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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
December 20, 1999
-----------------
(Date of earliest event reported)
CAPTEC NET LEASE REALTY, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 1045281 38-3368333
(State of Other Jurisdiction (Commission File No.) (I.R.S. Employer
of Incorporation) Identification No.)
24 FRANK LLOYD WRIGHT DRIVE, ANN ARBOR, MICHIGAN 48106
(Address of Principal Executive Offices)
(734) 994-5505
(Registrant's Telephone Number)
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ITEM 5. OTHER EVENTS.
On December 20, 1999, Captec Net Lease Realty, Inc. (the "Company")
executed an Omnibus Agreement and Plan of Merger (the "Merger Agreement") by and
among the Company, Captec Acquisition, Inc., a Michigan corporation
("Acquisition"), Captec Financial Group, Inc., a Michigan corporation
("Financial Group") and Captec Net Lease Realty Advisors, Inc., a Delaware
corporation ("Advisors"). The Merger Agreement provides for the merger of
Acquisition with and into Financial Group and of Advisors with and into the
Company (collectively, the "Merger"). Upon consummation of the Merger, Financial
Group will be a wholly-owned subsidiary of the Company and the separate
corporate existence of Advisors will terminate. Financial Group and Advisors are
affiliates of the Company and the Board of Directors established a special
committee of its board of directors (the "Special Committee") consisting
entirely of all independent, disinterested directors to consider and negotiate
the Merger. Acquisition is a wholly-owned subsidiary of the Company created for
the sole purpose of effectuating the Merger.
In consideration of the Merger, the Company will issue an aggregate
2,189,505 shares of its common stock, par value $.01 (the "Common Stock") to the
common stockholders, the preferred stockholder, option holders and certain
warrant holders of Financial Group and an aggregate 560,000 shares of the Common
Stock to the stockholders of Advisors and will make an aggregate cash payment of
approximately $2.5 million to holders of warrants to acquire shares of Financial
Group common stock in consideration of the termination of those warrants. The
common stockholders and option holders of Financial Group may earn up to an
additional 2,000,000 shares of Common Stock based upon the consolidated
performance of the Company in 2000 and 2001 (the "Earnout Shares") and a cash
payment with respect to any such additional shares of Common Stock which may be
issued. The Special Committee has received an opinion from its financial
advisor, J.C. Bradford & Co., that the consideration to be paid by the Company
in the Merger, including the Earnout Shares, is fair to the Company from a
financial point of view.
The Merger Agreement contains numerous customary and transaction
specific representations, warranties, covenants and conditions to closing.
Although the Delaware General Corporation Law does not require that the Merger
be approved by stockholders of the Company, because the Merger is among
affiliates and members of the Company's management and board of directors have
interests which are in addition to, or differ from, those of the Company, the
Merger Agreement provides that the Merger is subject to the affirmative vote of
a majority of the shares of the Common Stock, excluding shares of the Common
Stock owned by officers, directors or affiliates of the Company who or that are
also officers, directors or affiliates of Financial Group or Advisors.
ITEM 7. EXHIBITS.
EXHIBIT NO.
2 Omnibus Agreement and Plan of Merger, dated as of December 20, 1999,
by and among Captec Net Lease Realty, Inc., Captec Acquisition, Inc.,
Captec Financial Group, Inc. and Captec Net Lease Realty Advisors,
Inc. (without exhibits)
99 Press Release dated December 20, 1999.
FORWARD-LOOKING STATEMENTS
This Form 8-K contains certain "forward-looking statements" which
represent the Company's expectations or beliefs, including, but not limited to,
statements concerning industry performance and the
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Company's operations, performance, financial condition, plans, growth and
strategies. Any statements contained in this Form 8-K which are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the generality of the foregoing, words such as "may," "will," "expect,"
"anticipate," "intent," "could," "estimate" or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond the Company's control, and
actual results may differ materially depending on a variety of important factors
many of which are beyond the control of the Company.
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.
Date: December 30, 1999
/s/ W. Ross Martin
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Captec Net Lease Realty, Inc.
W. Ross Martin
Executive Vice President and Chief Financial Officer
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EXECUTION COPY
OMNIBUS AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAPTEC NET LEASE REALTY, INC.,
CAPTEC ACQUISITION, INC.,
CAPTEC FINANCIAL GROUP, INC.,
AND
CAPTEC NET LEASE REALTY ADVISORS, INC.
DATED AS OF DECEMBER 20, 1999
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
SECTION 1.01 Terms Defined in this Section............................... 1
ARTICLE II
THE MERGERS
SECTION 2.01 The Mergers; Effective Time................................. 7
SECTION 2.02 Closings.................................................... 8
SECTION 2.03 Effective Time.............................................. 8
SECTION 2.04 Effect of the Mergers....................................... 8
ARTICLE III
THE SURVIVING CORPORATIONS
SECTION 3.01 Names....................................................... 8
SECTION 3.02 Certificates of Incorporation and Bylaws.................... 8
SECTION 3.03 Officers and Directors...................................... 9
SECTION 3.04 Additional Actions.......................................... 9
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SECURITIES;
ADDITIONAL CONSIDERATION
SECTION 4.01 Share Consideration; Conversion or Cancellation of 9
Securities..................................................
