement of the Offer. The
Purchaser expressly reserves the right to modify the terms of the Offer,
PROVIDED, HOWEVER, that without the consent of the Company, the Purchaser
shall not, and the Parent shall not permit the Purchaser to (I) reduce the
number of shares of Company Common Stock to be purchased in the Offer, (II)
reduce the Offer Price, (III) materially modify or add to the Offer
Conditions, including any change to the Minimum Condition (as defined in
Annex A), (IV) change the form of consideration payable in the Offer, (V)
except as provided below, or as may be required by any rule, regulation,
interpretation or position of the United States Securities and Exchange
Commission (the "SEC"), change the expiration date of the Offer or (VI) amend
any other condition of the Offer in any material respect in a manner adverse
to the holders of the Shares. Notwithstanding anything in this Agreement to
the contrary, the Purchaser shall have the right, without the prior consent
of the Company, to extend the offer beyond its scheduled expiration date in
the following events: (X) if at any expiration date, any of the conditions to
the Offer shall not have been satisfied or waived, until such conditions are
satisfied or waived; (Y) for any period required by applicable law; and (Z)
if all of the conditions to the Offer are satisfied or waived, but the number
of Shares validly tendered and not withdrawn is less than the amount
necessary to effect a parent-subsidiary merger pursuant to Section 252 of the
Delaware General Corporation, for a period not to exceed twenty days
following the initial expiration date of the Offer. The Offer Conditions are
for the sole benefit of the Parent and the Purchaser and may be asserted by
the Parent and the Purchaser regardless of the circumstances giving rise to
any such Offer Conditions and, subject to the preceding sentence, may be
waived by the Purchaser in whole or in part. Subject only to the Offer
Conditions, the Purchaser shall, and the Parent shall cause the Purchaser to,
pay for all of the Shares validly tendered and not withdrawn pursuant to the
Offer (including any subsequent offering period) as soon as legally
permissible. In the event that (i) the Minimum Condition (as defined in Annex
A) has not been satisfied or (ii) any condition set forth in paragraph (a),
(d) or (e) of Annex A is not satisfied or waived at the scheduled expiration
date of the Offer, at the reasonable request of the Company, Purchaser shall,
and Parent shall cause Purchaser to, extend the expiration date of the Offer
in increments
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of five business days each until the earliest to occur of (1) the
satisfaction or waiver of such condition, (2) Parent reasonably determining
that such condition to the Offer is not capable of being satisfied on or
prior to the thirtieth day following the initial expiration date of the
Offer, (3) the termination of this Agreement in accordance with its terms and
(4) the thirtieth day following the initial expiration date of the Offer.
(b) Provided that this Agreement shall not have been
terminated in accordance with Article IX hereof and no event shall have occurred
which would result in a failure to satisfy any of the Offer Conditions, the
Parent and the Purchaser will file with the SEC, as soon as practicable after
the date hereof, a Tender Offer Statement on Sched ule TO (together with all
supplements or amendments thereto, and including all exhibits, the "Offer
Documents"). Each of Parent, Purchaser and the Company shall promptly correct
any information provided by it for use, or incorporated by reference, in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and each of Parent and Purchaser
shall take all steps necessary to amend or supplement the Offer Documents and to
cause the Offer Documents as so amended or supplemented to be filed with the SEC
and to be disseminated to the Company's shareholders, in each case as and to the
extent required by applicable Federal securities laws. The Parent and the
Purchaser shall give the Company and its counsel a reasonable opportunity to
review and comment on the Offer Documents prior to their being filed with the
SEC or disseminated to the stockholders of the Company. The Parent and the
Purchaser will furnish the Company and its counsel in writing with any comments
that the Parent, the Purchaser or their counsel may receive from the SEC or its
staff with respect to the Offer Documents, promptly after receipt of such
comments and shall provide the Company and its counsel with a reasonable
opportunity to participate in the response of the Parent or the Purchaser to
such comments.
1.2. COMPANY ACTION. (a) In connection with the Offer, the
Company shall cause its transfer agent as promptly as reasonably possible to
furnish the Purchaser with mailing labels, security position listings and any
available listings or computer files containing the names and addresses of
record holders of the Shares as of a recent date, and shall furnish the
Purchaser with such additional information (including, but not limited to,
updated lists of holders of Company Common Stock and their addresses, mailing
labels and lists of security positions) and offer such other assistance as
the Parent or the Purchaser may reasonably request in communicating the Offer
to the Company's stockholders. The information contained in any such labels,
listings and files shall be used solely for the purpose of communicating the
Offer or disseminating any other documents necessary to consummate the Merger
as contemplated by the Offer and shall
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otherwise be subject to the Confidentiality Agreement, dated November 15,
1999, between the Company and the Parent (the "Confidentiality Agreement").
If this Agreement shall be terminated, the Purchaser will deliver to the
Company all copies of information provided to it hereunder that remain in its
possession at such time.
(b) The Company hereby consents to the Offer and the Merger,
and represents and warrants to the Parent and the Purchaser that (I) the Board
of Directors of the Company (at a meeting duly called and held at which a quorum
was present) as part of its approval of this Agreement has unanimously (1)
approved the Offer and the Merger, (2) determined that each of the Offer and the
Merger is advisable, fair to and in the best interests of the stockholders of
the Company and (3) resolved to recommend acceptance of the Offer and approval
and adoption of this Agreement by the stockholders of the Com pany and (II)
Credit Suisse First Boston Incorporated ("CSFB") has delivered to the Board of
Directors of the Company its opinion that the consideration to be received by
the holders of Company Common Stock pursuant to the Offer and the Merger is fair
to the holders of Company Common Stock from a financial point of view, subject
to the assumptions and qualifications contained in such opinion. Concurrently
with the commencement of the Offer, the Company shall file a Tender Offer
Solicita tion/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, and including all exhibits, the "Schedule
14D-9") with respect to the Offer which shall contain (subject to the conditions
specified in Section 6.8(d)) the recommendations of the Board of Directors
referred to in clause (i) of the preceding sentence. The Board of Directors of
the Company will not withdraw, modify or amend such recommendations, unless the
conditions specified in Section 6.8(d) have been satisfied. The Parent, the
Purchaser and their counsel will be given a reasonable opportunity to review the
Schedule 14D-9 and all amendments or supplements thereto prior to their filing
with the SEC or dissemination to the holders of Shares. The Company shall
furnish to the Parent and the Purchaser a copy of the resolutions referred to in
the first sentence of this subsection (b), certified by an appropriate officer
of the Company.
1.3. BOARD OF DIRECTORS. (a) In the event that the Purchaser
acquires at least a majority of the outstanding Shares pursuant to the Offer, if
requested by the Parent, following the acceptance for payment of shares of
Company Common Stock and payment by the Purchaser for such shares in accordance
with the Offer, the Company shall take all actions necessary to entitle the
Purchaser to designate such number of directors on the Board of Directors of the
Company, rounded up to the next whole number, as will give the Purchaser
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
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multiplied by the percentage that such number of shares of Company Common
Stock so accepted for payment and paid for, purchased or otherwise acquired
or owned by the Purchaser or the Parent bears to the number of shares of
Company Common Stock outstanding and the Company and its Board of Directors
shall, at such time, take any and all such action needed to cause the
Purchaser's designees to be appointed to the Company's Board of Directors
(including increasing the size of the Board of Directors and/or causing
directors to resign). In addition, at the same time that the Purchaser is
entitled to representation on the Board of Directors pursuant to the
preceding provisions, the Company, if so requested, will cause persons
designated by the Purchaser to constitute the same percentage of each
committee of the Board of Directors, each board of directors of each
subsidiary of the Company and each committee of each such board.
(b) The Company's obligations with respect to the election of
the Purchaser's designees to the Board of Directors of the Company shall be
subject to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.3 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1. The Parent and the
Purchaser will supply to the Company in writing and shall be solely responsible
for any information with respect to any of them and their nominees, officers,
directors and affili ates required by Section 14(f) and Rule 14f-1.
(c) Notwithstanding any other provision of this Section 1.3,
the Parent, the Purchaser and the Company shall cause two members of the
Company's Board of Directors to be persons who were members of the Company's
Board of Directors on the date hereof, and who shall initially be John D. Reilly
and Shekar Narasimhan (the "Continuing Directors") so long as there are at least
two such persons who are willing to serve as Continuing Directors; PROVIDED,
that subsequent to the acceptance, purchase and payment for shares of Company
Common Stock representing greater than 50% of the voting power represented by
the outstanding shares of Company Common Stock pursuant to the Offer, the Parent
shall always have its designees represent at least a majority of the entire
Board of Directors. In the event that any Continuing Director(s) resign(s) from
the Board of Directors, the Parent, the Purchaser and the Company shall permit
the remaining Continuing Director(s) to appoint his or their successors in his
or their reasonable discretion. Following the election or appointment of the
Purchaser's designees pursuant to this Section 1.3 and prior to the Effective
Time, any amendment to this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of the Parent or the Purchaser and any waiver of
any of the Company's rights under this Agreement will
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require the concurrence of each of the Continuing Directors or their
appointees. If at any time the Continuing Directors reasonably deem it
necessary to consult with independent counsel in connection with their duties
as Continuing Directors or actions to be taken by the Company, the Continuing
Directors may retain counsel for such purpose and the Company will pay the
reasonable fees and expenses incurred in connection therewith.
ARTICLE II
THE MERGER
2.1. THE MERGER. (a) Upon the terms and subject to the
satisfaction or waiver, if permissible, of the conditions set forth in Article
VII hereof, as promptly as practicable following the consummation of the Offer,
in accordance with the provisions of this Agreement and the General Corporation
Law of the State of Delaware, as amended (the "GCL"), the parties hereto shall
cause the Purchaser to be merged with and into the Company, and the Company
shall be the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware. At the Effective Time, the separate existence of the
Purchaser shall cease.
(b) The name of the Surviving Corporation shall be Prudential
Mortgage Capital Holding Corp. The Surviving Corporation shall possess all the
rights, privileges, immunities, powers and franchises of the Purchaser and the
Company and shall by operation of law become liable for all the debts,
liabilities and duties of the Company and the Purchaser. The Merger shall have
the other effects provided for in the applicable provisions of the GCL.
2.2. CERTIFICATE OF INCORPORATION. At the Effective Time, the
certificate of incorporation of the Company shall be amended and restated to
conform to the certificate of incorporation of the Purchaser, as in effect
immediately prior to the Effective Time except as qualified by Section 6.9(a),
and shall become the certificate of incorporation of the Surviving Corporation
(the "Certificate of Incorporation").
2.3. BY-LAWS. At the Effective Time, the by-laws of the
Company shall be amended and restated to conform to the by-laws of the
Purchaser, as in effect immediately prior to the Effective Time except as
qualified by Section 6.9(a), and shall become the by-laws of the Surviving
Corporation (the "By-Laws") until thereafter amended, altered or repealed as
provided therein and by law.
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2.4. DIRECTORS AND OFFICERS. At the Effective Time, the
directors of the Purchaser immediately prior to the Effective Time shall be
appointed the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified.
2.5. EFFECTIVE TIME. The Merger shall become effective at the
date and time when a properly executed certificate of merger or certificate of
ownership and merger (either such document being referred to hereinafter as the
"Delaware Certificate of Merger"), together with any other documents required by
law to effectuate the Merger, shall be filed with the Secretary of State of the
State of Delaware in accordance with the GCL, or such other date and time as
shall be designated in the Delaware Certificate of Merger. The Delaware
Certificate of Merger shall be filed in Delaware in accordance with the GCL as
soon as practicable after the Closing. The date and time when the Merger shall
become effective is herein referred to as the "Effective Time."
ARTICLE III
CONVERSION OF SHARES
3.1. COMPANY COMMON STOCK. (a) Each Share issued and
outstanding immediately prior to the Effective Time (except for Shares then
owned beneficially or of record by the Parent or the Purchaser or any other
subsidiary of the Parent and except for Dissenting Shares (as defined in Section
3.2)), shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive the Offer Price (referred
to hereinafter as the "Merger Consideration") in cash payable to the holder
thereof, without interest thereon and net of applicable withholding taxes, upon
surrender of the certificate representing such Share.
(b) Each Share issued and outstanding immediately prior to the
Effective Time which is then owned beneficially or of record by the Parent or
the Purchaser or any other subsidiary of the Parent shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and retired and cease to exist, without any con version thereof.
(c) Each Share issued and held in the Company's treasury
immediately prior to the Effective Time shall, by virtue of the Merger, be
cancelled and retired and cease to exist, without any conversion thereof.
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(d) At the Effective Time the holders of certificates
representing Shares (including restricted Shares) shall cease to have any rights
as stockholders of the Company and, except as aforesaid, their sole right shall
be the right to surrender any such certificate in exchange for payment of the
Merger Consideration or, in the case of a Dissenting Stockholder (as defined
below), to perfect his or her right to receive payment for Shares pursuant to
the law of the State of Delaware if such holder has validly perfected and not
withdrawn the right to receive payment for his or her shares.
3.2. DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary but only to the extent required by the GCL, shares of
Company Common Stock that are issued and outstanding immediately prior to the
Effective Time and are held by holders of Company Common Stock who comply with
all the provisions of law of the State of Delaware concerning the right of
holders of Company Common Stock to dissent from the Merger ("Dissenting
Stockholders") and require appraisal of their shares of Com pany Common Stock
("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration but shall become the right to receive such consideration as
may be determined to be due such Dissenting Stockholder pursuant to the law of
the State of Delaware; PROVIDED, HOWEVER, that (I) if any Dissenting Stockholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (II) if
any Dissenting Stockholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (III) if within 120 days
of the Effective Time neither any Dissenting Stockholders nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of Company Common Stock outstanding at the Effective Time and held by
Dissenting Stockholders in accordance with applicable law, then such Dissenting
Stockholder or Stockholders, as the case may be, shall forfeit the right to
appraisal of such shares and such shares shall thereupon be deemed to have been
converted into the right to receive, as of the Effective Time, the Merger
Consideration less any applicable withholding tax, without interest. The Company
shall give the Parent and the Purchaser (A) prompt notice of any written demands
for appraisal, withdrawals of demands for appraisal and any other related
instruments received by the Company, and (B) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal. The Company
will not voluntarily make any payment with respect to any demands for appraisal
and will not, except with the prior written consent of the Parent, settle or
offer to settle any demand.
3.3. PURCHASER COMMON STOCK. Each share of common stock, par
value $.01 per share of the Purchaser ("Purchaser Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any
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action on the part of the holder thereof, be converted into and exchangeable
for one fully paid and non-assessable share of common stock, par value $.01
per share of the Surviving Corporation ("Surviving Corporation Common
Stock"). From and after the Effective Time, each outstanding certificate
theretofore representing shares of Purchaser Common Stock shall be deemed for
all purposes to evidence ownership of and to represent the same number of
shares of Surviving Corporation Common Stock.
3.4. EXCHANGE OF SHARES. (a) Prior to the Effective Time, the
Purchaser shall, and the Parent shall cause the Purchaser to, deposit in trust
with the depositary for the Offer, or with a bank or trust company in the United
States, designated by the Pur chaser and reasonably acceptable to the Company
(the "Exchange Agent"), cash in an aggregate amount equal to the product of (I)
the number of Shares issued and outstanding immediately prior to the Effective
Time (other than any such Shares owned beneficially or of record by the Parent
or the Purchaser or any other subsidiary of the Parent and other than Dissenting
Shares), and (II) the Merger Consideration (such amount being hereinafter
referred to as the "Exchange Fund"). The Exchange Agent shall, pursuant to
irrevocable instructions, make the payments provided for in Section 3.1(a) of
this Agreement out of the Exchange Fund. The Exchange Agent shall invest the
Exchange Fund as the Parent directs, in direct obligations of the United States
of America, obligations for which the full faith and credit of the United States
of America is pledged to provide for the payment of all principal and interest,
commercial paper obligations receiving the highest rating from either Moody's
Investors Services, Inc. or Standard & Poor's Corporation, or certificates of
deposit, bank repurchase agreements or banker's acceptances of commercial banks
with capital exceeding $10,000,000,000. If for any reason (including losses) the
Exchange Fund is inadequate to pay the amounts to which holders of shares of
Company Common Stock shall be entitled under this Section 3.4, Parent shall take
all steps necessary to enable or cause the Surviving Corporation promptly to
deposit in trust additional cash with the Exchange Agent sufficient to make all
payments required under this Agreement, and Parent and the Surviving Corporation
shall in any event be liable for payment thereof. The Exchange Fund shall not be
used for any purpose except as expressly provided in this Agreement.
(b) Promptly after the Effective Time, but in no event later
than five (5) business days following such date, the Surviving Corporation shall
cause the Exchange Agent to mail to each record holder (other than the Parent,
the Purchaser or any other subsidiary of the Parent) as of the Effective Time of
an outstanding certificate or certi ficates which immediately prior to the
Effective Time represented Shares (the "Certificates"), 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
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of the Certificates to the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender to the Exchange Agent of a Certificate, together with such letter
of transmittal duly executed and completed in accordance with the
instructions thereon, and any other items specified by the letter of
transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor cash in an amount equal to the product of the number of
Shares represented by such Certificate and the Merger Consideration, less any
applicable withholding tax, and such Certificate shall forthwith be
cancelled. No interest shall be paid or accrued on the cash payable upon the
surrender of the Certificates. If payment is to be made to a person other
than the person in whose name the Certificate surrendered is registered, it
shall be a con dition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any tax required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Exchange Agent and the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.4, each
Certificate (other than Certificates representing Shares owned beneficially
or of record by the Parent, the Purchaser or any other subsidiary of the
Parent and other than Certificates representing Dissenting Shares in respect
of which appraisal rights are perfected) shall be deemed to represent, for
all purposes, only the right to receive the Merger Consideration in cash
multiplied by the number of Shares evidenced by such Certificate less any
applicable withholding tax, without any interest thereon. If any holder of
Shares shall be unable to surrender such holder's Certificates because such
Certificates have been lost, mutilated or destroyed, such holder may deliver
in lieu thereof an affidavit and indemnity bond in form and substance and
with surety reasonably satisfactory to the Surviving Corporation. If payment
is to be made to a person other than the person in whose name the surrendered
Certificate is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other
than the registered holder of the surrendered Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is
not applicable.
(c) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates (other than Certificates representing Shares owned
beneficially or of record by the Parent, the Purchaser or any other subsidiary
of the Parent and other than Dissenting Shares) are presented to the Surviving
Corporation, they shall be delivered to the Exchange Agent and cancelled and
exchanged for cash as provided in this Article III. At the close of
<PAGE>
business on the day of the Effective Time the stock ledger of the Company
with respect to Company Common Stock shall be closed.
(d) All cash, certificates and other instruments in the
possession of the Exchange Agent that constitute any portion of the Exchange
Fund (other than net earnings on the Exchange Fund which shall be paid to the
Parent) which remains unclaimed by the stockholders of the Company for six
(6) months after the Effective Time (including any interest received with
respect thereto) shall be repaid promptly to the Surviving Corporation, upon
demand. Any stockholders of the Company who have not theretofore complied
with Section 3.4(b) shall thereafter look only to the Surviving Corporation
(subject to applicable abandoned property, escheat or other similar laws) for
payment of their claim for the Merger Consideration, without any interest
thereon and less any applicable withholding taxes, but shall have no greater
rights against the Surviving Cor poration than may be accorded to general
creditors of the Surviving Corporation under applicable law. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto shall be
liable to a holder of shares of Company Common Stock for any Merger
Consideration delivered to a public official pursuant to applicable abandoned
property, escheat and similar laws.
(e) The Surviving Corporation shall pay all charges and
expenses, including those of the Exchange Agent, in connection with the exchange
of cash for Shares.
3.5. EMPLOYEE STOCK OPTIONS. (a) Following the acquisition of
Shares pursuant to the Offer and 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 reasonably necessary, in the
opinion of the Purchaser, to provide for the cancellation, effective at the
Effective Time, subject to the payment provided for in the next sentence being
made, of all the outstanding stock options to purchase the Company Common Stock
(the "Options") heretofore granted under any stock option plan or stock
incentive plan, including, but not limited to, the Key Employee Incentive Plan
(the "KEIP"), of the Company (the "Stock Plans") and all rights (including but
not limited to rights to severance payments) ancillary to any such Option. As of
the Effective Time, each Option, whether or not then vested or exercisable,
shall no longer be exercisable for the purchase of shares of Company Common
Stock but shall entitle each holder thereof, in cancellation and full settlement
therefor, to a payment in cash (subject to any applicable withholding taxes, the
"Cash Payment"), as soon as practicable after the Effective Time, equal to the
product of (X) the total number of shares of Company Common Stock subject to
such Option, whether or not then vested or exercisable, and
<PAGE>
(Y) the excess of the Merger Consideration, if any, over the exercise price
per share of the Company Common Stock subject to such Option. Following the
acquisition of Shares pursuant to the Offer and prior to the Effective Time,
except to the extent provided in Section 3.5(c) in respect of the Performance
Shares (as defined in Section 3.5(c)), the Company will take all steps to
ensure that neither the Company nor any of its subsidiaries is or will be
bound by, or have any further obligation (including but not limited to the
obligation to pay severance amounts) whatsoever in respect of, any Options or
any other options, warrants, rights (including without limitation stock
appreciation rights) or agreements which would entitle any person, other than
the Parent or its affiliates, to own any capital stock of the Surviving
Corporation or any of its subsidiaries or to receive any payment in respect
thereof or related thereto.
(b) All Stock Plans and any other plan, program or arrangement
providing for the issuance or grant or any other interest in respect of the
capital stock of the Company or any subsidiary shall terminate as of the
Effective Time and the provisions in any other Benefit Plan (as defined in
Section 4.13) providing for the issuance, transfer or grant of any capital stock
of the Company or any interest in any capital stock of the Company shall be
amended following the acquisition of Shares pursuant to the Offer and prior to
the Effective Time to provide that, at the Effective Time, no participant or
beneficiary thereunder shall have any continuing rights to acquire, hold,
transfer or grant any capital stock of the Company or any interest in capital
stock of the Company (other than in respect of cash payments through the Offer
or the Merger), and, during such period, the Company shall take all necessary
action to ensure that following the Effective Time no holder of an Option or of
restricted Shares of the Company or any participant in any Stock Plans shall
have any right thereunder to acquire any capital stock of the Company, the
Parent or the Surviving Corporation or, except to the extent provided in
Schedule 3.5(c), any rights (including but not limited to rights to severance
payments) ancillary to any such right or award, subject in each case to the
receipt of the cash payment provided for herein being made.
(c) Subject to the following sentence, awards of restricted
Shares (other than awards of restricted Shares granted to Shekar Narasimhan,
Mitchell D. Clarfield and Glenn A. Sonnenberg (the "Performance Shares"))
granted prior to the Effective Time shall become fully vested as of the
Effective Time and the Shares underlying such awards shall then be surrendered
in exchange for the Merger Consideration in accordance with Section 3.1(d). The
Performance Shares may be surrendered for the Merger Consideration in accordance
with Section 3.1(d) only if such Performance Shares have vested on or before
June 30, 2000 in accordance with the terms thereof; PROVIDED, THAT, if the
Performance Shares do not vest on or before June 30, 2000, such Performance
Shares shall be forfeited and shall not be exchanged for the Merger
Consideration.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in a letter from the Company delivered to
the Parent prior to execution of this Agreement (which letter contains
appropriate references to identify the representations and warranties herein to
which the information in such letter relates) (the "Company Disclosure Letter")
or in the sections headed "Business," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Financial Statements and
Supplementary Data" of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1999, the Company represents and warrants to the Parent
and the Purchaser as follows:
4.1. ORGANIZATION. (a) Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to conduct its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power and
authority would not, individually or in the aggregate, have a material adverse
effect on the business, financial condition, results of operations or prospects
of the Company or of either of the Federal National Mortgage Association
("Fannie Mae") origination and servicing business or the Federal Housing
Administration ("FHA") origination and servicing business of the Company and its
subsidiaries, or on the Company's ability to perform its obligations or to
consummate the transactions under this Agreement (a "Material Adverse Effect").
Each of the Company and its subsidiaries is duly qualified or licensed and in
good standing to do business as a foreign corporation in each jurisdiction in
which the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or licensed and in good standing would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Each of the organizational documents of each of the
Company and its subsidiaries is in full force and effect and neither the Company
nor any of its subsidiaries is in violation of any of the provisions of its
organizational documents. The respective certificates of incorporation and
by-laws or other organizational documents of the subsidiaries of the Company do
not contain any provision limiting or otherwise restricting the ability of the
Company to control such subsidiaries.
4.2. CAPITALIZATION. (a) The authorized capital stock of the
Company
<PAGE>
consists of 25,000,000 shares of Company Common Stock, par value $.01
and 12,500,000 shares of preferred stock, par value $.01 (the "Preferred
Stock"). As of the date hereof there are (i) 10,958,302 shares of Company Common
Stock issued and outstanding (including 261,125 restricted shares which include
70,000 Performance Shares), (ii) 494,792 shares of Company Common Stock reserved
for issuance under future grants of options under the Company's Stock Plans,
(iii) 1,035,496 shares of Company Common Stock subject to options outstanding
under the Company's Stock Plans, (iv) 250,000 shares, 100,000 shares, 150,000
shares and 150,000 shares of Company Common Stock subject to outstanding
warrants to purchase such shares at a price of $6.25 per share, $5.90 per
share, $9.70 per share, and $7.00 per share, respectively, and (v) 342,215
shares of Company Common Stock held in the Company's treasury. There are no
shares of Preferred Stock issued and outstanding. All issued and outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable and are not subject to, nor were they issued in
violation of, any preemptive rights. Except as set forth above or as
contemplated by this Agreement, there are not now any existing, authorized or
outstanding options, warrants, calls, subscriptions, claims of any character,
preemptive rights or other rights or other agreements, convertible or
exchangeable securities, or commitments, or obligations contingent or otherwise,
whatsoever obligating the Company or any of its subsidiaries to issue, transfer,
deliver or sell or cause to be issued, transferred, delivered or sold any
additional shares of capital stock of the Company or any of its subsidiaries, or
obligating the Company or any of its subsidiaries to issue shares of Company
Common Stock, any other shares of capital stock or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for or otherwise to
acquire, any shares of the capital stock of the Company. The Company Disclosure
Letter sets forth the number of Options and the exercise price for each Option.
The Company has no authorized or outstanding bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exchangeable into or exercisable for securities having the right to vote) with
the stockholders of the Company or any of its subsidiaries on any matter. After
the Effective Time and subject to the payment provided for in Section 3.1(a)
being made, the Surviving Corporation will have no obligation to issue, transfer
or sell any shares of common stock of the Surviving Corporation pursuant to any
Benefit Plan (as defined in Section 6.10).
(b) All of the outstanding shares of capital stock of each of
the Company's subsidiaries have been duly authorized and validly issued, are
fully paid and non-assessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of any liens, encum brances, options or claims
whatsoever. No shares of capital stock of any of
<PAGE>
the Company's subsidiaries are reserved for issuance, except to the Company
or another subsidiary of the Company. There are no outstanding options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any subsidiary of
the Company, pursuant to which such subsidiary is or may become obligated to
issue any shares of capital stock of such subsidiary or any securities
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of such subsidiary, other than such rights granted to the Company
or a subsidiary of the Company. There are no material restrictions of any
kind which prevent the payment of dividends by any of the Company's
subsidiaries.
(c) There are no voting trusts or other agreements or
understandings to which the Company or any of its subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of its
subsidiaries. None of the Company or its subsidiaries is or will be required to
redeem, repurchase or otherwise acquire shares of capital stock of the Company,
or any of its subsidiaries, respectively, as a result of the transactions
contemplated by this Agreement or the Stockholders Agreement.
4.3. AUTHORIZATION OF THIS AGREEMENT; RECOMMENDATION OF
MERGER. The Company has all requisite corporate power and authority to execute
and deliver this Agreement and, subject to approval by the stockholders of the
Company to the extent required by law, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consumma tion of the transactions contemplated hereby
have been duly and validly authorized and approved by the Company's Board of
Directors and, except for the approval of this Agreement by the stockholders of
the Company to the extent required by law, no other corporate proceedings on the
part of the Company are necessary to authorize this Agree ment or consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company, and constitutes a valid and binding
agreement of the Company, subject to approval and adoption of this Agreement by
the Company's stockholders to the extent required by law, and (assuming due and
valid authorization, execution and delivery hereof by the other parties thereto
and the enforceability of this Agreement against them) is enforceable against
the Company in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4.4. CONSENTS AND APPROVALS. Except for (i) filings required
under the
<PAGE>
Exchange Act in connection with this Agreement and the transactions
contemplated hereby, (ii) the filing of a Pre-Merger Notification and Report
Form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations thereunder (together, the "HSR Act") with
the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and such filings as may be
required under any other Antitrust Laws, (iii) the filing and recordation of
appropriate merger documents as required by the GCL and, if applicable, the
laws of other states in which the Company is qualified to do business, (iv)
filings under the securities or blue sky laws or takeover statutes of the
various states, (v) filings with the Department of Housing and Urban
Development, FHA and the Government National Mortgage Association ("GNMA") as
set forth in Schedule 4.4 to the Company Disclosure Letter, (vi) filings with
Fannie Mae, the Federal Home Loan Mortgage Corporation ("Freddie Mac") and
the state regulatory authorities set forth in Schedule 4.4 to the Company
Disclosure Letter, and (vii) filings in connection with any applicable
transfer or other taxes in any applicable jurisdiction, no filing with, and
no permit, authorization, consent or approval of, any court, arbitral
tribunal, administrative commission, governmental or regulatory body, agency
or authority whether domestic or foreign (each, a "Governmental Entity"), is
necessary for the consummation by the Company of the transactions
contemplated by this Agreement, the failure to make or obtain which would
have a Material Adverse Effect or would prevent or materially delay
consummation of the transactions contemplated by this Agreement. All filings
with, or permits, authorizations, consents and approvals of, any Governmental
Entity (but not including, for the avoidance of doubt, Fannie Mae, FHA or
GNMA, the approvals of which are addressed separately in Section 4.14(a) and
clause (f) of Annex A), in each case as necessary to conduct the mortgage
lending and servicing business of the Company and its subsidiaries in all
material respects as presently conducted will have been made or obtained
prior to the acceptance for payment of any Shares pursuant to the Offer.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal and state statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines, and other laws, whether domestic or
foreign, that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of trade.
4.5. NO CONFLICTS. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
with or result in any violation of any provision of the restated certificate of
incorporation of the Company (the "Company Certificate of Incorporation") or the
by-laws of the Company (the "Company
<PAGE>
By-Laws"), or the certificate of incorporation or by-laws (or equivalent
instruments) of any of its subsidiaries, (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any mortgage, lien,
security interest, pledge, charge, encumbrance or other adverse claim of any
kind (collectively, "Liens") upon any of the properties or assets of the
Company or any of its subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Company or any of its subsidi
aries is a party or by which any of them or any of their properties or assets
is bound or (iii) violate any statute, rule, regulation, order, injunction,
writ or decree of any Govern mental Entity applicable to the Company or any
of its subsidiaries or by which the Com pany or any of its subsidiaries or
any of their respective assets or properties may be bound, excluding from the
foregoing clauses (ii) and (iii) conflicts, violations, breaches or defaults
which would not, either individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
4.6. COMPLIANCE. (a) The Company and each of its subsidiaries
are in compliance with all constitutions, treaties, statutes, laws (including
common laws), codes, rules, regulations, decisions, judgments, ordinances or
orders, whether domestic or foreign, (collectively, "Laws") of any Governmental
Entity applicable to the business and operations of the Company and its
subsidiaries or any of their respective properties or assets (other than
Environmental Laws which are covered in Section 4.18 and employment/labor laws
which are covered in Section 4.12), except for such non-compliance as would not
have, individually or in the aggregate, a Material Adverse Effect or prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
(b) Each of the Company and its subsidiaries has in effect all
federal, state and local governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights ("Permits") necessary
for it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except such as would not, individually or in the aggregate, have a
Material Adverse Effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
(c) Except for any matters set forth in Schedule 4.5 to the
Company Disclosure Letter, neither the Company nor any of its subsidiaries is in
default or violation of, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its
<PAGE>
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties are bound or affected, except for
any such defaults or violations which would not have a Material Adverse
Effect or prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(d) Neither the Company nor any of its subsidiaries has been
convicted of any crime described in Section 411 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or in Part I (g) of
Prohibited Transaction Class Exemption 84-14, 49 Fed. Reg. 9494 (1984), within
the thirteen years preceding the date of the Merger.
4.7. FINANCIAL STATEMENTS AND SEC REPORTS; NO UNDISCLOSED
LIABILITIES. (a) The Company has timely filed all forms, reports and
documents with the SEC since August 14, 1997 required to be filed by it
pursuant to the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act"), and the Exchange
Act and the rules and regulations promulgated thereunder, all of which have
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder (such forms, reports, registration statements and other filings
and financials, together with any exhibits, any amendments thereto and
information incorporated by reference therein, filed with the SEC prior to
the date hereof, are sometimes collectively referred to as the "Disclosure
Statements"). None of the subsidiaries is required to file any forms, reports
or other documents with the SEC pursuant to Section 12 or 15 of the Exchange
Act. None of such Disclosure Statements, at the time filed, contained any
untrue statement of a material fact or omitted to state a 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. The consolidated balance sheets and the related consolidated
statements of income, cash flows and stockholder's equity (including the
notes thereto) of the Com pany and its subsidiaries contained or incorporated
by reference in the Disclosure State ments, were prepared from, and are in
accordance with, the books and records of the Company and its consolidated
subsidiaries, complied as of their respective dates in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, and presented fairly the
consolidated financial position of the Company and its subsidiaries as of
their respective dates, and the consoli dated results of their income and
their cash flows for the periods presented therein, in con formity with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis, except as otherwise noted therein and, in the case of
unaudited quarterly financial statements, as permitted by Form 10-Q under the
Exchange Act, and subject in the case of quarterly financial statements to
normal year-end audit
<PAGE>
adjustments.
(b) Except for liabilities and obligations incurred in
connection with the consummation of the transactions contemplated hereby,
there is no liability of the Com pany or any subsidiary thereof of any
nature, whether direct, indirect, known, unknown, absolute, accrued,
contingent or otherwise, which, individually or in the aggregate, is material
to the Company and its subsidiaries, taken as a whole, other than liabilities
(i) shown on the December 31, 1999 audited consolidated balance sheet (or the
notes thereto) of the Company and its subsidiaries included in the Company's
Annual Report on Form 10-K for the fiscal year ending December 31, 1999 or
(ii) incurred in the ordinary course of business consistent with past
practice since December 31, 1999.
4.8. CERTAIN CONTRACTS AND ARRANGEMENTS. (a) The term "Company
Contract" means each contract to which the Company or any of its subsidiaries
is a party or by which it is bound which: (i) has been or would be required
to be filed by the Company as an exhibit to a Disclosure Statement under Item
10 of Rule 601 of Regulation S-K under the Exchange Act, or (ii) (x) the loss
of which would have a Material Adverse Effect, or (y) pursuant to which the
Company or any of its subsidiaries expects to or is scheduled to receive
(assuming full performance pursuant to the terms thereof) revenue of $500,000
or more during the 12-month period following the date of this Agreement.
(b) Neither the Company nor any of its subsidiaries is a party
to or is bound by any contract which contains covenants limiting the freedom of
the Company or any of its subsidiaries to engage in any line of business in any
geographic area or to compete with any person or entity or restricting the
ability of the Company or any of its subsidiaries to acquire equity securities
of any person or entity.
(c) With respect to each of the Company Contracts, (i) the
Company (or any of its subsidiaries) is not in default, and to the knowledge of
the Company no other party thereto is in default or has made a claim of default
thereunder, and no event has occurred which, with the passage of time or the
giving of notice (or both), would constitute a default thereunder, or would
permit modification, acceleration or termination thereof, except such as would
not have a Material Adverse Effect and (ii) the consummation of the transactions
contemplated by this Agreement will not give rise to a right of the other party
or parties thereto to terminate such contract or impose liability under the
terms thereof on the Company or any of its subsidiaries.
(d) Neither the Company nor any of its subsidiaries is a party
to any swap, hedge or other derivative instrument or contract other than as set
forth in Schedule 4.8(d)
<PAGE>
to the Company Disclosure Letter.