SECTION 4.02 Surrender and Exchange of Securities........................ 11
SECTION 4.03 Fractional Shares........................................... 11
SECTION 4.04 Transfer of Acquisition and CA Shares....................... 11
SECTION 4.05 Lost, Stolen or Destroyed Certificates...................... 11
SECTION 4.06 Additional Share Consideration.............................. 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CFG AND CA
SECTION 5.01 Organization................................................ 17
SECTION 5.02 Authorization; Enforceability............................... 18
SECTION 5.03 Conflicts................................................... 18
SECTION 5.04 Consents and Approvals...................................... 18
SECTION 5.05 Anti-takeover Provisions Inapplicable....................... 18
SECTION 5.06 Capitalization.............................................. 18
SECTION 5.07 Investments; Subsidiaries................................... 19
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SECTION 5.08 Financial Statements; No Material Adverse Change............ 19
SECTION 5.09 Compliance with Laws; Permits............................... 20
SECTION 5.10 Litigation.................................................. 21
SECTION 5.12 Employee Benefit Plans; Labor Matters....................... 21
SECTION 5.13 Tax Matters................................................. 23
SECTION 5.14 Real Property Owned or Leased............................... 24
SECTION 5.15 Undisclosed Liabilities..................................... 24
SECTION 5.16 Absence of Certain Changes or Events........................ 24
SECTION 5.17 Assets...................................................... 25
SECTION 5.18 Books and Records........................................... 26
SECTION 5.19 Proxy Statement............................................. 26
SECTION 5.20 Brokers and Finders......................................... 26
SECTION 5.21 Full Disclosure............................................. 26
SECTION 5.22 Environmental Matters....................................... 26
SECTION 5.23 Insurance Disclosure........................................ 27
SECTION 5.24 Allowance for Possible Loan Losses.......................... 27
SECTION 5.25 Year 2000 Compliance........................................ 27
SECTION 5.26 Material Agreements......................................... 28
SECTION 5.27 Intellectual Property....................................... 28
SECTION 5.28 Absence of Certain Business Practices....................... 28
SECTION 5.29 Affiliate Transactions...................................... 28
SECTION 5.30 Loans; Investments.......................................... 29
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ACQUISITION
SECTION 6.01 Organization................................................ 32
SECTION 6.02 Authorization; Enforceability............................... 32
SECTION 6.03 Conflicts................................................... 32
SECTION 6.04 Consents and Approvals...................................... 32
SECTION 6.05 Anti-takeover Provisions Inapplicable....................... 33
SECTION 6.06 Capitalization.............................................. 33
SECTION 6.07 Financial Statements; No Material Adverse Change............ 33
SECTION 6.08 No Prior Activities; Assets of Acquisition.................. 34
SECTION 6.09 Compliance with Laws........................................ 34
SECTION 6.10 SEC Reports................................................. 34
SECTION 6.11 Litigation.................................................. 34
SECTION 6.12 Proxy Statement............................................. 35
SECTION 6.13 Brokers and Finders......................................... 35
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ARTICLE VII
COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 7.01 Conduct of the Business..................................... 35
SECTION 7.02 Officers and Employees...................................... 37
SECTION 7.03 Meeting of Shareholders..................................... 37
SECTION 7.04 Proxy Materials............................................. 38
SECTION 7.05 Filings; Other Action....................................... 38
SECTION 7.06 Access to Information....................................... 38
SECTION 7.07 Advisory Agreement.......................................... 39
SECTION 7.08 Intellectual Property Rights................................ 39
SECTION 7.09 Tax Matters................................................. 39
SECTION 7.10 Reorganization.............................................. 40
SECTION 7.11 Further Actions; Cooperation................................ 41
SECTION 7.12 Notice of Certain Events.................................... 41
SECTION 7.13 Certain Actions............................................. 41
SECTION 7.14 Current Information......................................... 42
SECTION 7.15 Reservation of Shares to Satisfy Contingent Payment 42
Obligation..................................................
SECTION 7.16 Indemnification and Insurance............................... 42
SECTION 7.17 Certain Employment Matters.................................. 42
SECTION 7.18 Disclosure Schedule......................................... 42
SECTION 7.19 Tax Certificates............................................ 42
ARTICLE VIII
CONDITIONS TO THE MERGERS
SECTION 8.01 Conditions to Each Party's Obligations...................... 43
SECTION 8.02 Additional Conditions to Obligation of the Company and 44
Acquisition.................................................
SECTION 8.03 Additional Conditions to Obligation of CFG and CA........... 45
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 CFG and CA Indemnities to the Company....................... 46
SECTION 9.02 Company's Indemnities to CFG and CA......................... 46
SECTION 9.03 Notice and Opportunity to Defend............................ 47
SECTION 9.04 Survival of Representations and Warranties.................. 48
SECTION 9.05 Right of Set-off............................................ 48
SECTION 9.06 Limitations on Indemnification.............................. 48
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ARTICLE X
TERMINATION
SECTION
10.01 Termination................................................. 49
SECTION
10.02 Notice...................................................... 50
SECTION
10.03 Effect of Termination....................................... 50
ARTICLE XI
GENERAL PROVISIONS
SECTION
11.01 Expenses.................................................... 50
SECTION
11.02 Notices, Etc. .............................................. 51
SECTION
11.03 Binding Effect; No Assignment............................... 51
SECTION
11.04 Entire Agreement............................................ 52
SECTION
11.05 Remedies Cumulative; Specific Performance................... 52
SECTION
11.06 Waiver...................................................... 52
SECTION
11.07 No Third-Party Beneficiaries................................ 52
SECTION
11.08 Governing Law............................................... 52
SECTION
11.09 Section Headings; Interpretation............................ 52
SECTION
11.10 Severability................................................ 52
SECTION
11.11 Amendment................................................... 53
SECTION
11.12 Further Assurances.......................................... 53
SECTION
11.13 Public Announcements........................................ 53
SECTION
11.14 Exhibits and Schedules...................................... 53
SECTION
11.15 CFG/CA Representative....................................... 53
SECTION
11.16 Counterparts................................................ 53
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EXHIBITS
Exhibit A-1 CA Shareholders
Exhibit A-2 CFG Common Shareholders
Exhibit A-3 CFG Preferred Shareholders
Exhibit A-4 Individual Warrant Holders
Exhibit A-5 Institutional Warrant Holders
Exhibit A-6 Option Holders
Exhibit A-7 Options
Exhibit A-8 Warrants
Exhibit B Form of Registration Rights Agreement
Exhibit C Earnout Applicable Percentage
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SCHEDULES
Schedule 5.03 Conflicts
Schedule 5.04 Consents and Approvals
Schedule 5.06 Capitalization
Schedule 5.07 Investments; Subsidiaries
Schedule 5.08 Liabilities
Schedule 5.10 Litigation
Schedule 5.12 Employee Plans; Labor Matters
Schedule 5.13 Tax Matters
Schedule 5.14 Real Property
Schedule 5.15 Undisclosed Liabilities
Schedule 5.16 Absence of Certain Changes or Events
Schedule 5.17 Assets
Schedule 5.18 Books and Records
Schedule 5.22 Environmental Matters
Schedule 5.25 Year 2000 Compliance
Schedule 5.26 Material Agreements
Schedule 5.27 Intellectual Property
Schedule 5.29 Affiliate Transactions
Schedule 5.30(b) Portfolio Loans
Schedule 5.30(e) Loans
Schedule 5.30(g) Servicing Requirements
Schedule 5.30(k) Interest Rate Risk Management
Schedule 5.30(m) Repurchase Obligations
Schedule 5.30(o) Loan Defaults
Schedule 5.30(p) Loans Held for Securitizations
Schedule 5.30(q) Securitizations
Schedule 6.04 Governmental Authority Consents and Approvals
Schedule 9.01 Indemnification Percentage Interests
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OMNIBUS AGREEMENT AND PLAN OF MERGER
This OMNIBUS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of
December 20, 1999 and is by and among CAPTEC NET LEASE REALTY, INC., a Delaware
corporation (the "Company"), CAPTEC FINANCIAL GROUP, INC., a Michigan
corporation ("CFG"), CAPTEC NET LEASE REALTY ADVISORS, INC., a Delaware
corporation ("CA"), and CAPTEC ACQUISITION, INC., a Michigan corporation and a
wholly-owned subsidiary of the Company ("Acquisition").
RECITALS
WHEREAS, the Board of Directors of each of CFG and Acquisition has
determined that it is in the best interests of CFG and Acquisition and their
respective shareholders for CFG and Acquisition to merge pursuant to applicable
law, with CFG being the surviving entity;
WHEREAS, the Board of Directors of each of the Company and CA has
determined that it is in the best interests of the Company and CA and their
respective shareholders for the Company and CA to merge pursuant to applicable
law, with the Company being the surviving entity;
WHEREAS, the parties desire that (i) as part of the CFG Merger (as
hereinafter defined), the CFG Common Shareholders (as hereinafter defined) are
to receive shares of Company Common Stock (as hereinafter defined) and Earnout
Participation Rights (as hereinafter defined); the CFG Preferred Shareholders
(as hereinafter defined) are to receive shares of Company Common Stock and no
Earnout Participation Rights, but are to receive in lieu thereof certain rights
under the Registration Rights Agreement (as hereinafter defined); the Individual
Warrant Holders (as hereinafter defined) are to receive shares of Company Common
Stock and Earnout Participation Rights; the Option Holders are to receive shares
of Company Common Stock and Earnout Participation Rights; the Institutional
Warrant Holders (as hereinafter defined) are to receive cash and no shares of
Company Common Stock or Earnout Participation Rights; and (ii) as part of the CA
Merger, the CA Common Shareholders are to receive shares of Company Common
Stock, in each of (i) and (ii) all as more fully set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that each of the
Mergers (as hereinafter defined) qualify as a reorganization within the meaning
of Section 368(a) of the Code (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Terms Defined in this Section. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
"Acquisition" shall have the meaning set forth in the Preamble.
"Acquisition Common Stock" shall mean the common stock, par value $0.01 per
share, of Acquisition.
"Acquisition Proposal" shall have the meaning set forth in Section 7.13(b).
"Advisory Agreement" shall mean that certain Advisory Agreement, dated as
of August 29, 1997, by and between the Company and CA, as amended to date.
"Additional Payment" shall have the meaning given thereto in Section
4.06(l).
"Affiliate" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act.
"Agreement" shall have the meaning set forth in the Preamble.
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"Applicable Percentages" shall have the meaning set forth in Section
4.06(d).
"Asserted Liability" shall have the meaning set forth in Section 9.03.
"Audited CFG Financial Statements" shall have the meaning set forth in
Section 5.08(a).
"Authorization" shall mean any consent, approval or authorization of,
expiration or termination of any waiting period requirement (including pursuant
to the HSR Act) by, or filing, registration, qualification, declaration or
designation with, any Governmental Authority.
"Bradford" shall mean J.C. Bradford & Co. LLC.
"Business Combination" shall have the meaning set forth in Section 4.01(e).
"Business Day" shall mean any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law, regulation or executive order to close in The City of New
York or in the State of Michigan.
"CA" shall have the meaning set forth in the Preamble.
"CA Common Stock" shall mean the common stock, without par value, of CA.
"CA Exchange Ratio" shall have the meaning set forth in Section 4.01(d).
"CA Financial Statements" shall have the meaning set forth in Section
5.08(c).
"CA Merger" shall have the meaning set forth in Section 2.01(b).
"CA Shareholders" shall mean the holders of CA Common Stock identified in
Exhibit A-1.
"Certificate of Merger" shall mean the certificate of merger with respect
to each of the Mergers containing the provisions required by, and executed in
accordance with, DGCL Section 251 and MBCA Section 707, as the case may be.
"Certificate" or "Certificates" shall have the meaning set forth in Section
4.0l(f).
"CFG" shall have the meaning set forth in the Preamble.
"CFG/CA Financial Statements" shall have the meaning set forth in Section
5.08(c).
"CFG/CA Permits" shall have the meaning set forth in Section 5.09.
"CFG/CA Representative" shall have the meaning set forth in Section 11.15.
"CFG Common Shareholders" shall mean the holders of CFG Common Stock
identified in Exhibit A-2.
"CFG Common Stock" shall mean the common stock, par value $1.00 per share
of CFG.
"CFG Exchange Ratio" shall have the meaning set forth in Section 4.01(b).
"CFG Merger" shall have the meaning set forth in Section 2.01(a).
"CFG Preferred Shareholders" shall mean the holders of CFG Preferred Stock
listed in Exhibit A-3.
"CFG Preferred Stock" shall mean the Class A Convertible Preferred Stock,
without par value, of CFG.
"CFG Shareholders" shall mean all of the shareholders of CFG Common Stock
and CFG Preferred Stock.
"CFG Stock" shall mean the CFG Common Stock and the CFG Preferred Stock.
"CFG Surviving Corp." shall have the meaning set forth in Section 2.03(b).
"CFG Tax Issue" shall have the meaning set forth in Section 7.09(c).
"Change of Control" shall have the meaning set forth in Section 4.06(k).
"Closing" or "Closings" shall mean the closing of the Mergers.
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"Closing Date" shall mean the date on which the Closings occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company EPS" shall have the meaning set forth in Section 4.06(e).
"Company Indemnitees" shall have the meaning set forth in Section 9.01.
"Company Losses" shall have the meaning set forth in Section 9.01.
"Company Surviving Corp." shall have the meaning set forth in Section
2.03(b).
"DGCL" shall mean the General Corporation Law of the State of Delaware, as
amended from time to time.
"Disclosure Schedule" shall mean the schedule executed and delivered by the
Company, Acquisition, CFG and CA within 10 Business Days of the date of
execution hereof and that sets forth exceptions to the representations and
warranties contained herein and contains certain other information required
hereby.
"Earnout Audit" shall have the meaning set forth in Section 4.06(g).
"Earnout Default" shall have the meaning set forth in Section 4.06(k).
"Earnout Participants" shall mean the (i) CFG Common Shareholders, (ii)
Individual Warrant Holders, and (iii) Option Holders immediately prior to the
CFG Merger.
"Earnout Participation Rights" shall mean the right to receive the Earnout
Shares referred to in Section 4.06.
"Earnout Payment" shall have the meaning set forth in Section 4.06(a).