4.9. OFFER DOCUMENTS; PROXY/INFORMATION STATEMENT; OTHER
INFORMATION; SCHEDULE 14D-9. None of the information supplied in writing by the
Company specifically for inclusion in the documents pursuant to which the Offer
will be made, including the Offer Documents will, at the respective times the
Offer Documents or any amendments or supplements thereto are 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, in light of the circumstances under which they were made, not
misleading. The Schedule 14D-9 on the date filed with the SEC will not 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 foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information furnished to the Company by the Parent or the Purchaser
specifically for use in the Schedule 14D-9. No proxy solicitation materials or
information statement distributed by the Company to its stockholders and/or
filed with the SEC in connection with the Merger, including any amendments or
supplements thereto (collectively, the "Proxy/Information Statement") will, at
the time the Proxy/Information Statement is mailed to the Company's
stockholders, 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 or, at the time of the meeting of stockholders
to which the Proxy/Information Statement, as then amended or supplemented,
relates or at the Effective Time omit to state any material fact necessary to
correct any statement which has become false or mis leading in any earlier
communication with respect to the solicitation of any proxy for such meeting;
except that no representation is made by the Company with respect to infor
mation furnished in writing to the Company by the Parent or the Purchaser
specifically for use in the Proxy/Information Statement. The Schedule 14D-9
and the Proxy/Information Statement each will comply in all material
respects, both as to form and otherwise, with the requirements of the
Exchange Act and the rules and regulations thereunder.
4.10. TITLE TO PROPERTY. Each of the Company and its
subsidiaries owns, has valid leasehold interest in or valid contractual
rights to use, all of the assets, tangible and intangible, used by, or
necessary for the conduct of, its business, except where the failure to have
such valid leasehold interests or such valid contractual rights would not,
individually or in the aggregate, have a Material Adverse Effect and, in the
case of owned assets, owns such assets free and clear of any Liens, except
for such Liens that would not,
<PAGE>
individually or in the aggregate, have a Material Adverse Effect.
4.11. INTELLECTUAL PROPERTY. (a) Schedule 4.11(a) to the
Company Disclosure Letter sets forth all trademark registrations and
applications owned by the Company and its subsidiaries, and all material common
law trademarks and trade names used in the business of the Company and its
subsidiaries as currently conducted and as contemplated to be conducted (the
"Business").
(b) The Company and its subsidiaries own all right, title and
interest in and to the trademarks set forth in Schedule 4.11(a) to the Company
Disclosure Letter as used in the Business (the "Company Marks"). No claim or
demand has been received by the Company or any of its subsidiaries from any
person, and to the knowledge of the Company no proceeding is pending or
threatened, which challenges the rights of the Company or any of the
subsidiaries in respect of the Company Marks or any other Intellectual Property
owned by the Company and its subsidiaries.
(c) Except as set forth in Schedule 4.11(c) to the Company
Disclosure Letter, neither the Company nor any of the subsidiaries has granted
any license or right to use, option, release or covenant not to sue or
non-assertion assurance to any third person with respect to, or granted any
outstanding lien or security interest in, any of the Company Marks or other
Intellectual Property owned by the Company and any of its subsidiaries. Except
as set forth in Schedule 4.11(c) to the Company Disclosure Letter, there is no
existing or contemplated agreement, understanding, or grant of permission
between the Company or any of the subsidiaries and any third person that
encumbers or otherwise affects the Company's exclusive right to use the Company
Marks or other Intellectual Property owned by the Company and any of its
subsidiaries.
(d) The Intellectual Property that is owned by the Company and
its subsidiaries and the Intellectual Property used pursuant to licenses,
sublicenses, agreements or permissions set forth in Schedule 4.11(d) to the
Company Disclosure Letter constitutes all of the Intellectual Property necessary
to the conduct of the Business; provided, however, that Schedule 4.11(d) need
not list individually commercially available software used pursuant to
shrinkwrap licenses so long as such software licenses continue to be in effect,
without change, after the Merger. Immediately after the Merger, the Surviving
Corporation shall own or have the right to use all of the Intellectual Property
currently used in the Business, in each case free from any Liens, except where
the existence of Liens would not have a Material Adverse Effect and, otherwise
on the same terms and conditions as in effect prior to the Merger.
<PAGE>
(e) The conduct of the Business did not and does not infringe
upon, conflict in any material way with or misappropriate any Intellectual
Property of any third party. There are not any open claims known to the Company
or any of its subsidiaries from third parties that the Company and its
subsidiaries infringe their Intellectual Property rights.
(f) To the knowledge of the Company, none of the Intellectual
Property used in the Business is being infringed or used by any third party
without the permission of the Company.
(g) None of the material Intellectual Property (including the
Company Marks) owned by the Company or any subsidiary or used in the Business is
subject to any outstanding order, ruling, decree, judgment or stipulation by or
with any court or other Governmental Entity.
(h) Schedule 4.11(h) to the Company Disclosure Letter sets
forth all material worldwide trademark, copyright, and patent applications and
registrations owned by the Company and its subsidiaries, and the same are
validly subsisting in full force and effect and have not been adjudged invalid
or unenforceable, in whole or in part. The Company and its subsidiaries have
taken all reasonably necessary actions to ensure protection of the Intellectual
Property owned by the Company or any subsidiary or used in the Business
(including maintaining the secrecy of all confidential Intellectual Property).
As used herein, "Intellectual Property" shall mean all
material patents and applications, including all reissues, continuations,
divisions, continuations-in-part, renewals or extensions thereof; trademarks,
service marks, trade names, trade dress, domain names, logos, business and
product names, slogans, and registrations and applications for regis tration or
renewal thereof; copyrights and registrations or renewals thereof; Software;
inventions, processes, designs, formulae, trade secrets, know-how, confidential
and technical information; all other intellectual property and proprietary
rights; copies and tangible embodiments thereof (in whatever form or medium,
including electronic media); and licenses of any of the foregoing.
As used herein, "Software" shall mean all computer software,
including but not limited to, application software and system software,
including all source code and object code versions thereof, in any and all forms
and media, whether recorded on paper, magnetic media or other electronic or
non-electronic media (including data and related documentation, user manuals,
training materials, flow charts, diagrams, descriptive tests and programs,
computer print-outs, underlying tapes, computer databases and similar
<PAGE>
items), integrated circuits, embedded systems, and other electro-mechanical
or processor based systems.
4.12. LABOR RELATIONS; EMPLOYEES. (a) The Company and its
subsidiaries are not (either individually or jointly) parties to or bound by any
collective bargaining agreement and none of the employees of the Company or its
subsidiaries are represented by any labor organization and, to the knowledge of
the Company or its subsidiaries, no union claims to represent these employees
have been made. There have been no union organizing activities or requests for
union representation with respect to employees of the Company or its
subsidiaries within the past five years. Since January 1, 1995, there has not
occurred or been threatened any strike, slowdown, picketing, work stoppage,
concerted refusal to work overtime or other similar labor activity with respect
to employees of the Company or its subsidiaries. There are no pending or, to the
knowledge of the Company or its subsidiaries, threatened unfair labor practice
charges against the Company or its subsidiaries.
(b) The Company and each of its subsidiaries have not during
the past two years effectuated a "plant closing" or "mass layoff" (as defined in
the Worker Adjustment and Retraining Notification Act) affecting any of their
sites of employment or one or more facilities or operating units within any site
of employment or facility, nor will the Company or its subsidiaries take any
such action within the 90 day period prior to the Effective Time.
(c) The Company and each of its subsidiaries have complied in
all material respects with all applicable laws pertaining to the employment
or termination of employment of their respective employees, including all
such laws relating to labor relations, equal employment opportunities, fair
employment practices, prohibited discrimination or distinction and other
similar employment activities.
(d) Except as set forth in Schedule 4.12(d) to the Company
Disclosure Letter, there is no pending or, to the knowledge of the Company or
its subsidiaries, threatened litigation by or on behalf of any present or former
employee (or independent contractor) of the Company the outcome of which would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect or any existing liability pertaining in any manner to the
employment (or in the case of an independent contractor, retention of services)
and/or termination of such employment (or in the case of an independent
contractor, termination of such services) by the Company of such present or
former employee (or independent contractor) which would reasonably be expected
to have a Material Adverse Effect.
<PAGE>
(e) The Company has previously provided the Parent with a
true, correct and complete list, as of the date of this Agreement, of the name
and rate of base salary (or other form of base compensation) payable to each
person who, on the date hereof, is an employee of the Company and/or any
subsidiary. There is no individual who provides services to the Company or any
subsidiary who is classified as independent contractor who, under applicable
Federal income tax laws, rules or regulations, should be characterized as an
employee.
4.13. EMPLOYEE AGREEMENTS AND PLANS. (a) Except as set forth
in Schedule 4.13(a) to the Company Disclosure Letter, there are no employee or
retiree compensation or benefit plans, arrangements, contracts or agreements
(including, without limitation, stock option plans or other equity plans,
employment agreements, change of control, bonus, deferred compensation,
retention, severance and other similar arrangements or agreements) of any type
(including but not limited to plans described in Section 3(3) of ERISA), whether
written or unwritten, (i) maintained, or contributed to, by the Company, any of
its subsidiaries or any other trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company or any of its subsidiaries
would be deemed a "single employer" within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code") or Section 4001(b) of
ERISA for the benefit of any employee or former employee of the Company or any
of its subsidiaries, (ii) with respect to which the Company, any of its
subsidiaries or any ERISA Affiliate has or has had, within the preceding six
years, an obligation to contribute or (iii) with respect to which the Company or
any of its subsidiaries or any ERISA Affiliate has, has had or may have a
liability for the benefit of any employee or former employee of the Company or
any of its subsidiaries (a "Company Benefit Plan"). Neither the Company, any of
its subsidiaries nor any ERISA Affiliate has any formal plan or any
commitment or has communicated to any current or former employee any
intention, whether legally binding or not, to create or to modify in any
material way any Company Benefit Plan. Except as set forth in Schedule
4.13(a) to the Company Disclosure Letter, the Company and its subsidiaries
have the right to terminate any Company Benefit Plan that is a welfare
benefit plan within the meaning of Section 3(1) of ERISA at any time, and
following such termination shall have no liability or obligation thereunder
except to the extent that any claims related to events occurring prior to
such termination have not been paid.
(b) With respect to each Company Benefit Plan, the Company has
provided to the Parent accurate and complete copies of all written plans,
descriptions of unwritten plans, summary plan descriptions, summaries of
material modifications, trust agreements, insurance contracts or other funding
arrangements and other related agreements including all amendments to the
foregoing; the two most recent IRS Forms
<PAGE>
5500 and Forms 990-T, annual reports, including all Schedules and attachments
thereto; the most recent annual and periodic accounting of plan assets; the
most recent determination letter received from the United States Internal
Revenue Service (the "Service"); all material communications received from or
sent to the Service, the Pension Benefit Guaranty Corporation or the
Department of Labor or any other governmental agency or body having
jurisdiction over any Company Benefit Plan (including a written description
of any oral communication); any actuarial study of post-employment life or
medical benefits provided under any such Company Benefit Plan, if any;
statements or other communications regarding withdrawal or other
multiemployer plan liabilities; and the two most recent actuarial reports, to
the extent any of the foregoing may be applicable to a particular Company
Benefit Plan.
(c) Except as set forth in Schedule 4.13(c) to the Company
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement, whether alone or in combination with other events, will not entitle
any present or former employee of the Company or any of its subsidiaries (or any
beneficiary thereof) to severance pay or other termination benefits or
accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any individual and does not constitute, whether
alone or in combination with other events, a triggering event under any Company
Benefit Plan, policy, arrangement, statement, commitment or agreement, which
will or may result in any payment, acceleration, vesting or increase in benefits
to any employee or former employee or director of the Company or any of its
subsidiaries.
(d) No Company Benefit Plan is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA or a "multiple employer plan" within
the meaning of Section 4063 or 4064 of ERISA.
(e) Except as set forth in Schedule 4.13(e) to the Company
Disclosure Letter, (i) neither the Company nor any of its subsidiaries has
incurred or reasonably expects to incur (either directly or indirectly,
including as a result of any indemnification obligation) any liability or
obligation under or pursuant to Title I or IV of ERISA (or any comparable
provision of the law of any jurisdiction other than the United States) or the
penalty, excise tax or joint and several liability provisions of the Code
relating to employee benefit plans or the funding arrangements underlying
such employee benefit plans, and no event, transaction or condition has
occurred or exists which could result in any such liability of the Company or
any of its subsidiaries or, following the Closing, the Parent or the
Surviving Corporation or any of their affiliates, (ii) each Company Benefit
Plan intended to be qualified under Section 401(a) of the Code, the trust (if
any) forming a part thereof, and each voluntary employees' beneficiary
association intended to be qualified under Section 501(a) of the Code that is
used as a funding vehicle for any
<PAGE>
Company Benefit Plan has received a favorable determination letter from the
Service as to its qualification under the Code and no fact or condition
exists or has occurred which could reasonably be expected to result in the
disqualification of any such Company Benefit Plan or adversely affect the
tax-exempt status of any such trust, (iii) there are no pending or threatened
claims by or on behalf of any of the Company Benefit Plans, by or on behalf
of any present or former employee of the Company or any of its subsidiaries
with respect to any of the Company Benefit Plans or otherwise involving any
such Company Benefit Plan or the assets of any Company Benefit Plan (other
than routine claims for benefits), (iv) all contributions, premiums and
benefit payments required to be made or paid by the Company or any of its
subsidiaries in respect of any Company Benefit Plan, insurance contract or
other funding arrangement, or pursuant to any applicable law or collective
bargaining agreement have been paid within the earliest time prescribed by
such Company Benefit Plan, funding arrangement or law and (v) no Company
Benefit Plan is subject to the minimum funding requirements of Section 412 of
the Code or Section 302 of ERISA or Title IV of ERISA. Each of the Company
Benefit Plans has been operated and administered in all respects in
compliance with its terms and all laws, including but not limited to ERISA
and the Code.
(f) No employee is or may become entitled to post-employment
benefits under any Company Benefit Plan by reason of employment with the Company
or any of its subsidiaries, including, without limitation, death or medical
benefits (whether or not insured), other than (i) coverage provided pursuant to
the terms of any Company Benefit Plan specifically identified as providing such
coverage in Schedule 4.13(f) to the Company Disclosure Letter or (ii) benefits
or coverage required by law, including, without limitation, Section 4980B of the
Code and Sections 601 through 609 of ERISA.
(g) Neither the Company nor any of its subsidiaries has made
any payments, is obligated to make any payments, or is party to an agreement
that under certain circumstances could obligate it to make any payments which
would be nondeductible under Section 280G or 162(m) of the Code.
(h) There are no outstanding stock appreciation rights or
limited stock appreciation rights in respect of the Company Common Stock.
(i) Schedule 4.13(i) to the Company Disclosure Letter sets
forth (i) the names of each employee, consultant and other individual who
received an award under any of the Stock Plans and with whom the Company or any
affiliate has entered into any award agreement under any of the Stock Plans that
also provide, as part of the award, for severance payments or benefits upon the
termination of such employee's, consultant's or individual's employment or other
service relationship with the Company, and (ii) the
<PAGE>
amounts of severance payments to which each such employee, consultant or
other person would be entitled under the terms of such award.
(j) Except as otherwise set forth in Schedule 4.13(j) to the
Company Disclosure Letter, no employee who is or may become entitled to
severance payments under any employment agreement entered into with the Company
or any of its subsidiaries shall be or become entitled to severance payments
under any other Company Benefit Plan.
(k) Except as otherwise set forth in Schedule 4.13(k) to the
Company Disclosure Letter, each Company Benefit Plan affecting the terms and
conditions of any employee's employment with the Company or any subsidiary may
be amended or terminated by the Company or a subsidiary at any time without
notice or other limitation, including following the consummation of the
transactions contemplated hereby.
4.14. MORTGAGE BUSINESS.
(a) Each subsidiary of the Company that services or
originates loans (i) is and, after giving effect to the transactions
contemplated by this Agreement, will be, an approved and fully licensed
either (1) FHA-approved mortgagee and servicer for FHA-insured loans, (2)
Delegated Underwriting and Servicing ("DUS") seller/servicer of multi-family
first and second mortgages for Fannie Mae, or (3) GNMA issuer and servicer of
GNMA-guaranteed mortgage-backed securities, as the case may be, and (ii) is
in good standing with each of the FHA, Fannie Mae and GNMA and all
authorities and servicers for the state bond programs in which it
participates. Each subsidiary of the Company referred to in clause (i)(2) of
the preceding sentence meets, and giving effect to the transactions
contemplated by this Agreement, will meet, all applicable Fannie Mae
requirements so as to be able to originate, purchase, hold and service
mortgage loans to be sold to Fannie Mae; and each subsidiary of the Company
referred to in clauses (i)(1) or (3) of the preceding sentence meets, and
giving effect to the transactions contemplated by this Agreement, will meet,
all requirements of law and governmental regulations so as to be eligible to
originate, purchase, hold and service FHA-insured mortgage loans and to issue
mortgage-backed securities guaranteed by GNMA, as the case may be, in each
case to the same extent that the Company currently originates, purchases,
holds and services loans and issues mortgage backed securities guaranteed by
GNMA. There is no pending or, to the Company's knowledge, threatened
cancellation or reduction of any loan purchase commitment or other loan sale
contract to which the Company or any of its subsidiaries is a party, and the
obligations of the Company and its subsidiaries under each such contract are
being performed in accordance with its terms. There is no prior consent
required to be
<PAGE>
given by GNMA or the FHA in connection with the Offer, the Merger or the
other transactions contemplated by this Agreement in order to continue in
full force and effect the respective licenses of the Company and its
subsidiaries.
(b) All loans held for the account of the Company and its
subsidiaries, whether or not for future sale or delivery to an investor (the
"Owned Loans"), are owned by the Company or one of its subsidiaries free and
clear of any Lien, other than (i) Liens in favor of the Company's lender banks
pursuant to warehouse lines of credit as set forth in Schedule 4.14(b) to the
Company Disclosure Letter and (ii) forward sale commitments or similar
agreements to sell any such loans to investors as set forth in Schedule 4.14(b)
to the Company Disclosure Letter, and all Owned Loans meet all applicable
requirements for sale to any intended Investors (as defined below). Each
mortgage or deed of trust securing an Owned Loan, or an assignment thereof, if
applicable, has been duly recorded in the name of the Company or one of its
subsidiaries as mortgagee. Neither the Company nor any of its subsidiaries has
released any security for any Owned Loan, except upon receipt of reasonable
consideration for such release (as documented in the applicable Owned Loan
file), or accepted prepayment of any such Owned Loan which has not been promptly
applied to such Owned Loan.