"Earnout Period" shall have the meaning set forth in Section 4.06(a)
"Earnout Shares" shall have the meaning set forth in Section 4.06(a).
"Earnout Statement" shall have the meaning set forth in Section 4.06(g).
"Effective Time" shall have the meaning set forth in Section 2.03(a).
"Environmental Claim" shall mean any written notice, claim, demand, action,
suit, complaint, or proceeding which has been served upon or delivered or
otherwise transmitted to the party in question, by any Person alleging material
Environmental Liabilities or potential material Environmental Liabilities.
"Environmental Laws" shall mean all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations, as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof, including any applicable judicial or
administrative order, consent decree, order or judgment, imposing liability or
standards of conduct for or relating to the regulation and protection of the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
(42 U.S.C. sec.sec. 9601 et seq.) ("CERCLA"); the Hazardous Materials
Transportation Authorization Act of 1994 (49 U.S.C. sec.sec. 5101 et seq.); the
Federal Insecticide Fungicide, and Rodenticide Act (7 U.S.C. sec.sec. 136 et
seq.); the Solid Waste Disposal Act (42 U.S.C. sec.sec. 6901 et seq.); the Toxic
Substance Control Act (15 U.S.C. sec.sec. 2601 et seq.); the Clean Air Act (42
U.S.C. sec.sec. 7401 et seq.); the Occupational Safety and Health Act (29 U.S.C.
sec.sec. 651 et seq.); and the Safe Drinking Water Act (42 U.S.C. sec.sec.
300(f) et seq.), each as from time to time amended, and any and all regulations
promulgated thereunder, and all analogous state, local and foreign counterparts
or equivalents and any transfer of ownership notification or approval statutes.
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"Environmental Liabilities" shall mean, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of experts and consultants and
reasonable fees, disbursements and expenses of counsel), fines, penalties,
sanctions and interest incurred as a result of or related to any claim, suit,
action, investigation, proceeding or demand by any Person, whether based in
contract, tort, implied or express warranty, strict liability, criminal or civil
statute or common law, including any arising under or related to any
Environmental Laws, Environmental Permits, or in connection with any Release or
threatened Release or presence of a Hazardous Material whether on, at, in,
under, from or about or in the vicinity of any real or personal property.
"Environmental Permits" shall mean all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
"ERISA" shall have the meaning set forth in Section 5.12(a).
"ERISA Affiliate" shall have the meaning set forth in Section 5.12(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
and the rules and regulations promulgated thereunder.
"Financial Statements" shall have the meaning set forth in Section 6.07(a).
"First Earnout Payment" shall have the meaning set forth in Section
4.06(a).
"First Earnout Period" shall have the meaning set forth in Section 4.06(a).
"First Year Maximum Shares" shall have the meaning set forth in Section
4.06(b)(ii).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any self-regulating organization, securities exchange or
securities trading system.
"Hazardous Material" shall mean any substance, material or waste which is
regulated by or forms the basis of liability under, any Environmental Laws,
including any material or substance which is (a) defined as a "solid waste,"
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste," "restricted hazardous waste," "pollutant," "contaminant,"
"hazardous constituent," "special waste," "toxic substance" or other similar
term or phrase under any Environmental Laws, (b) petroleum or any fraction or
by-product thereof, asbestos, polychlorinated biphenyls (PCB')s, or any
radioactive substance.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended and the rules and regulations thereunder.
"Indemnitee" shall have the meaning set forth in Section 9.03.
"Indemnifying Party" shall have the meaning set forth in Section 9.03.
"Individual Warrant Holders" shall mean the individuals holding the
Warrants identified in Exhibit A-4.
"Initial Share Consideration" shall mean the shares of Company Common Stock
to be paid to the CFG Shareholders, the Individual Warrant Holders, the Option
Holders, and the CA Shareholders pursuant to the terms of Sections
4.01(b) - 4.01(d) hereof.
"Institutional Warrant Holders" shall mean the institutions holding the
Warrants identified on Exhibit A-5.
"Insurance Amount" shall have the meaning set forth in Section 7.16.
"Intellectual Property" shall mean any and all patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, tradenames, tradename
applications and registrations, trade dress copyrights, copyright applications
and registrations, mask
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work, mask work applications, licenses, logos, corporate and partnership names,
and customer lists, proprietary processes, formulae, inventions, trade secrets,
secret processes, computer programs, know-how, confidential information,
development tools and other proprietary rights, and all documentation and media
constituting, describing or relating to the above, including, but not limited
to, manuals, memoranda, know-how, notebooks, software, records and disclosures.
"Internal MIS Systems and Facilities" shall mean any computer software and
systems (including hardware, firmware, operating system software, utilities, and
applications software) used in the ordinary course of the applicable party's
business by or on behalf of such party, including the Company's payroll,
accounting, billing/receivables, inventory, asset tracking, customer service,
human resources, and e-mail systems.
"Investor" shall have the meaning set forth in Section 5.30(a).
"IRS" shall mean the Internal Revenue Service of the United States.
"Knowledge" or "knowledge" shall mean the terms "knowledge" and "aware" and
any derivatives thereof and, when applied to any party to this Agreement, shall
refer to the knowledge or awareness, as the case may be, which such party or, if
applicable, any director or executive officer thereof has, or reasonably should
have had, given such party's official position and after reasonable due inquiry
of the other officers, directors, and/or key employees of such party.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
encumbrance, claim, easement, transfer restriction, lien (statutory or
otherwise) or security agreement of any kind or nature whatsoever.
"Loan" shall have the meaning set forth in Section 5.30(a).
"Loan Documents" shall have the meaning set forth in Section 5.30(a).
"Loans Held for Sale" shall have the meaning set forth in Section 5.30(a).
"Material Acquisition" shall have the meaning set forth in Section
4.06(e)(ii).
"Material Adverse Effect" shall mean as to any Person, a material adverse
effect on the business, properties, operations or condition (financial or other)
of such Person taken as a whole; provided, however, that under no circumstance
shall a Material Adverse Effect be determined to have occurred as a result of
the Company ceasing to be a real estate investment trust. Whenever in this
Agreement an event, circumstance, or set of facts is described as having or
resulting in, or not having or resulting in, a Material Adverse Effect with
regard to the party involved, whether such event, circumstance or set of facts
does, in fact, so constitute such a Material Adverse Effect shall be determined
by assessing whether such event, circumstance, or set of facts would have or
result in a Material Adverse Effect individually or in the aggregate when taken
together with all such other similar or other events, circumstances, or set of
facts, which in and of themselves may not constitute, have, or result in a
Material Adverse Effect, but when taken together may so constitute a Material
Adverse Effect.
"Material Agreement" shall mean any contract, lease, restriction,
agreement, instrument or commitment to which CFG or CA is a party or by which
its properties are bound (i) which provides for either CFG or CA to receive or
commits either CFG or CA to expend, $50,000 (including cash or the fair market
value of non-cash assets) or more in the aggregate in any 12-month period or
$50,000 or more in the aggregate over any period, (ii) which if breached by any
party thereto would result in liability or loss to either CFG or CA of $50,000
or more in the aggregate or (iii) which is a stockholders agreement relating to
either CFG or CA, partnership agreement, joint venture agreement or other
agreement pursuant to which either CFG or CA has an equity interest in any
Person or any Person has an equity interest in CFG or CA.
"Material Disposition" shall have the meaning set forth in Section
4.06(e)(i).
"MBCA" shall mean the Business Corporation Act of the State of Michigan, as
in effect from time to time.
"Mergers" shall mean the CFG Merger and the CA Merger, collectively.
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"Mortgage Loan" shall have the meaning set forth in Section 5.30(a).
"Objection Notice" shall have the meaning set forth in Section 4.06(g).
"Offering Circular" shall mean the Offering Circular for Captec Franchise
Trust 1999-1, dated May 19, 1999.
"Option Holders" shall mean the holders of Options identified on Exhibit
A-6.
"Options" shall mean the options to purchase shares of CFG Common Stock
listed in Exhibit A-7.
"Option Termination Agreement" shall have the meaning set forth in Section
4.01(c).
"Order" shall have the meaning set forth in Section 8.01(e).
"ordinary course of business" shall mean the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Permitted Liens" shall mean (a) statutory Liens, including mechanics',
carriers', workmen's, repairmen's and other similar liens, arising or incurred
in the ordinary course of business with respect to which the underlying
obligations are not delinquent or the validity of which is being contested in
good faith by appropriate proceedings, (b) Liens for current taxes not yet due
and payable or for taxes the validity of which is being contested in good faith
by appropriate proceedings, and (c) Liens and defects in title that in the
aggregate do not have a Material Adverse Effect.
"Person" shall mean any individual or corporation, company, partnership,
trust, incorporated or unincorporated association, joint stock company,
Governmental Authority, joint venture or other legal entity of any kind.
"Plans" shall have the meaning set forth in Section 5.12(a).
"Pre-Closing Book Value" shall mean Fifteen Dollars ($15.00), the per-share
book value of the Company Common Stock as determined by mutual agreement of the
Company and the CFG Shareholders and the CA Shareholders.
"Portfolio Loan" shall have the meaning set forth in Section 5.30(a).
"Present Value" shall have meaning set forth in Section 4.06(k).
"Proxy Statement" shall have the meaning set forth in Section 5.04.
"Prudential Securities" shall mean Prudential Securities Incorporated.
"Registration Rights Agreement" shall mean that certain Registration Rights
Agreement between the Company and the CFG Preferred Shareholders to be entered
pursuant to and in accordance with Section 8.03(e) hereof and substantially in
the form of Exhibit B.
"Release" shall mean any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
"Remaining Shares" shall have the meaning set forth in Section
4.06(c)(iii).
"Representation Agreement" shall have the meaning set forth in Section
11.15.
"Resolution" shall have the meaning set forth in Section 7.09(c)(vii).
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 6.10.
"Second Earnout Payment" shall have the meaning set forth in Section
4.06(a).
"Second Earnout Period" shall have the meaning set forth in Section
4.06(a).
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"Second Year Maximum Shares" shall have the meaning set forth in Section
4.06(c)(ii).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Seller Losses" shall have the meaning set forth in Section 9.02.
"Serviced Loans" shall have the meaning set forth in Section 5.30(a).
"Servicing Requirements" shall have the meaning set forth in Section
5.30(a).
"Special Committee" shall mean the Special Committee of the Board of
Directors of the Company.
"Stockholders' Meetings" shall have the meaning set forth in Section 5.04.
"Subsidiary" shall mean as to any Person, any other Person of which at the
time of determination the first Person owns or controls directly or indirectly
more than 50% of the outstanding common stock or equity securities.
"Surviving Corporations" shall have the meaning set forth in Section
2.03(b).
"Tax" or "Taxes" means all net income, capital gains, gross income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property, or
windfall profit taxes, customs duties, or other taxes, fees, assessments, or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax, or additional amounts imposed by any Taxing Authority.
"Tax Matter" shall have the meaning set forth in Section 7.09(c).
"Tax Return" shall mean any return, declaration of estimated tax, tax
report, customs declaration, claim for refund or information return or statement
relating to Taxes, including any amendment thereto.
"Taxing Authority" shall have the meaning set forth in Section 5.13(e).
"Unaudited CFG Financial Statements" shall have the meaning set forth in
Section 5.08(b).
"Warrants" shall mean the warrants to purchase shares of CFG Common Stock
listed in Exhibit A-8.
"Warrant Holder" shall mean each Institutional Warrant Holder and each
Individual Warrant Holder.
"Warrant Termination Agreement" shall have the meaning set forth in Section
4.01(c).
"Year 2000 Compliant" means that (1) the products, services, or other
item(s) at issue accurately process, provide and/or receive all date/time data
(including calculating, comparing, sequencing, processing, and outputting)
within, from, into, and between centuries (including the twentieth and
twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (2) neither the performance nor the functionality of the
products, services, and other item(s) at issue will be affected by any
dates/times prior to, on, after, or spanning January 1, 2000 except as could not
reasonably be expected to have a Material Adverse Effect.
ARTICLE II
THE MERGERS
SECTION 2.01 The Mergers; Effective Time.
(a) The CFG Merger. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, Acquisition shall be merged with and into CFG
in accordance with Section 707 of the MBCA, with CFG being the surviving
corporation, whereupon the separate corporate existence of Acquisition shall
cease and CFG shall continue its corporate existence under the laws of the State
of Michigan (the "CFG Merger").
(b) The CA Merger. Subject to the terms and conditions set forth in this
Agreement, at the Effective Time, CA shall be merged with and into the Company
in accordance with Section 251 of the DGCL, with the
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Company being the surviving corporation, whereupon the separate corporate
existence of CA shall cease and the Company shall continue its corporate
existence under the laws of the State of Delaware (the "CA Merger").