(c) Each Owned Loan, each loan which was originated by the
Company or one of its subsidiaries and subsequently transferred to a third
party (the "Transferred Loans") and each loan which is being serviced by the
Company or one of its subsidiaries for the account of others (the "Serviced
Loans", and together with the Owned Loans and the Transferred Loans, the
"Loans") was (i) underwritten and originated (to the best knowledge of the
Company in the case of Loans not originally underwritten or originated by the
Company or one of its subsidiaries) and (ii) (in the case of Serviced Loans)
is being serviced and the loan documents and loan files maintained by the
Company or one of its subsidiaries with respect thereto are being maintained
in each case materially in compliance with all applicable laws and
regulations and, if applicable, (1) the requirements of the "Investor" (which
term means (A) Fannie Mae, GNMA, the trustee for any CMBS, or any other
person, as the case may be, that owns any of the Loans or holds beneficial
title to the Loans, and (B) any person who owns servicing rights for Loans
serviced or master serviced by the Company or one of its subsidiaries
pursuant to a Loan Servicing Agreement, as defined below) which originated or
acquired or is expected to acquire such Loan (or, if there is no such
Investor, in accordance with underwriting, servicing and file maintenance
standards which are substantially comparable to those of Fannie Mae), (2) the
requirements of each person who insures or guarantees all or any portion of
the risk of loss upon borrower default on any of the Loans, including,
without limitation, the FHA and any private mortgage insurer, and (3) the
requirements of all providers of life, hazard, flood, disability,
environmental, title or other insurance
<PAGE>
with respect to any of the Loans or the collateral therefor (each, an
"Insurer"). Neither the Company nor any of its subsidiaries has done or
failed to do, or caused to be done or omitted to be done, any act, the effect
of which would operate to invalidate or materially impair (aa) any approvals
of Fannie Mae, GNMA or any other agency or of the FHA to insure, (bb) any
private mortgage insurance or commitment of any private mortgage insurer to
insure, (cc) any title insurance policy, (dd) any hazard insurance policy,
(ee) any environmental insurance policy, (ff) any flood insurance policy,
(gg) any fidelity bond, direct surety bond, errors and omissions or other
insurance policy required by any of Fannie Mae, the FHA or GNMA, Investor or
Insurer, (hh) any surety or guaranty agreement, (ii) any guaranty issued by
GNMA, Fannie Mae or Freddie Mac to the Company or any of its subsidiaries or
to bond purchasers respecting GNMA bonds or mortgage backed securities issued
by the Company or any of its subsidiaries and other like guaranties, (jj) the
rights of the Company or any of its subsidiaries under any Loan Servicing
Agreement (as defined below) or loan purchase commitment, (kk) the
obligations of the mortgagor under the mortgage document, or (ll) title
priority of the mortgage. None of Fannie Mae, GNMA the FHA or any other
agency, nor any Investor or Insurer has (x) notified the Company or any of
its subsidiaries, or to the knowledge of the Company claimed, that the
Company or any of its subsidiaries has violated or has not complied with the
applicable underwriting or servicing standards with respect to Loans sold or
serviced by the Company or any of its subsidiaries or (y) imposed
restrictions on the activities (including commitment authority) of the
Company or any of its subsidiaries.
(d) The loan documents relating to a Loan maintained in the
loan files of the Company were materially in compliance with all applicable laws
and regulations at the time of the origination or modification of such Loan, as
the case may be. The loan files maintained by the Company contain originals (or,
where necessitated by the terms of the applicable mortgage servicing agreements,
contain true, correct and complete copies) of the documents relating to each
Loan and the information contained in such loan files with respect to each such
Loan is true, complete and accurate and in compliance with all applicable laws
and regulations. To the knowledge of the Company, the terms of the note, bond,
deed of trust and mortgage for each such Loan have not been impaired, waived,
altered or modified in any respect from the date of their origination except by
a written instrument which written instrument has been recorded if recordation
is necessary to protect the interests of the owner thereof and duly noted in the
loan file and on the Servicing Tape (as defined below).
(e) All of the contracts pursuant to which the Company or any
of its subsidiaries has the right and/or obligation to service Serviced Loans
(each, a "Loan Servicing Agreement") are (i) valid and binding obligations of
the Company or the
<PAGE>
relevant subsidiary, and to the knowledge of the Company, of all the other
parties thereto, (ii) in full force and effect, (iii) enforceable in
accordance with their terms (except where enforcement thereof may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles) and (iv) owned
by the Company or one of its subsidiaries free and clear of any Lien. The
aggregate principal balance of the Fannie Mae, FHA and GNMA Serviced Loans at
December 31, 1999 was approximately $9.3 billion, and such balance will be no
less than $8.37 billion at the consummation of the Offer. Schedule 4.14(e) to
the Company Disclosure Letter sets forth a true and complete list of all such
Loan Servicing Agreements. There is no material default by the Company or any
of its subsidiaries or, to the knowledge of the Company, claim of default
against the Company or any of its subsidiaries by any party under any such
Loan Servicing Agreement, and to the knowledge of the Company no event has
occurred which with the passage of time or the giving of notice or both would
constitute a default by any party under any such Loan Servicing Agreement or
would result in any such mortgage servicing agreement being terminable by any
party thereto. There is no pending or, to the knowledge of the Company,
threatened cancellation of any Loan Servicing Agreement and the obligations
of the Company and its subsidiaries under each Loan Servicing Agreement are
being performed by the Company or the relevant subsidiary materially in
accordance with the terms of such Loan Servicing Agreement and applicable
rules or regulations.
(f) None of the Company's or any of its subsidiaries'
servicing rights are subject to recourse against the Company or any of its
subsidiaries acting as a servicer, and neither the Company nor any of its
subsidiaries is subject to recourse in connection with any Loans sold by it, in
each case for losses on liquidation of a loan, borrower defaults or repurchase
obligations upon the occurrence of non-payment or other events.
(g) Unless otherwise prohibited by law or an executed escrow
waiver, the Company or one of its subsidiaries collects all escrows related to
the Loans, and all escrow accounts have been maintained by the Company or one of
its subsidiaries and, to the Company's knowledge, all prior servicers materially
in accordance with the related loan documents, all applicable laws, rules,
regulations, and requirements of Investors, Insurers and governmental
authorities, and in accordance with the applicable Loan Servicing Agreements.
Schedule 4.14(g) to the Company Disclosure Letter sets forth the current balance
of all escrow accounts, which balances are at least equal to the amount required
under the relevant Loan documents and the respective Loan Servicing Agreements.
The Company or one of its subsidiaries has credited to the account of borrowers
all interest required to be paid on any escrow account in accordance with
applicable law and the terms of such agreements and loan documents. All
escrow, custodial, and suspense accounts related to the Loans are held in the
name of the
<PAGE>
Company or one of its subsidiaries or in the Investor's name.
(h) There are no servicing or other contracts to which the
Company or any of its subsidiaries is a party which obligates it to make
servicing advances for principal and interest payments with respect to defaulted
or delinquent Loans other than in a manner as provided in standard and customary
agreements with Fannie Mae or GNMA. To the extent made, any such advances are
valid and subsisting amounts owing to the Company or one of its subsidiaries,
subject to the terms of the applicable Loan Servicing Agreement.
(i) All of the Loans are secured by multifamily (i.e., more
than four family) residential real property or commercial real property.
(j) With respect to each Loan, the Company has, since the date
it commenced servicing such loan and, to the Company's knowledge, all prior
servicers have (i) properly and accurately entered into its system all data
required to service the loan materially in accordance with the related loan
documents and all regulations, (ii) properly and accurately adjusted the monthly
payment on each payment adjustment date (for those Loans for which the interest
rate is not fixed for the entire term of the loan), (iii) properly and
accurately calculated the amortization of principal and interest on each payment
adjustment date (for those Loans for which the interest rate is not fixed for
the entire term of the loan), in each case materially in compliance with all
applicable laws, rules and regulations and the related loan documents, and (iv)
executed and delivered any and all necessary notices required under, and in a
form that complies materially with, all applicable laws, rules and regulations
and the terms of the related loan documents.
(k) There are no agreements or understandings of any nature
with any third party that obligate the Company or any of its subsidiaries to
offer conduit originations or any other Loan origination opportunity to such
third party.
(l) (i) The Company and its relevant subsidiary, as servicer
under the applicable Loan Servicing Agreement (the "Securitization Servicer") of
each outstanding transaction under which the Company or any of its subsidiaries
has sold or pledged Loans in a securitization, whether sold under the Securities
Act or otherwise (a "Securitization Transaction"), have complied in all material
respects with all contracts, including the Loan Servicing Agreements, and all
material conditions to be performed or satisfied by them with respect to all
agreements and arrangements pursuant to which such person is bound under such
Securitization Transaction (collectively, "Securitization Instruments"). (ii) No
Securitization Servicer or, to the Company's knowledge, no trustee or issuer
with respect
<PAGE>
to any securitization, has taken any action which would reasonably be
expected to adversely affect the characterization or tax treatment for
federal, state or local income or franchise tax purposes of the issuer or any
securities issued in a Securitization Transaction, and all required federal,
state and local tax and information returns, if any, relating to any
Securitization Transaction required to be filed by the Securitization
Servicer have been properly filed by it. (iii) Each material representation
and warranty made by the Company or its subsidiaries in each "Purchase
Agreement," "Pooling and Servicing Agreement," "Placement Agency Agreement,"
"Servicer's Indemnification Agreement" and any other Securitization
Instrument to which any of them was a party in any Securitization Transaction
was true and correct in all material respects whenever made or reaffirmed by
any of them and the Company and its subsidiaries have each fully performed
and carried out each material covenant and agreement made by any of them in
any such Securitization Instrument. (iv) No rating agency has downgraded, or
given the Company or its subsidiaries any written indication that it is
considering a downgrading of any securities issued in any Securitization
Transaction, or of its rating of any Securitization Servicer.
(m) Each Loan which is indicated in the related loan documents
to have FHA insurance is insured under the National Housing Act or qualifies for
such insurance. As to each FHA insured loan and each Loan which is indicated in
the related loan file to be insured by private mortgage insurance, the Company
or one of its subsidiaries has complied in all material respects with applicable
provisions of the insurance or guaranty contract and applicable laws and
regulations, the insurance or guaranty is in full force and effect with respect
to each such Loan, and to the knowledge of the Company, there does not exist any
event or condition which, but for the passage of time or the giving of notice or
both, can result in a revocation of any such insurance or guaranty or constitute
adequate grounds for the applicable Insurer to refuse to provide insurance or
guaranty payments thereunder.
(n) Security for each Loan has been covered by a policy of
hazard insurance and flood insurance, to the extent required by the Loan
Servicing Agreements relating thereto or any laws, rules, regulations or
Investor or Insurer requirements applicable to such Loan, all in a form usual
and customary in the industry and each of which is in full force and effect and
all amounts due and payable under each policy have been paid prior to the date
such payments were due; and all taxes, assessments, ground rents or other
applicable charges or fees due and payable as to each Loan have been paid prior
to the date such payments were due. Any and all claims under such insurance
policies have been submitted and processed in accordance with the applicable
Investor's and Insurer's requirements, and all outstanding claims in excess of
$100,000 are set forth in Schedule 4.14(n) to the Company Disclosure Letter.
Such insurance policies name the
<PAGE>
Company and its successors and assigns as mortgagee under standard BFU 438
mortgage protection endorsements or their equivalent.
(o) Each Loan is covered by an ALTA lender's title insurance
policy or other generally acceptable form of policy of insurance or opinion of
title acceptable to the relevant Investor, and each such title insurance policy
is issued by an Insurer acceptable to the applicable Investor and qualified to
do business in the jurisdiction where the collateral securing such Loan is
located, and insures the originator and its successors and assigns as to the
first priority lien of the mortgage in the original principal amount of the Loan
(or, in the case of a second mortgage, the second priority lien). All
outstanding claims are set forth in Schedule 4.14(o) to the Company Disclosure
Letter. The applicable Investor, as assignee of the originator's rights, is an
insured of such lender's title insurance policy, and such lender's policy is in
full force and effect. Neither the Company nor any of its subsidiaries has, nor,
to the Company's knowledge, has any prior servicer, performed any act or
omission which would impair the coverage of such lender's policy.
(p) Neither the Company nor any of its subsidiaries has
received written notice of or has knowledge of any damage or destruction for
which insurance has been denied or is insufficient in respect of, or any
proceeding pending or threatened for the partial or total condemnation of, any
of the collateral securing any of the Loans, and neither the Company nor any of
its subsidiaries has received written notice or has knowledge that all or any
part of such collateral has been or will be condemned.
(q) The Company has previously delivered to the Parent a tape
(magnetic media) ("Servicing Tape") on which certain information regarding the
servicing portfolio of the Company and its subsidiaries as of December 31, 1999
is recorded. Such tape accurately contains the list of Serviced Loans as of such
date. The information contained on such tape is true, correct, accurate and
complete in all material respects.
(r) To the knowledge of the Company, (i) there have been no
actions taken by the Company or any of its subsidiaries as originator or
servicer of any Loans, (ii) there are no circumstances or conditions involving
any of the Loans, and (iii) there are no inquiries, investigations or abatement
activities that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of any
property of the Company pursuant to any Environmental Law.
(s) (i) There are no Loans in the DUS portfolio with a greater
risk level than Fannie Mae Risk Level I other than as set forth in Schedule
4.14(s) to the Company Disclosure Letter, and (ii) the credit quality of the
Loan portfolio has not suffered any material adverse change since December 31,
1999.
<PAGE>
(t) Except as set forth in Schedule 4.14 (t) to the Company
Disclosure Letter, (i) the Company has not incurred any obligation or
commitment, whether conditional, contingent or otherwise, to fund, invest,
loan or disburse any funds to or on behalf of WMF Carbon Mesa Advisors, Inc.
("WMF-CMA"), Commercial Mortgage Investment Trust, Inc. ("COMIT"), Carbon
Capital Mortgage Partners I, L.P. ("CCMP"), or Commercial Asset Purchase Fund
LLC ("CAP I"); (ii) WMF-CMA has not incurred any obligation or commitment,
whether conditional, contingent or otherwise, to fund, invest, loan or
disburse any funds to or on behalf of COMIT, CCMP, CAP I or any other party;
(iii) none of the Company nor any of its subsidiaries has guaranteed or
otherwise agreed to pay, whether conditional, contingent or otherwise, any
obligation or commitment of COMIT, CCMP or CAP I; and (iv) neither COMIT,
CCMP nor CAP I has incurred any obligation or commitment, whether
conditional, contingent or otherwise, to fund, invest, loan or disburse any
funds to or on behalf of any party.
(u) To the extent any of the Schedules to the Company
Disclosure Letter relating to this Section 4.14 contains information that is as
of the month-end prior to the date of this Agreement, the Company (i) represents
that there has been no material adverse change in the information set forth on
such Schedules and (ii) undertakes to update such Schedules as promptly as
practicable after the end of each calendar month occurring between the date of
this Agreement and the Effective Time.
4.15. ABSENCE OF CERTAIN CHANGES. Since December 31, 1999,
except for the negotiation and execution of this Agreement, the Company and its
subsidiaries have conducted their respective businesses and operations
consistent with past practice only in the ordinary and usual course and there
have not occurred (i) any events, changes, or effects (including the incurrence
of any liabilities or obligations of any nature, whether accrued, contingent or
otherwise) having, or which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; (ii) any material adverse change
in the availability of capital for the commercial or multi-family mortgage
markets; (iii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
equity interests of the Company or of any of its sub sidiaries (except for cash
dividends paid to the Company by its wholly owned subsidiaries); (iv) any change
by the Company or any of its subsidiaries in accounting principles, practices or
methods, except insofar as may be required by a change in GAAP; (v) any grant of
Options or stock appreciation rights under any Company Benefit Plan; (vi) any
increase in the compensation of any officer or grant of any general salary or
benefits increase to the employees of the Company other than in the ordinary
course of business consistent with past practice; (vii) any adoption, amendment
<PAGE>
or execution (or any representation regarding the adoption, amendment or
execution) of any employment, consulting, retention, change of control,
collective bargaining, bonus or other incentive compensation, profit sharing,
health or other welfare, stock option or other equity, pension, retirement,
vacation, severance, deferred compensation plan or arrangement for the
benefit of any employee, consultant or director of the Company; (viii) any
entry by the Company into any agreement, commitment or transaction or any
incurrence of any liability (direct, contingent or otherwise) that is
material to the Company and its subsidiaries, taken as a whole, other than in
the ordinary course of business; or (ix) any other action or failure to act
by the Company which, if occurring after the date of this Agreement, would
constitute a breach of Section 6.1 hereof.
4.16. LITIGATION. There is no suit, action, proceeding or
investigation (whether at law or equity, before or by any federal, state or
foreign court, tribunal, commission, board, agency or instrumentality, or before
any arbitrator) pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries, the outcome of which would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company or any of its subsidiaries having, or
which would reasonably be expected to have, a Material Adverse Effect.
4.17. TAXES. (a) The Company, its subsidiaries and all
affiliated, combined or consolidated tax groups of which the Company or any of
its subsidiaries is or has been a member (each an "Affiliated Group") (i) have
duly filed all Tax Returns (as hereinafter defined) required to be filed by them
on or prior to the date hereof, and will duly file all material Tax Returns
required to be filed by them on or before the Effective Time, and (ii) have duly
paid in full, or made provision for the payment of, all Taxes (as hereinafter
defined) for all periods through the Closing Date. Such Tax Returns are and will
be true, complete and correct in all material respects.
(b) No audits or other proceedings are presently pending with
regard to any Taxes or Tax Returns of the Company, any of its subsidiaries or
any Affiliated Group in which the Company or any of its subsidiaries is or has
been a member, (i) for periods including only days after May 9, 1997 or, (ii) to
the knowledge of the Company, for periods including days on or before May 9,
1997, in all cases which proceedings would individually or in the aggregate
result in a Material Adverse Effect.
(c) No material deficiencies for Taxes were asserted against
the Company, any of its subsidiaries or any Affiliated Group in which the
Company or any of its subsidiaries is or has been a member (i) for periods
including only days after May 9, 1997
<PAGE>
or (ii) to the knowledge of the Company, for periods including days on or
before May 9, 1997, in all cases which have not been resolved and fully paid
or which are not adequately reserved for.
(d) Schedule 4.17 to the Company Disclosure Letter sets
forth the net operating loss and net capital loss carryovers of the Company
and its subsidiaries for United States federal, state and local Tax purposes
(identified by jurisdiction) to the Tax year beginning January 1, 2000, or
such other Tax year identified therein. All net operating loss and net
capital loss carryovers of the Company and its subsidiaries have arisen with
respect to periods beginning on or after May 9, 1997. Since May 9, 1997,
there has been no "ownership change," as defined in Section 382 of the
Internal Revenue Code of 1986, with respect to the Company or any of its
subsidiaries prior to the Closing Date.
(e) "Taxes" shall mean all federal, state, local and foreign
taxes, and other assessments of a similar nature (including, without limitation,
any payroll or employment taxes), whether imposed directly or through
withholding and including any interest and penalties thereon and additions
thereto. "Tax Returns" shall mean all federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns.