SECTION 2.02 Closings. Subject to Article X and the fulfillment or waiver
of the conditions set forth in Article VIII, the Closings shall take place at
(i) the offices of Brown & Wood LLP, 1666 K Street, N.W., Washington, D.C., at
10:00 a.m., as promptly as practical (and in any event within two Business Days)
following the fulfillment or waiver of the conditions set forth in Article VIII
(other than conditions which by their nature are intended to be fulfilled at the
Closings), or (ii) such other place or time or on such other date as the parties
may mutually agree in writing or as the parties may mutually agree is necessary
to permit the fulfillment or waiver of the conditions set forth in Article VIII.
SECTION 2.03 Effective Time.
(a) In accordance with the applicable provisions of the MBCA and the DGCL,
the Mergers shall become effective (the "Effective Time") (i) on the date and at
the time of the filing of a Certificate of Merger with respect to the CFG Merger
with the Secretary of State of the State of Michigan in accordance with the
provisions of the MBCA; and (ii) on the date and at the time of the filing of a
Certificate of Merger with respect to the CA Merger with the Secretary of State
of the State of Delaware in accordance with the provisions of the DGCL, or at
such later times, not later than five Business Days thereafter, as may be
specified in the respective Certificates of Merger. Each Certificate of Merger
shall, at least 15 Business Days prior to the date of filing thereof, be
submitted to the appropriate authority for pre-clearance in accordance with the
administrative procedures of the Secretary of State of the State of Michigan and
the Secretary of State of the State of Delaware, as the case may be. The parties
agree to use their reasonable commercial efforts to ensure that the Effective
Time of each Merger occurs concurrently and on the Closing Date.
(b) CFG, as the surviving corporation of the CFG Merger, shall be referred
to herein as "CFG Surviving Corp." The Company, as the surviving corporation of
the CA Merger, shall be referred to herein as "Company Surviving Corp."
(collectively, CFG Surviving Corp. and Company Surviving Corp. are referred to
herein as the "Surviving Corporations"). In accordance with and subject to the
provisions of the DGCL and the MBCA, as applicable, (i) all the rights,
privileges, powers, immunities, purposes and franchises of CFG and Acquisition
shall vest in CFG Surviving Corp. and all debts, liabilities, obligations, and
duties of CFG and Acquisition shall become the debts, liabilities, obligations,
and duties of CFG Surviving Corp., and (ii) all the rights, privileges, powers,
immunities, purposes and franchises of the Company and CA shall vest in Company
Surviving Corp. and all debts, liabilities, obligations, and duties of the
Company and CA shall become the debts, liabilities, obligations, and duties of
Company Surviving Corp. For Tax purposes, the parties agree that the Effective
Time shall be deemed to occur after the close of business on the date on which
the Effective Time occurs, and no party hereto shall take a position
inconsistent therewith, except as may be required by law.
SECTION 2.04 Effect of the Mergers. The CFG Merger shall have the effect
set forth in Section 724 of the MBCA, and the CA Merger shall have the effect
set forth in Section 259 of the DGCL.
ARTICLE III
THE SURVIVING CORPORATIONS
SECTION 3.01 Names. The name of the surviving corporation of (a) the CFG
Merger shall be "CFG, Inc.", and (b) the CA Merger shall be "Captec Financial
Group, Inc." or, in each case, such other name as may be approved by the
shareholders of the respective Surviving Corporations.
SECTION 3.02 Certificates of Incorporation and Bylaws.
(a) The Articles of Incorporation and Bylaws of CFG as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of CFG Surviving Corp. unless and until amended in accordance with
their terms and applicable law.
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(b) The Certificate of Incorporation and Bylaws of the Company as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of Company Surviving Corp. unless and until amended in
accordance with their terms and applicable law.
SECTION 3.03 Officers and Directors.
(a) The officers and, except as otherwise provided in the Certificate of
Merger evidencing the CFG Merger, the directors of CFG immediately prior to the
Effective Time shall continue as the officers and directors of CFG Surviving
Corp. and shall remain officers and directors thereof until their successors are
duly elected and qualified or their prior resignation, removal or death.
(b) The officers and directors of the Company immediately prior to the
Effective Time shall continue as the officers and directors of Company Surviving
Corp. and shall remain officers and directors thereof until their successors are
duly elected and qualified or their prior resignation, removal or death.
SECTION 3.04 Additional Actions. If, at any time after the Effective Time,
CFG Surviving Corp. or Company Surviving Corp. shall consider or be advised that
any deeds, bills of sale, assignments, assurances or any other actions, things
or documents are necessary or desirable to vest, perfect or confirm of record or
otherwise in CFG Surviving Corp. or Company Surviving Corp., as the case may be,
its respective right, title or interest in, to or under any of the rights,
properties or assets of Acquisition or CA, as the case may be, or otherwise to
carry out the terms or purposes of this Agreement, the officers and directors of
CFG Surviving Corp. or Company Surviving Corp., as appropriate, shall be
authorized to execute and deliver, in the name and on behalf of Acquisition or
CA, as the case may be, all such deeds, bills of sale, assignments and
assurances or other documentation and to take and do, in the name and on behalf
of Acquisition or CA, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in CFG Surviving Corp. or Company
Surviving Corp., as the case may be, or otherwise to carry out the purpose of
this Agreement.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SECURITIES; ADDITIONAL CONSIDERATION
SECTION 4.01 Share Consideration; Conversion or Cancellation of Securities.
(a) Company Securities. All issued and outstanding securities of the
Company outstanding immediately prior to the Effective Time (including, without
limitation, all shares of Company Common Stock and all options and warrants
exercisable for and securities convertible into shares of Company Common Stock)
shall remain issued and outstanding following the Mergers with the same terms
and subject to the same conditions as in effect prior to the Effective Time.
(b) CFG Securities; Acquisition Securities. At the Effective Time, each
share of CFG Stock issued and outstanding immediately prior to the Effective
Time, shall, by virtue of the CFG Merger and without any action on the part of
the holder thereof, be converted into the right to receive, except as otherwise
indicated on Exhibit A-2, 45.71086 shares of Company Common Stock, subject to
appropriate adjustment in the event of a stock split, stock dividend or
recapitalization or other similar event applicable to shares of Company Common
Stock prior to the Effective Time (the "CFG Exchange Ratio"), upon surrender of
the certificate representing such share of CFG Stock. The aggregate number of
shares of Company Common Stock to be provided to the CFG Shareholders, the
Option Holders and the Warrant Holders hereunder shall not exceed 2,440,000,
subject to any additional shares of Company Common Stock to be provided to the
Earnout Participants pursuant to Section 4.06. In addition to the shares of
Company Common Stock to be received by the holders of CFG Stock and the Option
Holders and the Warrant Holders (as more fully set forth in Section 4.01(c)) in
the CFG Merger, (i) the Earnout Participants shall also be entitled to receive
the Earnout Shares and the Additional Payments all as more fully set forth in
Section 4.06, and (ii) the CFG Preferred Shareholders shall receive registration
rights as are provided in the Registration Rights Agreement referred to in
Section 8.03(e) hereof. Each share of CFG Stock held in treasury by CFG
immediately prior to the Effective Time shall, by
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virtue of the CFG Merger, be canceled and retired and cease to exist, without
any conversion thereof and no consideration shall be issued in exchange
therefor. At the Effective Time, each share of Acquisition Common Stock issued
and outstanding immediately prior to the Effective Time, shall, by virtue of the
CFG Merger and without any action on the part of the holder thereof, be
converted into one share of common stock of CFG Surviving Corp.