4.18. ENVIRONMENTAL MATTERS. Except for such matters as would
not, individually or in the aggregate, have a Material Adverse Effect: (i) the
Company and each of its subsidiaries are, and at all times have been, in
compliance with all applicable Environmental Laws; (ii) the Company and each of
its subsidiaries have at all times been in possession of, and compliance with,
all permits, authorizations and approvals required under applicable
Environmental Laws; (iii) the Company has no knowledge of or reason to know that
the properties currently owned or operated by the Company (including soils,
groundwater, surface water, buildings or other structures) are contaminated with
any Hazardous Substances; (iv) the Company has no knowledge of or reason to know
that the properties formerly owned or operated by the Company or any of its
subsidiaries were contaminated with Hazardous Substances during the period of
ownership or operation by the Company or any of its subsidiaries; (v) neither
the Company nor any of its subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (vi)
neither the Company nor any of its subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (vii) neither the
Company nor any of its subsidiaries has received any notice, demand, letter,
claim or request for information alleging that the Company or any of its
subsidiaries may be in violation of or liable under any Environmental Law;
(viii) neither the Company nor any of its subsidiaries is subject to any orders,
decrees, injunctions or other arrangements with
<PAGE>
any Governmental Entity or any other person or is subject to any indemnity or
other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (ix) there are no
circumstances or conditions involving the Company or any of its subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use, or transfer of
any property of the Company pursuant to any Environmental Law. The Company
has made available to the Purchaser all site assessments, audits and studies
in its possession, custody and control relating to environmental conditions
at any property or assets currently or formerly owned, leased or used.
As used herein, the term "Environmental Law" means any
federal, state, local or foreign law, statute, ordinance, regulation, rule,
judgment, order, decree, arbitration award, agency requirement, license, permit,
authorization or opinion or any other requirement of law (including common law),
relating to: (A) the protection, investigation or restoration of the
environment, health and safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) noise, odor, wetlands, pollution, contamination or any injury or threat of
injury to persons or property.
As used herein, the term "Hazardous Substance" means any
substance or material that is (A) listed, classified or regulated pursuant to
any Environmental Law; (B) any petroleum product or by-product,
asbestos-containing material, lead-containing paint, polychlorinated biphenyls,
radioactive materials, radon or urea-formaldehyde insulation; or (C) any other
substance or material which may be the subject of regulatory action by any
Government Entity pursuant to any Environmental Law.
4.19. BOARD APPROVAL; STATE TAKEOVER STATUTES; STOCKHOLDER
VOTE. (a) The Board of Directors of the Company has approved the Offer, the
Merger and this Agreement, and the consummation of all transactions contemplated
by this Agreement, and such approval is sufficient to render inapplicable to the
Merger and the other transactions contemplated by this Agreement the provisions
of Section 203 of the GCL.
(b) Unless the Merger is consummated in accordance with the
provisions of Section 253 of the GCL, the affirmative vote of a number of shares
representing a majority of the total voting power represented by the Company
Common Stock entitled to be cast approving this Agreement is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
<PAGE>
4.20. RIGHTS AGREEMENT. The Company does not have any
continuing obligations under the Rights Agreement, dated as of April 21, 1997,
by and between NHP Incorporated, NHP Financial Services, Ltd. and The First
National Bank of Boston as Rights Agent, and is not a party to any other
agreement giving rise to stockholder rights as a result of the announcement,
commencement or consummation of the Offer, the execution or delivery of this
Agreement or any amendment hereto or the consummation of the other transactions
contemplated by this Agreement.
4.21. FINDERS AND INVESTMENT BANKERS. No agent, broker, person
or firm acting on behalf of the Company is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the parties hereto, or from
any person controlling, controlled by, or under common control with any of the
parties hereto, in connection with this Agreement or any of the transactions
contemplated hereby, except for CSFB, whose fees (which are limited to those set
forth in Schedule 4.22 to the Company Disclosure Letter), to the extent payable,
shall be paid by the Company.
4.22. TRANSACTION COSTS. Schedule 4.22 to the Company
Disclosure Letter sets forth a true and complete list of all transaction-related
expenses and change of control payments for which the Company has become liable,
or will become liable, through the Closing Date (other than premium to be paid
for any Representations and Warranties Insurance Policy) ("Transaction Costs").
The Company's aggregate pre-tax liability for all such Transaction Costs up to
and including the Closing Date will in no event exceed the limits set forth in
Schedule 4.22. The Company has a written commitment or oral understanding with
each service provider or other creditor whose fees, expenses or charges are
reflected in Schedule 4.22 to the effect that such party will not submit an
invoice to, or otherwise seek payment from, the Company in connection with the
transactions contemplated by this Agreement in an amount that exceeds that set
forth in Schedule 4.22. For purposes of determining whether the Offer Condition
set forth in paragraph (d) of Annex A has been satisfied, the failure of any
representation or warranty contained in this Section 4.22 to be true and correct
shall be deemed "material."
4.23. OPINION OF FINANCIAL ADVISOR. The Company has received
the opinion of CSFB to the effect that, as of the date of this Agreement, the
consideration to be received in the Offer and the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a complete and correct signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to the Parent.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
Each of the Parent and the Purchaser jointly and severally
represents and warrants to the Company as follows:
5.1. ORGANIZATION. Each of the Parent and the Purchaser is
a limited liability company or a corporation, as the case may be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority
to conduct its business as now being conducted. The Purchaser is a
wholly-owned subsidiary of the Parent.
5.2. AUTHORIZATION OF THIS AGREEMENT. Each of the Parent and
the Purchaser has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
sole member or the Board of Directors, as the case may be, of the Parent and the
Purchaser and by the Parent as the sole stockholder of the Purchaser, and no
other proceedings on the part of the Parent or the Purchaser are necessary to
authorize this Agreement or consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of the
Parent and the Purchaser and this Agreement (assuming the due and valid
authorization, execution and delivery of this Agreement by the Company and the
enforceability of this Agreement against it) constitutes a valid and binding
agreement of the Parent and the Purchaser and is enforceable against each of
them in accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except for (i)
filings required under the Exchange Act in connection with this Agreement and
the transactions contemplated hereby, including the Tender Offer Statement on
Schedule TO ("Schedule TO"), (ii) the filing of a Pre-Merger Notification and
Report Form by the Parent under the HSR Act, and such filings as may be required
under any other Antitrust Laws, (iii) the filing and recordation of appropriate
merger documents as required by the GCL, (iv) filings under the securities or
blue sky laws or takeover statutes of the various states, (v) filings in
connection with any applicable transfer or other taxes in any applicable
jurisdiction and (vi) such filings as are disclosed in the Company Disclosure
Letter, no
<PAGE>
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the consummation by the Parent and the
Purchaser of the transactions contemplated by this Agreement, the failure to
make or obtain which would materially impair the ability of the Parent or the
Purchaser to perform their respective obligations hereunder or to consummate
the transactions contemplated hereby. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
nor com pliance by the Parent or the Purchaser with any of the provisions
hereof will (i) conflict with or result in any violation of any provision of
the organizational documents of the Parent or the certificate of
incorporation or by-laws of the Purchaser, (ii) result in a viola tion or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any Liens upon any of the
properties or assets of the Parent or the Purchaser or any of their
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation to which the Parent or the Purchaser or any of their subsidiaries
is a party, or by which any of them or any of their respective properties or
assets is bound, or (iii) violate any statute, rule, regulation, order,
injunction, writ or decree of any Governmental Entity applicable to the
Parent or the Purchaser or any of their subsidiaries or by which any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (ii) and (iii) con flicts, violations, breaches or defaults which
would not, either individually or in the aggre gate, prevent or materially
delay consummation of the transactions contemplated by this Agreement.
5.4. OFFER DOCUMENTS. The Offer Documents will comply in all
material respects, both as to form and otherwise, with the requirements of the
Exchange Act and the rules and regulations thereunder. The Offer Documents, all
written communications by the Parent or Purchaser relating to the transactions
contemplated by this Agreement as filed with the SEC, and all amendments and
supplements thereto, will, when filed with the SEC and when published, sent or
given to holders of Company common stock, comply as to form in all material
respects with the Exchange Act and will not 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, except that no
representation is made by the Parent or Purchaser with respect to information
supplied by or on behalf of the Company for inclusion therein.
5.5. PROXY/INFORMATION STATEMENT; OTHER INFORMATION. None of
the infor mation supplied or to be supplied in writing by the Parent or the
Purchaser specifically for inclusion in the Schedule 14D-9 or in the
Proxy/Information Statement
<PAGE>
will, (i) at the time the Schedule 14D-9 or the Proxy/Information Statement
is filed with the SEC, at any time it is amended or supplemented or at the
time it is first published, given or mailed to the Company's stockholders, as
the case may be, 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 or, (ii) in the case of the Proxy/Information
Statement, at the time of the meeting of stockholders to which such
Proxy/Information Statement, as then amended or supplemented, relates, or at
the Effective Time, omit to state any material fact necessary to correct any
statement which has become false or misleading in any earlier communication
with respect to the solicitation of any proxy for such meeting.
Notwithstanding the foregoing, no representation or warranty is made with
respect to any information with respect to the Company or its officers,
directors and affiliates provided to the Parent or the Purchaser by the
Company in writing for inclusion in the Offer Documents or amendments or
supplements thereto.
5.6. FINANCIAL ABILITY TO PERFORM. The Parent and the
Purchaser, at the expiration of the Offer and the Effective Time, will have cash
funds sufficient to pay all cash payments for Shares in the Offer and the Merger
and, to pay all related fees and expenses.
5.7. FINDERS AND INVESTMENT BANKERS No agent, broker, person
or firm acting on behalf of the Parent or the Purchaser is, or will be, entitled
to any fee, commission or broker's or finder's fees from any of the parties
hereto, or from any person controlling, controlled by, or under common control
with any of the parties hereto, in connection with this Agreement or any of the
transactions contemplated hereby, except for Prudential Securities Incorporated
whose fees, to the extent payable, shall be paid by the Parent.
ARTICLE VI
COVENANTS
6.1. CONDUCT OF THE BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement, agreed to in writing by the Parent or as set
forth in the Company Disclosure Letter, during the period from the date of this
Agreement and prior to its termination or the time the directors designated by
the Purchaser have been elected to, and shall constitute a majority of, the
Board of Directors of the Company, the Company and its subsidiaries will each
conduct its operations (i) according to its ordinary course of business
consistent with past practice or (ii) within the scope of the authority given
management by the Board of Directors of the Company in the corporate policies as
set
<PAGE>
forth in and modified pursuant to a facsimile transmission, dated May 8,
2000, Re: Corporate Policies from Michael B. Jameson, Senior Vice President
of Parent to the Chairman and Chief Executive Officer of the Company (the
"Corporate Policies"). Without limiting the gene rality of the foregoing, and
except as otherwise expressly permitted by the Corporate Policies,
contemplated by this Agreement or set forth in the Company Disclosure Letter,
prior to the Effective Time, neither the Company nor any of its subsidiaries
will, without the prior written consent of the Parent (which consent shall be
solicited from Parent by notice given pursuant to Section 10.4, upon receipt
of which Parent shall respond within 10 days):
(a) amend its certificate of incorporation or by-laws (or
equivalent instruments);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of additional options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any shares of capital stock of any
class or any securities convertible into shares of capital stock of any
class, except as required by any stock option plan or agreement
existing as of the date hereof;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, redeem or otherwise acquire any shares of
its capital stock, or alter in any respect the ownership structure of
the Company and its subsidiaries;
(d) (i) pledge or otherwise encumber shares of capital stock
of the Company or any of its subsidiaries; (ii) create, incur, assume,
maintain, prepay, or permit to exist any long-term debt (including
obligations in respect of capital leases) or obligations with respect
to letters of credit or any material short-term debt, other than
indebtedness that is mandatorily prepayable in accordance with its
terms and short-term borrowings incurred in the ordinary course of
business consistent with past practice; (iii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person other than
any subsidiary of the Company; or (iv) make any loans, advances or
capital contributions to, or investments in, any person other than any
of the subsidiaries of the Company (other than DE MINIMIS amounts
advanced to employees for travel, meal and other similar
business-related expenses or the advances it has committed to make on
co-investments in COMIT);
<PAGE>
(e) (i) sell, transfer, mortgage or otherwise dispose of or
encumber, any business, subsidiary, assets of the Company and its
subsidiaries, or, other than in the ordinary course of business
consistent with past practice, fixed assets, (ii) sell, assign or
otherwise transfer any rights to service loans, (iii) except in the
ordinary course of business and in a manner consistent with past
practice and, in the case of encumbrances, pursuant only to existing
conduit agreements that have been previously disclosed to the Parent,
sell, transfer or encumber any loan or (iv) cancel any correspondent
relationships;
(f) amend, default under or terminate any Company Contracts,
waive, release or assign any material right or claim, or modify, or
enter into any new, intra-company agreements or arrangements;
(g) originate any DUS Loans with a greater risk level than
Fannie Mae Risk Level I or originate or underwrite any Loans under
origination and underwriting standards other than those in place on the
date of this Agreement;
(h) permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be cancelled or terminated;
(i) grant any increase in the compensation payable or to
become payable to any of its officers or employees except in the
ordinary course of business consistent with past practice to employees
who are not officers and except to the extent required under employment
or consulting contracts in effect on the date of this Agreement, copies
of which have been delivered to the Purchaser or increase the total
number of employees employed by the Company or any subsidiary or take
any other action that has the effect of increasing the aggregate
payroll obligations of the Company or any subsidiary in any material
fashion, or establish, adopt, enter into, make any new grants or awards
under, be obligated to grant any awards under, terminate, amend, or
make any representations regarding, any Company Benefit Plan or any
collective bargaining (except as required by law), bonus, profit
sharing, thrift, compensation, stock option or other equity, pension,
retirement, incentive or deferred compensation, employment, retention,
termination, severance, health, life or other welfare, fringe or other
plan, agreement, trust, fund, policy or arrangement for the benefit of
any current or former directors, officers or employees of the Company
or any of its subsidiaries, or grant or pay any benefit not required by
any existing plan or arrangement (including, without limitation, the
granting of stock options, stock appreciation rights, shares of
restricted stock or performance units) or amend any annual return
<PAGE>
or other filing required with respect to any Company Benefit Plan by
the Service, the Pension Benefit Guaranty Corporation, the Department
of Labor or any other governmental agency or body having jurisdiction
over any Company Benefits Plan;
(j) change in any material respect any of the accounting
principles used by it, unless required by GAAP or deplete the reserves
or cash balances of the Company or any of the subsidiaries, other than
in the ordinary course of business consistent with past practices;
(k) (i) enter into any material commitment or transaction with
respect to the Company or its subsidiaries outside the ordinary course
of business, (ii) transfer any business or material portion thereof,
(iii) make any further investment in WMF Carbon Mesa Advisors, Inc. or
(iv) enter into any new line of business;
(l) (i) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a 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 of any
other person (other than the purchase of assets in the ordinary course
of business and consistent with past practice), or (ii) acquire any
servicing right in a "bulk" transaction;
(m) (i) take any action, engage in any transaction or enter
into any agreement which would cause any of the representations or
warranties set forth in Article IV hereof to be untrue as of the
Closing Date or (ii) purchase or acquire, or offer to purchase or
acquire, any shares of capital stock of the Company;
(n) take any action, including without limitation, any
amendments to the Company Certificate of Incorporation, which would,
directly or indirectly, restrict or impair the ability of the Parent to
vote, or otherwise to exercise the rights and receive the benefits of a
stockholder with respect to, securities of the Company that may be
acquired or controlled by the Parent or the Purchaser or permit any
stockholder to acquire securities of the Company on a basis not
available to the Parent in the event that the Parent were to acquire
securities of the Company;
(o) terminate the employment of any production or management
personnel identified by the Parent to the Company in a facsimile
communication from Michael B. Jameson, Senior Vice President of Parent
to the Chairman and Chief
<PAGE>
Executive Officer of the Company dated May 8, 2000;
(p) amend any Tax Return previously filed or agree to settle
or compromise any government audit, assessment, dispute or other proceedings
with respect to Taxes;
and
(q) agree to do any of the foregoing actions.
6.2. ACCESS TO INFORMATION. From the date hereof to the
Effective Time, the Company shall, and shall cause its subsidiaries,
officers, directors, employees, auditors and other agents to, afford the
officers, employees, auditors and other agents of the Parent reasonable
access to its officers, employees, agents, properties, offices, plants and
other facilities and to all books, records and contracts, and shall furnish
the Parent with all financial, operating and other data and information as
the Parent, through its officers, employees or agents, may from time to time
reasonably request. The Company will promptly furnish to the Parent a copy of
each material document filed or received by it pursuant to the Federal
securities laws or Federal, state, local or foreign tax laws or any
Environmental Laws, and of such other documents as the Parent may reasonably
request. The Confidentiality Agreement shall apply with respect to
information furnished hereunder.
6.3. STOCKHOLDER APPROVAL. (a) If required by applicable law
in order to consummate the Merger, as soon as practicable following the purchase
of the Shares pur suant to the Offer, the Company, acting through its Board of
Directors, shall in accordance with applicable law, take all steps necessary
duly to call, set a record date for, give notice of, convene and hold a meeting
of its stockholders for the purpose of voting on the adoption and approval of
this Agreement and the transactions contemplated hereby. At such meeting, the
Parent and the Purchaser will each vote, or cause to be voted, all Shares
acquired in the Offer or otherwise beneficially owned by it or any of its
subsidiaries on the record date for such meeting, in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby. Subject to
the rights of the Board of Directors as set forth in Section 6.8(d), the Company
shall use its reasonable best efforts to solicit from its stockholders written
consents and proxies, and shall take all other action necessary and advisable,
to secure the vote of stockholders required by applicable law to obtain the
approval for this Agreement.
(b) The Company will, as promptly as practicable, if
required by law for the consummation of the Merger and upon the request of
the Parent or the Purchaser, prepare and file a Proxy/Information Statement
with the SEC, and shall use best efforts to
<PAGE>
obtain and furnish the information required to be included by it in the
Proxy/Information Statement and, after consultation with the Parent, to
respond promptly to any comments made by the SEC with respect to the
Proxy/Information Statement and any preliminary version thereof, to furnish
all information required to prepare the definitive Proxy/Information
Statement (including, without limitation, financial statements and supporting
schedules and certificates and reports of independent public accountants) and
cause the Proxy/Information Statement to be mailed to its stockholders at
the earliest practicable time following the purchase of the Shares pursuant
to the Offer. If necessary, after the definitive Proxy/Information Statement
shall have been so mailed, the Company will promptly circulate amended,
supplemental or supplemented proxy material and, if required in con nection
therewith, resolicit proxies. The Company will not use any proxy material in
connection with the meeting of its stockholders without the Parent's prior
approval, such consent not to be unreasonably delayed or withheld, and
subject to the rights of the Board of Directors as set forth in Section
6.8(d). The Board of Directors of the Company, the sole member of the Parent
and the Board of Directors of the Purchaser have each deter mined that the
Merger is advisable, fair to and in the best interests of the stockholders or
the members, as the case may be, of their respective companies and, except to
the extent that the conditions set forth in Section 6.8(d) have been
satisfied, the Board of Directors of the Company will (i) recommend to the
stockholders of the Company the adoption and approval of this Agreement and
the transactions contemplated hereby and the other matters to be submitted to
such stockholders in connection therewith and (ii) use its best efforts to
obtain the necessary approval by the stockholders of the Company of this
Agreement and the transactions contemplated hereby. The Parent shall provide
the Company with the information concerning the Parent and the Purchaser
required to be included in the Proxy/Information Statement. The Company
agrees that it will include in the Proxy/Information Statement the
recommendation of its Board of Directors that holders of Company Common Stock
approve and adopt this Agreement and approve the Merger, unless the Board of
Directors of the Company has exercised its rights pursuant to, and in
accordance with, Section 6.8(d) of this Agreement.
(c) Notwithstanding the foregoing, in the event that after the
closing of the Offer the Purchaser or its affiliates shall be the owner of at
least 90 percent of the outstanding Shares, the parties hereto shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer and in compliance with any
applicable rules of the SEC, without a meeting of stockholders of the Company,
in accordance with Section 253 of the GCL.
6.4. REASONABLE BEST EFFORTS. Subject to the terms and
conditions herein provided, and except to the extent expressly permitted in
Section 6.3(b), each of the parties hereto agrees to cooperate and use their
respective reasonable best efforts
<PAGE>
consistent with applicable legal requirements to take, or cause to be taken,
all action, and to do, or cause to be done, all things necessary or proper
and advisable under applicable laws and regula tions to ensure that the
conditions set forth in Annex A hereto and Article VII hereof are satisfied
and to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement. The Company
agrees to pay the non-refundable deposit and the premium payable under, and
in accordance with the terms of, that certain Representations and Warranties
Insurance Policy, effective on the date of this Agreement, between The
Reliance Insurance Company of Illinois, as Insurer, and the insured named
therein.
6.5. CONSENTS. The Parent and the Company each shall use
its commercially reasonable efforts to obtain all material consents of third
parties and governmental authorities, and to make all filings (including,
without limitation, under any applicable Antitrust Laws) with all
Governmental Entities and with Fannie Mae, FHA and GNMA, necessary to the
consummation of the transactions contemplated by this Agreement. The Company,
the Parent and the Purchaser shall as soon as practicable file Pre-Merger
Notification and Report Forms under the HSR Act with the FTC and the
Antitrust Division, and shall use their commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from the FTC or
the Antitrust Division for additional information or documentation. Each of
the parties shall use reasonable efforts (but neither the Parent, the
Purchaser nor the Company nor any of its respective subsidiaries shall have
any obligation to pay any material fees or incur any material expenses) to
secure required written consents or waivers. In addition, the Parent shall
provide publicly available financial information, and such other information,
about itself as may be reasonably requested by the person from whom a consent
or waiver is sought in connection with obtaining any such consents or waivers.
6.6. PUBLIC ANNOUNCEMENTS. The Parent and the Company will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Offer, the Merger or the transactions
contemplated by this Agreement and neither the Parent nor the Company shall
issue any such press release or make any such public statement without the prior
approval of the other party, which approval will not be unreasonably delayed or
withheld, except as may be required by applicable laws or court process.
6.7. CONSENT OF THE PARENT. The Parent, as the sole
stockholder of the Purchaser, by executing this Agreement consents to the
execution and delivery of this Agreement by the Purchaser and the consummation
of the Merger and the other transactions contemplated hereby and such consent
shall be treated for all purposes as a
<PAGE>
vote duly cast at a meeting of the stockholders of the Purchaser held for
such purpose.
6.8. NO SOLICITATION. (a) Neither the Company nor any of
its subsidiaries nor any of their respective officers, directors, employees,
agents or representatives (including, without limitation, investment bankers,
attorneys and accountants) shall, directly or indi rectly, (i) solicit,
initiate or encourage or (ii) enter into any discussions or negotiations
with, in any way continue any discussions or negotiations commenced before
the date of this Merger Agreement with, or disclose directly or indirectly
any information not cus tomarily disclosed concerning its business and
properties to, or afford any access to its properties, books and records to,
any corporation, partnership or other person or group in connection with any
inquiry or proposal (an "Acquisition Proposal") regarding a sale of any
shares of the capital stock of the Company or any of its subsidiaries or a
merger, con solidation or sale or spin-off of all or a substantial portion of
the assets of the Company or any subsidiary of the Company, or a liquidation
or a recapitalization of the Company or any of its subsidiaries, or any
similar transaction. The Company will notify the Parent immediately, orally
and in writing, if any discussions or negotiations are sought to be
initiated, any inquiry or proposal is made, or any such information is
requested, with respect to an Acquisition Proposal or potential Acquisition
Proposal or if any Acquisition Proposal is received or if the Company has
been informed that an Acquisition Proposal is forthcoming, and will include
in such notification the identity of the other party or parties and the
material terms and conditions of any such request, inquiry or Acquisition
Proposal. Except as expressly provided below, the Board of Directors of the
Company shall not take any action to withdraw or modify in a manner adverse
to the Parent or the Purchaser, or take a public position inconsistent with,
its approvals or recommendation of the Offer, the Merger, this Agreement or
the Stockholders Agreement or to recommend another Acquisition Proposal and
shall not resolve to do any of the foregoing. The Company will keep the
Parent informed in reasonable detail of the status (including amendments or
proposed amendments) of any such request, inquiry or Acquisition Proposal.
Immediately following the execution of this Agreement, the Company will cease
any existing discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal and request each person
which has heretofore executed a confidentiality agreement in connection with
its consideration of acquiring the Company or any of its subsidiaries or any
portion thereof to return all confidential information heretofore furnished
to such person by or on behalf of the Company.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Company and its Board of Directors (i) may participate in
discussions or negotiations with or furnish information to any third party that
has made an unsolicited Acquisition Proposal in writing after the date hereof (a
"Potential Acquiror") if the Board reasonably determines in good faith (A) that
such Acquisition Proposal is reasonably likely to result
<PAGE>
in a Superior Proposal and (B) after receiving advice of its independent
legal counsel, that participation in such discussions or negotiations or
furnishing such information is consistent with its fiduciary duties to the
Company's stockholders under applicable law, and (ii) shall be permitted to
take and disclose to the Company's stockholders a position with respect to
any tender or exchange offer by a third party, or amend or withdraw such
position, pursuant to Rules 14d-9 and 14e-2 of the Exchange Act or make any
other disclosure to the Company's shareholders as the Board determines in
good faith, after receiving advice of its independent legal counsel, is
consistent with its fiduciary duties to the Company's stockholders under
applicable law.
(c) Any non-public information furnished to a Potential
Acquiror shall be pursuant to a confidentiality agreement containing standard
terms for confidentiality agreements entered into in such circumstances, which
terms shall be no more favorable to the Potential Acquiror than the terms of the
Confidentiality Agreement are to the Parent.
(d) Except as provided in the following sentence, the Board
of Directors of the Company shall not (i) withdraw or modify or propose to
withdraw or modify, in any manner adverse to Parent, the approval or
recommendation of such Board of Directors of this Agreement, the Offer or the
Merger or (ii) approve or recommend, or propose to approve or recommend, any
Acquisition Proposal. In the event that, after the Company has received a
bona fide Superior Proposal not solicited in violation of this Agreement, the
Board determines (after receiving the advice of its independent counsel)
prior to the consummation of the Offer (or, if the Offer is consummated and
extended, the initial consummation of the Offer) that to do so is consistent
with its fiduciary duties, the Board may (x) withdraw or modify its approval
or recommendation of this Agreement, the Offer and the Merger, and (y)
approve or recommend such a Superior Proposal.
(e) The term "Superior Proposal" means any proposal to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, more than a majority of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms which the
Board of Directors of the Company in good faith concludes (after receiving the
advice of its financial advisors and independent counsel), taking into account,
among other things, all legal, financial, regulatory and other aspects of the
proposal and the person making the proposal, (i) would, if consummated, result
in a transaction that is more favorable to its stockholders (in their capacity
as stockholders), from a financial point of view, than the Offer and the Merger
and the other transactions contemplated by this Agreement (taking into account,
at the time of determination, any changes to the terms of this Agreement which
as of that time had been proposed in writing, in good faith, by the Parent) and
(ii) that the person making the Acquisition Proposal is capable of consummating
such Acquisition Proposal.
<PAGE>
6.9. INDEMNIFICATION; INSURANCE. (a) For a period of six
years after the Effective Time, the Parent shall, and shall cause the
Surviving Corporation to, indemnify, defend and hold harmless the present and
former officers, directors, employees and agents of the Company and its
subsidiaries (collectively, the "Indemnified Parties") from and against, and
pay or reimburse the Indemnified Parties for, all losses, obligations,
expenses, claims, damages or liabilities (whether or not resulting from
third-party claims and including interest, penalties, out-of-pocket expenses
and attorneys' fees incurred in the investigation or defense of any of the
same or in asserting any of their rights hereunder) with respect to actions
or omissions arising out of such individuals' services as officers,
directors, employees or agents of the Company or any of its subsidiaries or
as trustees or fiduciaries of any plan for the benefit of employees of the
Company or any of its subsidiaries occurring on or prior to the Effective
Time (including, without limitation, the transactions contemplated by this
Agreement) to the full extent permitted or required under applicable law and,
in the case of indemnification by the Surviving Corporation, to the extent
permitted under the provisions of the Company Certificate of Incorporation
and the Company By-Laws, each as in effect at the date hereof (which
provisions shall not be amended in any manner which adversely affects any
Indemnified Party, for a period of six years), including provisions relating
to advances of expenses incurred in the defense of any action or suit;
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 each such
claim shall continue until final disposition of such claim. Without limiting
the foregoing, in any case in which approval by the Surviving Corporation is
required to effectuate any indemnification, the Parent shall cause the
Surviving Corporation to direct, at the election of the Indemnified Party,
that the determination of any such approval shall be made by independent
counsel selected by the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification
under Section 6.9(a) shall provide notice to the Parent promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and the Indemnified Party shall permit the Parent (at the Parent's
expense) to assume the defense of any claim or any litigation resulting
therefrom; PROVIDED that (i) counsel for the Parent who shall conduct the
defense of such claim or litigation shall be reasonably satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense at
such Indemnified Party's expense, and (ii) the omission by any Indemnified Party
to give notice as provided herein shall not relieve the Parent of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Parent and the Parent is
materially damaged as a result of such failure to give notice. The Parent shall
not, in the defense of any such claim or litigation, except with the consent of
the
<PAGE>
Indemnified Party, consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of
a release from all liability with respect to such claim or litigation. In the
event that the Parent does not accept the defense of any matter as above
provided, or counsel for the Parent advises that there are issues which raise
conflicts of interest between the Parent or the Surviving Corporation and the
Indemnified Parties, the Indemnified Parties may retain counsel satisfactory
to them, and the Parent or the Surviving Corpora tion shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; PROVIDED that the Parent shall
not be liable for any settlement effected without its prior written consent.
In any event, the Parent and the Indemnified Parties shall cooperate in the
defense of any action or claim subject to this Section 6.9 and, subject to
the Confidentiality Agreement, the records of each shall be available to the
other with respect to such defense.
(c) The Parent will cause to be maintained for a period of
not less than six (6) years from the Effective Time the Company's current
directors' and officers' insurance and indemnification policy to the extent
that it provides coverage for events occurring prior to the Effective Time
("D&O Insurance") for all persons who are directors and officers of the
Company on the date of this Agreement, so long as the annual premium therefor
would not be in excess of 150% of the last annual premium paid prior to the
date of this Agreement (the "Maximum Premium"); PROVIDED, HOWEVER, that if
the annual premium therefor would exceed the Maximum Premium, the Parent
shall purchase as much coverage as is available for the Maximum Premium;
PROVIDED, FURTHER, that the Parent may, in lieu of maintaining such existing
D&O Insurance as provided above, cause coverage to be provided under any
policy maintained for the benefit of the Parent or any of its subsidiaries or
any policy specifically obtained for this purpose, so long as the terms
thereof are no less advantageous to the intended beneficiaries thereof than
the existing D&O Insurance for a period of not less than six (6) years from
the Effective Time. If the existing D&O Insurance expires, is terminated or
canceled during such six (6) year period, the Parent will obtain as much D&O
Insurance as can be obtained for the remainder of such period for an
annualized premium equal to the Maximum Premium, on terms and conditions no
less advantageous to the covered persons than the existing D&O Insurance.
6.10. EMPLOYMENT AND BENEFIT PLANS. (a) Following the
Effective Time, the Parent shall cause the Company and/or The Prudential
Insurance Company of America ("PICA") to provide each then current employee of
the Company who was an employee of the Company as of the Effective Time
("Company Employee") with benefits under employee benefit plans (as such term is
defined in Section 3(3) of ERISA ("Benefit Plans")), that are similar to the
benefits received by (i) similarly situated Company
<PAGE>
Employees under Benefit Plans sponsored by the Company immediately prior to
the Effective Time subject to the terms and conditions of such Company
Benefit Plans, as in effect from time to time, or (ii) similarly situated
employees of the Parent under Benefit Plans sponsored by PICA on or after the
Effective Time, subject to the terms and conditions of such PICA Benefit
Plans, as in effect from time to time. Active service with the Company prior
to the Effective Time shall be recognized for purposes of determining
eligibility to participate in and vesting of benefits under (but not for
purposes of determining benefit accrual under or eligibility to receive
post-retirement welfare benefits under) the Benefit Plans of the Company or
PICA on or after the Effective Time; PROVIDED, that active service with the
Company prior to the Effective Time shall not be recognized if such
recognition of service would result in a duplication of benefits under the
Benefit Plans of the Company or PICA. Nothing in this Agreement shall be
construed as limiting in any way (i) the right of the Parent or the Company
(as the case may be) to terminate the employment of any Company Employee
after the Effective Time or (ii) the right of PICA or the Company (as the
case may be) to amend or terminate any Benefit Plan of PICA or the Company
(including, without limitation, to change the level of benefits provided
thereunder or the requirements for eligibility to participate thereunder) in
accordance with the terms thereunder.
(b) Following the acquisition of Shares pursuant to the Offer,
and prior to the Effective Time, the Company shall take, by action of the
Company's Board of Directors (or an appropriate committee thereof), all actions
reasonably necessary and appropriate, in the opinion of the Purchaser, to ensure
that any Company Employee who commences participation, on or after the Effective
Time, in any Benefit Plan of PICA does not receive duplicate benefits under any
Benefit Plan of the Company.
6.11. STOCK OPTIONS; STOCK PLANS. Following the acquisition of
Shares pursuant to the Offer and prior to the Effective Time, the Company shall
take, by action of the Company's Board of Directors (or an appropriate committee
thereof), all necessary and appropriate actions, in the reasonable opinion of
the Purchaser, to cancel, and shall use all reasonable efforts to obtain all
necessary consents with respect to such cancellation of, all of the Company's
Options (and all ancillary rights attached thereto, including but not limited to
the obligation to pay severance amounts) and to terminate each of the Stock
Plans, all as of the Effective Time, as provided in Section 3.5 hereof.
Notwithstanding the cancellation and settlement of the rights of such former
KEIP participants as provided in Section 3.5, solely for a period of 180 days
after the Effective Time, the Company shall make available to former
participants in the KEIP who are employed by the Company as of the time of
cancellation and settlement of such rights under Section 3.5 severance benefits
that are no less favorable than those to which such former KEIP participants
<PAGE>
would have been entitled (under their respective KEIP award agreements) if the
Company had terminated the employment of such KEIP participants within 180 days
following a "transfer of control" as defined in such award agreements.
6.12. TRANSFER TAXES. Except as otherwise provided in Article
III, the Purchaser shall pay any stock transfer, real estate transfer,
documentary, stamp, recording and similar Taxes payable in connection with the
Offer and the Merger and shall be responsible for the preparation and filing of
any required Tax Returns with respect to such Taxes.
6.13. ANTI-TAKEOVER STATUTES. If any "fair price,"
"moratorium," "control share acquisition" or other form of anti-takeover statute
is or shall become applicable to the Offer, Merger or other transactions
contemplated hereby, the Company and the members of the Board of Directors of
the Company shall grant such approvals and take such actions as are necessary so
that the Offer, Merger and other transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of any such anti-takeover
statute on the transactions contemplated hereby.
6.14. NOTIFICATION OF CERTAIN MATTERS. Each of the Company,
the Parent and the Purchaser shall give prompt notice to each other party of
any notice of, or other communication relating to, a material default or
event that, with notice or lapse of time or both, would become a material
default, received by such party subsequent to the date of this Agreement and
prior to the Effective Time, under any material contract to which such party
is a party or is subject. Each of the Company and the Parent shall give
prompt notice to the other party of (a) any notice or other communication
from any third party alleging that the consent of such third party is or may
be required in connection with the transactions contemplated by this
Agreement and (b) the occurrence, or non-occurrence, of any events the
occurrence, or non-occurrence, of which would cause either (i) a
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
date Shares are accepted for payment pursuant to the Offer or (ii) any of the
conditions set forth in Annex A or any covenant, condition or agreement to be
complied with or satisfied under this Agreement to be unsatisfied in any
material respect at any time from the date hereof to the date Shares are
purchased pursuant to the Offer; PROVIDED, HOWEVER, that the delivery of any
notice pursuant to this Section 6.14 will not limit or otherwise affect the
remedies available under this Agreement to the party receiving such notice.
6.15. AMENDMENT TO SCHEDULE TO, PROXY/INFORMATION STATEMENT
AND SCHEDULE 14D-9. (a) If at any time prior to the expiration or termination of
the Offer any
<PAGE>
event occurs which is required by the Exchange Act to be described in an
amendment or supplement to the Schedule TO or any amendment or supplement
thereto, the Purchaser will file and disseminate, as required, an amendment
or supplement which complies in all material respects with the Exchange Act
and the rules and regulations thereunder and any other applicable laws. Prior
to or contemporaneously with its filing with the SEC, the amendment or
supplement shall be delivered to the Company and its counsel.