(c) Treatment of Options and Warrants. Immediately prior to the Effective
Time, each Option Holder shall execute and deliver to CFG an agreement (an
"Option Termination Agreement") in a form to be mutually agreed between CFG and
the Special Committee, and pursuant to which the Option Holders shall forfeit
all rights under and pursuant to the terms of their Options, in exchange for the
right to receive in the CFG Merger such number of shares of Company Common Stock
as is set forth opposite the name of each respective Option Holder on Exhibit
A-6. Immediately prior to the Effective Time, each Warrant Holder shall execute
and deliver to CFG an agreement (a "Warrant Termination Agreement") in a form to
be mutually agreed between CFG and the Special Committee, and pursuant to which
the Institutional Warrant Holders and the Individual Warrant Holders, shall
forfeit all rights under and pursuant to the terms of their Warrants in exchange
for the right to receive in the CFG Merger such cash payments and shares of
Company Common Stock, respectively, as are set forth opposite the name of such
Warrant Holder on Exhibit A-8. The effectiveness of each Option Termination
Agreement and each Warrant Termination Agreement shall be expressly contingent
upon and subject to the consummation of the transactions contemplated herein.
(d) CA Securities. At the Effective Time, each share of CA Common Stock,
issued and outstanding immediately prior to the Effective Time, shall, by virtue
of the CA Merger and without any action on the part of the holder thereof, be
converted into the right to receive 560 shares of Company Common Stock, subject
to appropriate adjustment in the event of a stock split, stock dividend or
recapitalization or other similar event applicable to shares of Company Common
Stock prior to the Effective Time (the "CA Exchange Ratio"), upon surrender of
the certificate representing such share of CA Common Stock. The aggregate number
of shares of Company Common Stock to be provided to the CA Shareholders
hereunder shall be 560,000. Each share of CA Common Stock held in treasury by CA
immediately prior to the Effective Time shall, by virtue of the CA Merger, be
canceled and retired and cease to exist, without any conversion thereof and no
consideration shall be issued in exchange therefor.
(e) No Splits, Etc. Each of CFG and CA covenants and agrees that, prior to
the Effective Time, each of such entities shall not split or combine its capital
stock, or pay a stock dividend or other stock distribution in shares of its
capital stock, or in rights or securities exchangeable or convertible into or
exercisable for its capital stock, or otherwise change its capital stock into,
or exchange its capital stock for, any other securities (whether pursuant to or
as part of a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation of such entity as a result of which
its respective shareholders receive cash, stock or other property in exchange
for, or in connection with, their capital stock of such entity (a "Business
Combination") or otherwise), or make any other dividend or distribution on or of
its capital stock, without the parties hereto having first entered into an
amendment to this Agreement pursuant to which the consideration to be paid
hereunder will be adjusted to reflect such split, combination, dividend,
distribution, Business Combination or change; provided, however, that CA shall
not be prohibited by reason of this Section 4.01(e) from making a cash
distribution to its officers, directors and shareholders immediately prior to
the CA Merger.
(f) No Further Rights. All CFG Stock, Options, Warrants, and CA Common
Stock to be converted into Company Common Stock pursuant to this Section 4.01
shall cease to be outstanding, shall be canceled and retired and shall cease to
exist, and the holders of a certificate or certificates representing such shares
(a "Certificate" or the "Certificates") or Options or Warrants representing the
right to acquire such shares shall thereafter cease to have any rights with
respect thereto, except the right to receive for all of the CFG Stock, Options,
Warrants, or CA Common Stock, as the case may be, upon the surrender of such
Certificates, Options or Warrants in accordance with Section 4.02, the Company
Common Stock or in the case of the Institutional Warrant Holders, cash,
specified and, with respect to all the CFG Shareholders and CA Shareholders,
cash in lieu of fractional shares of Company Common Stock as contemplated by
Section 4.03.
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SECTION 4.02 Surrender and Exchange of Securities. At or after the
Effective Time, upon surrender by the CFG Shareholders and the CA Shareholders
of their respective Certificates for cancellation to the Company, together with
any other required documents, and upon evidence that the Option Holders and
Warrant Holders have executed the Option Termination Agreement or the Warrant
Termination Agreement, as applicable, the CFG Shareholders, the CA Shareholders,
the Option Holders and the Individual Warrant Holders shall receive (i)
certificates of Company Common Stock representing the number of whole shares of
Company Common Stock into which shares of CFG Stock or CA Common Stock, as the
case may be, have been converted in accordance with Section 4.01(b) or Section
4.01(d), as the case may be, or such number of shares of Company Common Stock as
each Option Holder or Individual Warrant Holder is entitled to under Section
4.01(c) hereof, as the case may be, and (ii) cash in lieu of fractional shares
as contemplated by Section 4.03, and all Certificates, Options and Warrants so
surrendered shall forthwith be canceled, and the Institutional Warrant Holders
shall receive the cash referred to in Section 4.01. Until surrendered or
exchanged, the outstanding Certificates, Options and Warrants shall, upon and
after the Effective Time, be deemed for all purposes (other than to the extent
provided in the following sentence) to evidence ownership of the number of
shares of Company Common Stock into which such CFG Stock, Options, Warrants, or
CA Common Stock, as the case may be, has been converted pursuant to Section 4.01
hereof and the other rights contemplated in the preceding sentence; provided,
however, that no dividends or other distributions, if any, in respect of such
shares of Company Common Stock, declared after the Effective Time and payable to
holders of record after the Effective Time, shall be paid to the holders of any
unsurrendered Certificates, Options or Warrants until such Certificates, Options
or Warrants are surrendered. Subject to applicable law, after the surrender and
exchange of Certificates, Options or Warrants the record holders thereof will be
entitled to receive any such dividends or other distributions without interest
thereon, which theretofore have become payable with respect to the number of
shares of Company Common Stock for which such Certificate, Option or Warrant was
exchangeable. Holders of any unsurrendered Certificates, Options or Warrants
shall not be entitled to vote with respect to Company Common Stock that they may
be entitled to receive until such unsurrendered Certificates are exchanged
pursuant to this Section 4.02.