(b) If at any time prior to the expiration or termination of
the Offer any event occurs which is required by the Exchange Act to be described
in an amendment or supplement to the Schedule 14D-9 or any amendment or
supplement thereto, the Company will file and disseminate, as required, an
amendment or supplement which complies in all material respects with the
Exchange Act and the rules and regulations thereunder and any other applicable
laws. Prior to its filing with the SEC, the amendment or supplement shall be
delivered to the Parent and the Purchaser and their counsel, and any such
amendment or supplement shall be subject to the approval of the Parent and the
Purchaser, which approval (i) shall not be unreasonably withheld or delayed, and
(ii) shall be consistent with the terms and conditions of this Agreement,
including, but not limited to, the rights of the Board of Directors of the
Company as set forth in Section 6.8(d).
(c) If at any time prior to the Effective Time any event
with respect to the Company or any it its subsidiaries, or with respect to
information supplied by the Company for inclusion in the Proxy/Information
Statement, occurs which is required by the Exchange Act to be described in an
amendment or supplement to the Proxy/Information Statement, the Company will
file and disseminate, as required, an amendment or supplement which complies
in all material respects with the Exchange Act and the rules and regulations
thereunder and any other applicable laws. Prior to its filing with the SEC,
the amendment or supplement shall be delivered to the Parent and the
Purchaser and their counsel, and any such amendment or supplement shall be
subject to the approval of the Parent and the Purchaser, which approval (i)
shall not be unreasonably withheld or delayed, and (ii) shall be consistent
with the terms and conditions of this Agreement, including, but not limited
to, the rights of the Board of Directors of the Company as set forth in
Section 6.8(d).
6.16. CONTINUING SERVICES WITH RESPECT TO TAX MATTERS. The
Company will not terminate its existing arrangements with KPMG with respect to
the preparation of Tax Returns and the performance of related Tax services for
the Company and its subsidiaries prior to the Closing Date and will, upon the
request and subject to the consent of the Parent, enter into reasonable
arrangements with KPMG to continue to provide such services to the Company and
its subsidiaries, at prevailing markets rates, for an interim period following
the Closing Date. The Company is not required to make any payment to
<PAGE>
KPMG in order to comply with the foregoing covenant unless the Parent agrees
to reimburse the Company for such payment.
6.17. SUPPLEMENTAL SCHEDULES. The Company may, from time to
time prior to the consummation of the Offer, by notice given in accordance with
this Agreement, supplement or amend the Company Disclosure Letter to reflect any
development (other than a development intentionally caused by the Company, a
Stockholder or any of their respective affiliates), but only to the extent such
development arises after the date of this Agreement, the non-disclosure of which
may otherwise give rise to a breach of any representation or warranty of the
Company contained in Article IV of this Agreement. The representations and
warranties of the Company contained in Article IV of this Agreement shall not be
deemed to be modified by any such supplement or amendment for purposes of
determining whether the condition set forth in clause (d) of Annex A to this
Agreement is satisfied.
ARTICLE VII
CLOSING CONDITIONS
7.1. CONDITIONS TO THE OBLIGATIONS OF THE PARENT, THE
PURCHASER AND THE COMPANY. The respective obligations of each party to effect
the Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions:
(a) The Purchaser shall have purchased all Shares duly
tendered and not withdrawn pursuant to the terms of the Offer and
subject to the terms thereof; PROVIDED that the obligation of the
Parent and the Purchaser to effect the Merger shall not be conditioned
on the fulfillment of the condition set forth in this subsec tion (a)
if the failure of the Purchaser to purchase the Shares pursuant to the
Offer shall have constituted a breach of the Offer or of this
Agreement;
(b) There shall not be in effect any statute, rule or
regulation enacted, promulgated or deemed applicable by any
Governmental Entity of competent jurisdiction that makes consummation
of the Merger illegal and no temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; PROVIDED, HOWEVER, that
each of the parties shall use its best efforts to prevent the entry of
any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered;
<PAGE>
(c) If required by applicable law, this Agreement shall have
been approved and adopted by the affirmative vote of the holders of the
requisite number of shares of Company Common Stock in accordance with
applicable law; and
(d) Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
ARTICLE VIII
CLOSING
8.1. TIME AND PLACE. The closing of the Merger (the "Closing")
shall take place at the offices of Debevoise & Plimpton, 875 Third Avenue, New
York, New York, as soon as practicable following satisfaction or waiver, if
permissible, of the conditions set forth in Article VII. The date on which the
Closing actually occurs is herein referred to as the "Closing Date."
8.2. FILINGS AT THE CLOSING. At the Closing, the Parent, the
Purchaser and the Company shall cause the Delaware Certificate of Merger,
together with any other documents required by law to effectuate the Merger, to
be filed with the Secretary of State of the State of Delaware in accordance with
the provisions of the GCL, and shall take any and all other lawful actions and
do any and all other lawful things necessary to cause the Merger to become
effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual consent of the sole member of the Parent and
the Board of Directors of the Company;
(b) by either the Parent or the Company if (i) the Offer shall
have not been consummated by 12:00 p.m. midnight on July 31, 2000 (the
"Offer Termination Date"), or (ii) the Effective Time shall not have
occurred by October 31, 2000 (the earlier of such date and the Offer
Termination Date, the "Termination Date"); PROVIDED, HOWEVER, that (A)
the passage of such period shall
<PAGE>
be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or
Offer and (B) such July 31 date may be extended to a date not later
than August 31, 2000, by Parent or the Company prior to termination
of this Agreement, by notice in writing to the other, if on July 31,
2000, the Offer has not been consummated because of the failure of
the condition in clause (i) of the lead-in paragraph in Annex A or
the condition in paragraph (a) in Annex A or the absence of third
party consents which can reasonably be expected to be obtained
within 30 days, PROVIDED, FURTHER, that a party may not terminate
this Agreement pursuant to this Section 9.1(b) if such party has
committed a breach of any representation, warranty, covenant or
agreement set forth in this Agreement, which has been the cause of
or resulted in the failure of the Offer to be consummated or the
Effective Time to occur;
(c) by the Parent or the Company, if the Offer shall expire or
terminate in accordance with its terms without any Shares having been
purchased thereunder due to a failure of any of the conditions set
forth in Annex A to be satisfied, provided that neither the Parent nor
the Company may terminate this Agreement pursuant to this Section
9.1(c) if such termination or expiration has been caused or resulted
from the failure by the Parent or the Company, respectively, to perform
in any material respect any of its covenants or agreements contained in
this Agreement;
(d) by the Company, if the Parent or the Purchaser shall have
failed to commence the Offer within the period set forth in Section 1.1
of this Agreement; PROVIDED, that the Company may not terminate this
Agreement pursuant to this Section 9.1(d) if the Company has failed to
perform in any material respect any of its covenants or agreements
contained in this Agreement which has been the cause or resulted in the
failure of the Parent or the Purchaser to commence the Offer;
(e) by the Company, if Parent or the Purchaser breaches or
fails to perform in any material respect any of its representations,
warranties or covenants contained in this Agreement, which breach or
failure to perform cannot be or has not been cured within 10
business days after the giving of notice to the Parent of such
breach, except such failures which are not reasonably likely to
materially and adversely affect the Parent, or the Purchaser's
ability to complete the Offer or the Merger;
(f) by either the Parent, the Purchaser or the Company, if any
court of
<PAGE>
competent jurisdiction in the United States or other governmental
agency of competent jurisdiction shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their respective
reasonable best efforts to lift) restraining, permanently enjoining
or otherwise prohibiting the consummation of the Offer or the
Merger, and such order, decree, ruling or other action has become
final and non-appealable;
(g) by the Parent or the Purchaser if, prior to the purchase
of shares of Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have withdrawn, or modified or changed
in a manner adverse to the Parent or the Purchaser, its approval or
recommendation of the Offer, this Agreement or the Merger or shall have
publicly recommended a Superior Proposal or shall have resolved to do
either of the foregoing;
(h) by the Company, if, prior to the purchase of Shares
pursuant to the Offer, (i) the Board of Directors of the Company shall
have determined in good faith, after receiving advice of its
independent legal counsel, that it is consistent with its fiduciary
duties to the Company's stockholders under applicable law, to terminate
this Agreement in order to enter into an agreement with respect to or
to consummate a transaction constituting a Superior Proposal, (ii) the
Company shall have given notice to the Purchaser advising the Purchaser
that the Company has received a Superior Proposal from a third party,
specifying the material terms and conditions (including the identity of
the third party), and that the Company intends to terminate this
Agreement in accordance with this Section 9.1(h), (iii) either (A) the
Purchaser shall not have revised its proposal for the Offer and the
Merger within five (5) business days from the time on which such notice
is deemed to have been given to Parent or (B) if the Purchaser within
such period shall have revised its proposal for the Offer and the
Merger, the Board of Directors of the Company, after receiving advice
from CSFB, shall have determined that the third party's Acquisition
Proposal remains a Superior Proposal, and (iv) the Company, at the time
of such termination, has complied in all respects with the provisions
of Section 6.8 and pays the Expenses and the Termination Fee in
accordance with Section 9.3(b); or
(i) if approval by the Company stockholders is required by
law, by either the Purchaser or the Company if, upon a vote at a duly
held Company stockholders meeting or any adjournment thereof at which
such Company stockholder approval shall have been voted upon, such
approval shall not have been obtained.
9.2. PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination and
<PAGE>
abandonment of the Merger by the Parent, the Purchaser or the Company
pursuant to Sec tion 9.1, written notice thereof shall forthwith be given to
the other party or parties specifying the provision hereof pursuant to which
such termination is made and this Agreement shall terminate and the Merger
shall be abandoned, without further action by any of the parties hereto. The
Purchaser agrees that any termination by the Parent shall be conclusively
binding upon it, whether given expressly on its behalf or not, and the
Company shall have no further obligation with respect to it. If this
Agreement is terminated as provided herein, no party hereto shall have any
liability or further obligation to any other party to this Agreement,
PROVIDED that any termination shall be without pre judice to the rights of
any party hereto arising out of breach by any other party of any covenant or
agreement contained in this Agreement, and PROVIDED, FURTHER, that the obliga
tions set forth in the second sentence of Section 1.2(a) and Sections 4.21,
5.7, 9.3, 10.7 and 10.11 and in the Confidentiality Agreement shall in any
event survive any termination.
9.3. FEES AND EXPENSES. (a) Except as otherwise provided for
in this Agreement, all costs and expenses incurred in connection with this
Agreement and the Offer, the Merger and any transactions contemplated thereby
shall be paid by the party incurring such expenses, whether or not any
transaction is consummated.
(b) The Company shall pay, or cause to be paid, in same day
funds to Parent the sum of (i) Parent's Expenses (as defined below) and (ii)
$3,075,000 (the "Termination Fee") upon demand if (A) the Company terminates
this Agreement pursuant to Section 9.1(h), (B) the Parent or the Purchaser
terminates this Agreement pursuant to Section 9.1(g), or (C) the Parent or
the Company terminates this Agreement pursuant to Section 9.1(c) (other than
as a result of a failure of any of the conditions set forth in clause (i) of
the introductory paragraph of Annex A or in any of clauses (a), (b), (c)(i),
(f) or (g) of Annex A, or clause (d) of Annex A if the breach of
representation or warranty giving rise to the failure of the condition set
forth in clause (d) of Annex A would also give rise to a failure of the
condition set forth in clause (f) of Annex A or in the ability of the Parent
or the Purchaser to terminate this Agreement under Section 9.1(f)), and,
within nine (9) months after any termination referred to in the immediately
preceding clause (C), any person publicly announces (x) a merger,
consolidation or other business combination with the Company or a subsidiary
of the Company, or (y) the purchase of 50% or more (in voting power) of the
voting securities of the Company or of 50% or more (in market value) of the
assets of the Company and its subsidiaries, on a consolidated basis, and such
transaction shall within twelve months following such announcement be
consummated on substantially the terms theretofore announced. "Expenses"
shall mean all out-of-pocket fees and expenses incurred or paid by or on
behalf of the Parent or any of its affiliates in connection with the Offer
and Merger or the consummation of any of the transactions
<PAGE>
contemplated by this Agreement (including, without limitation, fees and
expenses of counsel, commercial banks, investment banking firms, accountants,
experts and consultants to Parent and any of its affiliates) in an amount not
to exceed $1,000,000.
(c) The Company shall pay, or cause to be paid, in same day
funds to Parent Parent's Expenses upon demand if (i) the Parent or the Purchaser
or the Company terminates this Agreement pursuant to Section 9.1(f) at any time
after any third-party Acquisition Proposal has been made, (ii) the Parent or the
Company terminates this Agreement pursuant to Section 9.1(c) as a result of a
failure of any of the conditions set forth in clause (i) of the introductory
paragraph of Annex A or in any of clauses (a), (b), (c)(i), (f) or (g) of Annex
A, or clause (d) of Annex A if the breach of representation or warranty giving
rise to the failure of the condition set forth in clause (d) of Annex A would
also give rise to a failure of the condition set forth in clause (f) of Annex A
or in the ability of the Parent or the Purchaser to terminate this Agreement
under Section 9.1(f) or (iii) the Parent or the Company terminates this
Agreement pursuant to Section 9.1(b), and, within nine (9) months after any
termination referred to in the immediately preceding clauses (i), (ii) or (iii),
any person publicly announces (x) a merger, consolidation or other business
combination with the Company or a subsidiary of the Company, or (y) the purchase
of 50% or more (in voting power) of the voting securities of the Company or of
50% or more (in market value) of the assets of the Company and its subsidiaries,
on a consolidated basis, and such transaction shall within twelve months
following such announcement be consummated on substantially the terms
theretofore announced.
ARTICLE X
MISCELLANEOUS
10.1. AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented only by written agreement of the Parent, the
Purchaser and the Company at any time prior to the Effective Time with respect
to any of the terms contained herein, PROVIDED, that after this Agreement is
adopted by the Company's stockholders pursuant to Section 6.3, no such amendment
or modification shall be made that reduces the amount or changes the form of the
Merger Consideration or otherwise materially and adversely affects the rights of
the Company's stockholders hereunder, without the further approval of such
stockholders.
10.2. WAIVER OF COMPLIANCE; CONSENTS. Any failure of the
Parent or the Purchaser, on the one hand, or the Company, on the other hand, to
comply with any obli gation, covenant, agreement or condition herein may be
waived by the Company or
<PAGE>
the Parent, respectively, only by a written instrument signed by the party
granting such waiver (and, in the case of the Company, approved in accordance
with the provisions of Section 1.3(c) if applicable), but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 10.2. The Purchaser hereby agrees
that any consent or waiver of compliance given by the Parent hereunder shall
be conclusively binding upon it, whether given expressly on its behalf or not.
10.3. SURVIVAL OF WARRANTIES. Each and every representation
and warranty made in Article IV, other than Section 4.21 (if this Agreement is
terminated before consummation of the Offer), and Article V, other than Section
5.7 (if this Agreement is terminated before consummation of the Offer), of this
Agreement shall expire with, and be terminated and extinguished by, the Merger,
or the termination of this Agreement pursuant to Section 9.1. This Section 10.3
shall have no effect upon any other obligation of the parties hereto, whether to
be performed before or after the Closing.
10.4. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if (a) delivered personally or by
overnight courier, (b) mailed by registered or certified mail, return receipt
requested, postage prepaid, or (c) transmitted by telecopier, and in each case,
addressed to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice; PROVIDED that notices of a
change of address shall be effective only upon receipt thereof):
(a) if to the Parent or the Purchaser, to
Prudential Mortgage Capital Company, LLC
Four Embarcadero Center, Suite 2700
San Francisco, California 94111-4106
Telephone: 415-291-5080
Telecopy: 415-296-7237
ATTENTION: Michael B. Jameson
with copies to:
The Prudential Insurance Company of America
751 Broad Street, 4th Floor
Newark, New Jersey 07102-3777
<PAGE>
Telephone: 973-367-3473
Telecopy: 973-367-8105
ATTENTION: Douglas A. Gregory
Prudential Mortgage Capital Company, LLC
Four Embarcadero Center, Suite 2700
San Francisco, California 94111-4106
Telephone: 415-291-5040
Telecopy: 415-956-2197
ATTENTION: Harry N. Mixon
and:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: 212-909-6000
Telecopy: 212-909-6836
ATTENTION: Stephen J. Friedman
(b) if to the Company, to
The WMF Group, Ltd.
1593 Spring Hill Road
Suite 400
Vienna, VA 22182-2245
Telephone: 703-610-1400
Telecopy: 703-610-1404
ATTENTION: Shekar Narasimhan
with copies to:
Hunton & Williams
951 East Byrd Street
Richmond, VA 23219-4074
Telephone: 804-788-7275
Telecopy: 804-788-8218
ATTENTION: Randall S. Parks
<PAGE>
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Telephone: 617-951-7000
Telecopy: 617-951-7050
ATTENTION: Jane D. Goldstein
Any notice so addressed shall be deemed to be given upon delivery, if
transmitted by hand delivery, overnight courier or telecopier.
10.5. ASSIGNMENT; PARTIES IN INTEREST. This Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties (except that the Purchaser may assign to the Parent or any
other direct or indirect wholly-owned subsidiary of The Prudential Insurance
Company of America any and all rights and obligations of the Purchaser under
this Agreement and/or the Purchaser's right to purchase Shares transferred
pursuant to the Offer, provided that any such assignment will not relieve the
Parent or the Purchaser from any of its obligations under this Agreement).
Except for Section 6.9, which is intended for the benefit of the Company's
directors, officers, employees and agents, this Agreement is not intended to
confer upon any other person except the parties any rights or remedies under or
by reason of this Agreement.
10.6. SPECIFIC PERFORMANCE. 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
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
10.7. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of Delaware (regardless of the laws that might otherwise
govern under applicable principles of conflicts of law) as to all matters,
including but not limited to matters of validity, construction, effect,
performance and remedies.
10.8. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
10.9. INTERPRETATION. The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement. As used in this Agreement, (i) the term
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof; (ii) the
terms "affiliate" and "associate" shall have the meanings set forth in Rule
l2b-2 of the General Rules and Regulations promulgated under the Exchange Act;
and (iii) the term "subsidiary" shall mean as to any person, (x) any corporation
50% or more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person and/or one or
more subsidiaries of such person and (y) any partnership, association, joint
venture, limited liability company or other entity in which such person and/or
one or more subsidiaries of such person has a 50% or more equity interest at the
time; and (IV) the phrase "to the knowledge" of any specified corporation shall
refer only to the actual knowledge of the directors, officers or management of
such corporation.
10.10. ENTIRE AGREEMENT. This Agreement, including the
Confidentiality Agreement, the Company Disclosure Letter and Annex A hereto,
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein and supersedes all prior agreements and
the understandings between the parties with respect to such subject matter.
10.11. JURISDICTION. Each party hereby irrevocably submits
to the exclusive jurisdiction of the United States District Court for the
Southern District of New York or any court of the State of New York located
in the City of New York in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action, suit or
proceeding shall be brought only in such court (and waives any objection
based on forum non conveniens or any other objection to venue therein);
PROVIDED, however, that such consent to jurisdiction is solely for the
purpose referred to in this Section 10.11 and shall not be deemed to be a
general submission to the jurisdiction of said courts or in the State of New
York other than for such purposes. Each party hereto hereby waives any right
to a trial by jury in connection with any such action, suit or proceeding.
<PAGE>
IN WITNESS WHEREOF, the Parent, the Purchaser and the Company
have caused this Agreement to be signed by their respective duly authorized
officers as of the date first above written.
PRUDENTIAL MORTGAGE CAPITAL
COMPANY, LLC
By /s/ Michael B. Jameson
--------------------------------
Name: Michael B. Jameson
Title: Senior Vice President
PRUDENTIAL MORTGAGE CAPITAL
ACQUISITION CORP.
By /s/ Michael B. Jameson
--------------------------------
Name: Michael B. Jameson
Title: Vice President
THE WMF GROUP, LTD.
By /s/ Shekar Narasimhan
--------------------------------
Name: Shekar Narasimhan
Title: CEO and Chairman
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Offer, the Purchaser shall not be required to accept for payment, or,
subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered shares after the termination or withdrawal of the Offer),
to pay for any Shares not theretofore accepted for payment or paid for, and the
Purchaser may (subject to the terms of the Merger Agreement) amend or terminate
the Offer as to, and may postpone the acceptance of, and payment for, such
Shares not theretofore accepted for payment or paid for (subject to any such
applicable rules and regulations of the SEC) unless (I) any applicable waiting
period under the Antitrust Laws shall have expired or been terminated, (II) each
of Capricorn Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings
Corporation, Phemus Corporation, Commonwealth Overseas Trading, Mohammed A.
Al-Tuwaijri, J. Roderick Heller, III, John D. Reilly and Shekar Narasimhan shall
have validly tendered and not withdrawn prior to the expiration date of the
Offer their respective shares of Company Common Stock (the "Minimum Condition")
and (III) at any time on or after the date of the Merger Agreement and at or
before the time that the particular Shares are accepted for payment (whether or
not any other Shares shall theretofore have been accepted for payment or paid
for pursuant to the Offer) none of the following conditions shall occur and be
continuing:
(a) there shall have been any action or proceeding brought by
any governmental authority before any federal, state or foreign court,
or any order or preliminary or permanent injunction entered in any
action or proceeding before any federal, state or foreign court or
governmental, administrative or regulatory authority or agency having
jurisdiction over the Company or the Parent, or any statute, rule,
regulation, legislation, interpretation, judgment or order enacted,
entered, enforced, promulgated, amended, issued by any legislative
body, court, government or governmental, administrative or regulatory
authority or agency located or having jurisdiction within the United
States or any country or economic region in which either the Company or
the Parent, directly or indirectly, has material assets or operations,
which would reasonably be expected to have the effect of: (i) making
illegal or prohibiting the making of the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of all
or a material portion of the Shares by the Parent or the Purchaser, or
the consummation of any of the transactions contemplated by the Merger
Agreement or the Stockholders Agreement; (ii) (a) prohibiting or
materially limiting the ownership or operation by the Parent, the
Purchaser or any of the Parent's subsidiaries, of all
<PAGE>
or any material portion of the business or assets of the Company and
its subsidiaries taken as a whole, or of the Parent and its
subsidiaries taken as a whole, or (B) compelling the Purchaser, the
Parent or any of the Parent's subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company and its subsidiaries taken as a whole or of the Parent and its
subsidiaries taken as a whole, in each case as a result of the
transactions contemplated by the Offer or the Merger Agreement or the
Stockholders Agreement; (III) imposing limitations on the ability of
the Purchaser, the Parent or any of the Parent's subsidiaries
effectively to acquire or hold or to exercise full rights of ownership
of the Shares including, without limitation, the right to vote any
Shares acquired or owned by the Parent or the Purchaser or any of the
Parent's subsidiaries on all matters properly presented to the
stockholders of the Company, including, without limitation, the
adoption and approval of the Merger Agreement and the Merger or the
right to vote any shares of capital stock of any subsidiary directly
or indirectly owned by the Company; or (IV) requiring divestiture by
the Parent or the Purchaser, directly or indirectly, of any Shares;
(b) there shall have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States which would reasonably be expected to have a Material
Adverse Effect on the Company or materially adversely affect (or
materially delay) the consummation of the Offer, (ii) any limitation
(whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
on, or any other event that materially adversely affects, the
extension of credit by banks or other lending institutions which would
reasonably be expected to have a Material Adverse Effect on the
Company or materially adversely affect (or materially delay) the
consummation of the Offer, (iii) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States which would reasonably be
expected to have a Material Adverse Effect on the Company or
materially adversely affect (or materially delay) the consummation of
the Offer or (iv) in the case of any of the foregoing existing at the
time of the execution of the Agreement, a material acceleration or
worsening thereof which acceleration or worsening is reasonably
expected to have a Material Adverse Effect or to materially adversely
affect the consummation of the Offer;
(c) (i) it shall have been publicly disclosed or the Purchaser
shall have otherwise learned that beneficial ownership (determined for
the purposes of this paragraph as set forth in Rule 13d-3 promulgated
under the Exchange Act) of 15%
<PAGE>
or more of the outstanding Shares has been acquired by any corporation
(including the Company or any of its subsidiaries or affiliates),
partnership, person or other entity or group (as defined in Section
13(d)(3) of the Exchange Act), other than the Parent or any of its
affiliates or the Stockholders, and such Shares have not been tendered
in the Offer, or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse
to the Parent or the Purchaser the approval or recommendation of the
Offer, the Merger or the Merger Agreement, or approved or recommended
any takeover proposal or any other acquisition of Shares other than
the Offer and the Merger, (B) any such corporation, partnership,
person or other entity or group shall have entered into a definitive
agreement or an agreement in principle with the Company with respect
to a tender offer or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the
Company or any of its subsidiaries or (C) the Board of Directors of
the Company or any committee thereof shall have resolved to do any of
the foregoing;
(d) any of the representations and warranties of the Company
set forth in the Merger Agreement that are qualified as to materiality
shall not be true and correct or any such representations and
warranties that are not so qualified shall not be true and correct in
any material respect, in each case as if such representations and
warranties (other than representations and warranties made as of a
specified date) were made at the time of such determination except, in
each case, for changes specifically permitted by the Merger Agreement;
(e) the Company shall have failed to perform in any respect
any material obligation or to comply in any respect with any material
agreement or material covenant of the Company to be performed or
complied with by it under the Merger Agreement prior to the time of
such determination;
(f) the Company and its subsidiaries shall not have obtained
and delivered to the Parent written evidence that (i) all required
notices relating to the transactions contemplated by the Merger
Agreement have been provided to each of GNMA and the FHA and (as
certified by the Chairman and Chief Executive Officer of the Company)
that no objections have been received from GNMA or the FHA which would
cause the Company and its subsidiaries not to be eligible to issue
mortgage-backed securities guaranteed by GNMA or to originate,
purchase, hold and service FHA-insured mortgage loans in the same
manner as on the date of the Merger Agreement and (ii) all required
approvals, consents, licenses, accreditations, registrations and
qualifications relating to the transactions contemplated by the Merger
Agreement have been received from Fannie Mae for
<PAGE>
the Company and its subsidiaries to be able to originate, purchase,
hold and service mortgage loans to be sold to Fannie Mae in the same
manner as on the date of the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been terminated with
the written consent of the Company.
The foregoing conditions are for the sole benefit of the
Purchaser and may be asserted by the Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by the Purchaser in whole or
in part at any time and from time to time in its sole discretion (subject to the
terms of the Merger Agreement). The failure by the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
(Not Part of the Agreement)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE TENDER OFFER.................................................................................2
1.1. The Offer......................................................................2
1.2. Company Action.................................................................3
1.3. Board of Directors.............................................................4
ARTICLE II
THE MERGER.......................................................................................6
2.1. The Merger.....................................................................6
2.2. Certificate of Incorporation...................................................6
2.3. By-Laws........................................................................6
2.4. Directors and Officers.........................................................7
2.5. Effective Time.................................................................7
ARTICLE III
CONVERSION OF SHARES.............................................................................7
3.1. Company Common Stock...........................................................7
3.2. Dissenting Shares..............................................................8
3.3. Purchaser Common Stock.........................................................9
3.4. Exchange of Shares.............................................................9
3.5. Employee Stock Options........................................................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................13
4.1. Organization..................................................................13
4.2. Capitalization................................................................13
4.3. Authorization of this Agreement; Recommendation of Merger.....................15
4.4. Consents and Approvals........................................................15
4.5. No Conflicts..................................................................16
4.6. Compliance....................................................................17
4.7. Financial Statements and SEC Reports; No Undisclosed Liabilities..............18
4.8. Certain Contracts and Arrangements............................................18
4.9. Offer Documents; Proxy/Information Statement; Other Information;
Schedule 14D-9.............................................................19
<PAGE>
4.10. Title to Property............................................................20
4.11. Intellectual Property........................................................20
4.12. Labor Relations; Employees...................................................22
4.13. Employee Agreements and Plans................................................23
4.14. Mortgage Business............................................................26
4.15. Absence of Certain Changes...................................................33
4.16. Litigation...................................................................34
4.17. Taxes........................................................................34
4.18. Environmental Matters........................................................35
4.19. Board Approval; State Takeover Statutes; Stockholder Vote....................36
4.20. Rights Agreement.............................................................36
4.21. Finders and Investment Bankers...............................................37
4.22. Transaction Costs............................................................37
4.23. Opinion of Financial Advisor.................................................37
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER..................................37
5.1. Organization..................................................................37
5.2. Authorization of this Agreement...............................................38
5.3. Consents and Approvals; No Violations.........................................38
5.4. Offer Documents...............................................................39
5.5. Proxy/Information Statement; Other Information................................39
5.6. Financial Ability to Perform..................................................40
5.7. Finders and Investment Bankers................................................40
ARTICLE VI
COVENANTS.......................................................................................40
6.1. Conduct of the Business of the Company........................................40
6.2. Access to Information.........................................................43
6.3. Stockholder Approval..........................................................44
6.4. Reasonable Best Efforts.......................................................45
6.5. Consents......................................................................45
6.6. Public Announcements..........................................................46
6.7. Consent of the Parent.........................................................46
6.8. No Solicitation...............................................................46
6.9. Indemnification; Insurance....................................................48
6.10. Employment and Benefit Plans.................................................50
6.11. Stock Options; Stock Plans...................................................50
6.12. Transfer Taxes...............................................................51
6.13. Anti-takeover Statutes.......................................................51
6.14. Notification of Certain Matters..............................................51
6.15. Amendment to Schedule TO, Proxy/Information Statement and
Schedule 14D-9............................................................52
6.16. Continuing Services with Respect to Tax Matters..............................52
6.17. Supplemental Schedules.......................................................53
ARTICLE VII
CLOSING CONDITIONS..............................................................................53
7.1. Conditions to the Obligations of the Parent, the Purchaser and the
Company....................................................................53
ARTICLE VIII
CLOSING.........................................................................................54
8.1. Time and Place................................................................54
8.2. Filings at the Closing........................................................54
ARTICLE IX
TERMINATION AND ABANDONMENT.....................................................................54
9.1. Termination...................................................................54
9.2. Procedure and Effect of Termination...........................................56
9.3. Fees and Expenses.............................................................57
ARTICLE X
MISCELLANEOUS...................................................................................58
10.1. Amendment and Modification...................................................58
10.2. Waiver of Compliance; Consents...............................................58
10.3. Survival of Warranties.......................................................59
10.4. Notices......................................................................59
10.5. Assignment; Parties in Interest..............................................60
10.6. Specific Performance.........................................................61
10.7. Governing Law................................................................61
10.8. Counterparts.................................................................61
10.9. Interpretation...............................................................61
10.10. Entire Agreement............................................................62
10.11. Jurisdiction................................................................62
ANNEX A .................................................................................................1
</TABLE>
<PAGE>
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AGREEMENT AND PLAN OF MERGER
AMONG
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.
AND
THE WMF GROUP, LTD.
Dated as of May 10, 2000
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<PAGE>
FOR IMMEDIATE RELEASE CONTACT: Kevin Heine
May 10, 2000 (973) 802-7810
Grace Healy
(312) 540-4235
PRUDENTIAL MORTGAGE CAPITAL COMPANY
TO ACQUIRE THE WMF GROUP, LTD.
-- CREATES FULL-SERVICE COMMERCIAL MORTGAGE FINANCIAL SERVICES COMPANY
WITH LEADING INDUSTRY POSITION --
NEWARK, N.J. - Prudential Mortgage Capital Company, the commercial
mortgage lending arm of The Prudential Insurance Company of America, and The WMF
Group, Ltd. announced today that they have entered into a definitive merger
agreement whereby Prudential Mortgage Capital Company will acquire WMF (NASDAQ:
WMFG) in a transaction valued at $138 million. Under the merger agreement, WMF
shareholders will receive $8.90 in cash per share of WMF common stock. The
transaction is expected to close by the end of the second quarter, subject to
any necessary third party and shareholder approvals.
Located in Vienna, Virginia, WMF is one of the nation's largest
commercial mortgage financial services companies. Its primary business
activities include commercial and multi-family loan servicing, Fannie Mae and
FHA loan origination, and asset
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Prudential Mortgage Capital/WMF...2
management for third-party institutional investors. Revenues in 1999 exceeded
$65 million.
David Twardock, president of Prudential Mortgage Capital Company, said,
"The acquisition of WMF will give Prudential one of the most comprehensive
product lines in the commercial mortgage industry. We will make these products
available to our customers in any way they choose, whether through our
trademarked PruEXPRESS network, independent brokers, directly or on-line."
The acquisition of WMF creates an independent commercial mortgage
servicing business with over $31 billion of assets. Annual loan originations at
year-end 1999 totaled $5.5 billion on a combined basis.
"We expect this acquisition to provide significant growth
opportunities, building on the new organization's position as the fourth largest
commercial mortgage firm in the United States and the largest originator of
Fannie Mae and Federal Housing Administration-insured, multi-family mortgage
loans. It will also speed Prudential's ongoing strategic expansion into the
high-yield real estate debt business through WMF's Carbon Mesa subsidiary," said
Twardock. "The highly-fragmented $1.4 trillion commercial real estate debt
market offers substantial growth opportunities for a multi-product real estate
finance firm with a strong focus on customers."
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Prudential Mortgage Capital/WMF...3
WMF's chairman and chief executive officer, Shekar Narasimhan, who will
continue to lead the agency and asset management segments of the new
organization, said, "This transaction offers excellent benefits to all of our
key stakeholders. Shareholders will receive a significant premium over current
market value, customers will enjoy more robust product and service offerings,
and our employees will enjoy excellent career opportunities with Prudential.
Given the dramatic changes underway in our business with technological advances
and consolidation, joining with a major long-term player is a `win-win' for both
sides."
The purchase of WMF by Prudential includes all subsidiary companies and
operations, including the Fannie Mae DUS, FHA, funds management, capital markets
and commercial mortgage brokerage operations. However, because Prudential
believes owning units that have other correspondent lending relationships
represents a conflict of interest, the company said it expects to work closely
with current management of WMF's commercial mortgage brokerage unit to determine
the best way to divest itself of that unit while maintaining an ongoing
strategic relationship.
In accordance with the merger agreement, Prudential Mortgage Capital
Company expects to commence on or prior to May 24, 2000, a tender offer for all
shares of common stock of WMF at a cash price of $8.90 per share. WMF's
controlling
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Prudential Mortgage Capital/WMF...4
stockholders and certain members of its Board of Directors have agreed to tender
all WMF shares owned by them. The tender offer is conditioned on the tender by
those shareholders, as well as other customary conditions. Prudential Securities
Incorporated will act as dealer manager for the tender offer.
Following the completion of the tender offer, it is expected that a
corporation controlled by Prudential Mortgage Capital Company will merge with
WMF, with any remaining shares of WMF converted into cash at the same price as
offered in the tender offer.
Credit Suisse First Boston, a global investment banking firm, advised
WMF on the sale of the company.
Prudential is one of the largest life insurance companies in the
United States and is among the largest financial institutions in the world.
Prudential has more than $360 billion in assets managed and administered as of
December 31, 1999 and serves more than 30 million customers worldwide, offering
a variety of products and services, including life insurance, property and
casualty insurance, mutual funds, annuities, pension and retirement related
investments and administration, asset management, securities brokerage, and real
estate and relocation. Prudential is headquartered in Newark, New Jersey. Visit
the Prudential Web site at http://www.prudential.com.
- PRUDENTIAL -
Investors and security holders are advised to read both the tender offer
statement and the solicitation/recommendation statement regarding the tender
offer referred to in this press release, when they become available, because
they will contain important information. The tender offer statement will be
filed by Prudential Mortgage Capital Company with the
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<PAGE>
Prudential Mortgage Capital/WMF...5
Securities and Exchange Commission, and the solicitation/recommendation
statement will be filed with the Commission by WMF. Investors and security
holders may obtain a free copy of these statements (when available) and other
documents filed by Prudential Mortgage Capital Company and WMF with the
Commission at the Commission's web site at www.sec.gov. The tender offer
statement and related offering materials may be obtained for free from
Prudential Mortgage Capital Company, LLC, by directing such requests to: Susan
Luthy, Prudential Mortgage Capital Company, Four Gateway Center, Newark, NJ
07102-4069, (973)367-4601, [email protected]. The
solicitation/recommendation statement and such other documents may also be
obtained for free from WMF by directing such requests to: Jay Harrison, WMF
Group, Inc., 1593 Spring Hill Road, Suite 400, Vienna, Virginia 22182,
(703)610-1469, [email protected].
This press release contains forward-looking statements within the meaning of the
safe harbor provisions of the Securities Exchange Act of 1934 (the "Exchange
Act"), including statements regarding the operations of The WMF Group, Ltd.
during the interim period between the execution of the Merger Agreement and the
consummation of the transactions contemplated thereby. The forward-looking
statements are subject to various risks and uncertainties. Although the Company
believes its expectations are based on reasonable assumptions within the bounds
of its knowledge of its business and operations, there can be no assurance that
actual results will not vary materially from its expectations. Those risks and
uncertainties include the failure of the certain conditions set forth in the
Merger Agreement, adverse industry and economic conditions and adverse changes
in interest rates, the secondary mortgage market or in assets securing
mortgages. Other risk factors are detailed from time to time in the reports of
the Company filed under the Exchange Act.