SECTION 4.03 Fractional Shares. No fractional shares of Company Common
Stock shall be issued in the Mergers. In lieu of any such fractional securities,
CFG Shareholders, Option Holders, Warrant Holders, and CA Shareholders, as the
case may be, will be paid an amount in cash (without interest) equal to the Pre-
Closing Book Value of one share of the Company Common Stock, multiplied by such
fraction.
SECTION 4.04 Transfer of Acquisition and CA Shares. No transfers of CFG
Stock, Options, Warrants or CA Common Stock shall be made on the stock transfer
books of CFG or CA, respectively, after the date of this Agreement and before
the Closing Date; provided, however, that any holder of any CFG Common Stock or
CA Common Stock, or any Option Holder or Individual Warrant Holder shall not be
precluded from making such transfers for personal estate planning purposes,
including transfers to a trust or trusts for the benefit of such party's family
members.
SECTION 4.05 Lost, Stolen or Destroyed Certificates. In the event any
Certificate, Option or Warrant shall have been lost, stolen or destroyed, upon
receipt by the Company of an affidavit of that fact from the holder thereof and
if reasonably satisfied that adequate provision for indemnification has been
made, which may include, at the Company's discretion, the provision by the
holder thereof at his sole cost and expense, of an appropriate bond or other
form of insurance, the Company will issue in exchange for such lost, stolen or
destroyed Certificate, Option or Warrant shares of Company Common Stock, as
applicable, cash in lieu of fractional shares, and unpaid dividends and
distributions on shares of Company Common Stock all as provided in Section 4.02,
deliverable in respect thereof pursuant to this Agreement.
SECTION 4.06 Additional Share Consideration.
(a) Timing and Procedure of Earnout Shares. In addition to the Initial
Share Consideration, the Company hereby agrees that it shall issue to the
Earnout Participants in accordance with the terms of this Section 4.06
additional shares of Company Common Stock (collectively, the "Earnout Shares")
based on the performance of the Company Surviving Corp. on a consolidated basis
during (i) the period from January 1, 2000 (pro forma assuming the Mergers were
consummated as of such date) until and including December 31,
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2000 (such period referred to as the "First Earnout Period" and such amount
referred to as the "First Earnout Payment"), and (ii) the period from January 1,
2001 until and including December 31, 2001 (such period referred to as the
"Second Earnout Period" and such amount referred to as the "Second Earnout
Payment," and each of the First Earnout Period and the Second Earnout Period, an
"Earnout Period," and each of the First Earnout Payment and the Second Earnout
Payment, an "Earnout Payment"). Any Earnout Shares to be issued pursuant to the
terms of this Section 4.06 shall be issued not later than the tenth Business Day
following the date the Earnout Statement (as hereinafter defined) is required to
be delivered to the CFG/CA Representative in accordance with Section 4.06(g)
unless the parties disagree as to the computation of the Company EPS (as defined
in Section 4.06(e)) reflected on the Earnout Statement for the applicable
Earnout Period, in which event any such Earnout Shares to be issued shall be
issued within two Business Days following final resolution of any such
disagreement in accordance with Section 4.06(g). Any Earnout Shares to be issued
shall be in an amount as determined in accordance with Section 4.06(b) and
Section 4.06(c) hereof, as the case may be. Any reference to the Company in this
Section 4.06 shall be deemed to refer to Company Surviving Corp.
(b) Determination of First Earnout Payment. The Earnout Shares, if any, to
be issued to the Earnout Participants pursuant to this Section 4.06 for the
applicable period shall be issued pursuant to the applicable formulae set forth
in Section 4.06(b)(i) and 4.06(c)(i), based on Company EPS (as defined in
Section 4.06(e)) during the applicable period. The First Earnout Payment shall
be equal to the Earnout Shares earned for the First Earnout Period.
(i) If Company EPS for the First Earnout Period is:
(A) Less than $1.80 per share, no Earnout Shares shall be issued;
(B) Greater than or equal to $1.80 per share, and less than $1.85
per share, the Company shall issue 200,000 shares of Company Common
Stock;
(C) Greater than or equal to $1.85 per share, and less than $1.90
per share, the Company shall issue an aggregate of 400,000 shares of
Company Common Stock;
(D) Greater than or equal to $1.90 per share, and less than $1.95
per share, the Company shall issue an aggregate of 600,000 shares of
Company Common Stock;
(E) Greater than or equal to $1.95 per share, and less than $2.00
per share, the Company shall issue an aggregate of 800,000 shares of
Company Common Stock; and
(F) Greater than or equal to $2.00 per share, the Company shall
issue an aggregate of 1,000,000 shares of Company Common Stock.
(ii) The maximum number of shares of Company Common Stock that the
Earnout Participants in the aggregate shall be entitled to receive for the
First Earnout Period shall be 1 million shares (the "First Year Maximum
Shares").
(c) Determination of Second Earnout Payment. The Second Earnout Payment
shall be equal to the Earnout Shares earned for the Second Earnout Period.
(i) If Company EPS for the Second Earnout Period is:
(A) Less than $2.00 per share, no Earnout Shares shall be issued;
(B) Greater than or equal to $2.00 per share, and less than $2.05
per share, the Company shall issue the greater of (x) 111,000 shares of
Company Common Stock, and (y) 11% of the Maximum Shares (as defined in
Section 4.06(c)(iii));
(C) Greater than or equal to $2.05 per share, and less than $2.10
per share, the Company shall issue the greater of (x) an aggregate of
222,000 shares of Company Common Stock, and (y) 22% of the Maximum
Shares;
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(D) Greater than or equal to $2.10 per share, and less than $2.15
per share, the Company shall issue the greater of (x) an aggregate of
333,000 shares of Company Common Stock, and (y) 33% of the Maximum
Shares;
(E) Greater than or equal to $2.15 per share, and less than $2.20
per share, the Company shall issue the greater of (x) an aggregate of
444,000 shares of Company Common Stock and (y) 44% of the Maximum
Shares;
(F) Greater than or equal to $2.20 per share, and less than $2.25
per share, the Company shall issue the greater of (x) an aggregate of
555,000 shares of Company Common Stock, and (y) 56% of the Maximum
Shares;
(G) Greater than or equal to $2.25 per share, and less than $2.30
per share, the Company shall issue the greater of (x) an aggregate of
666,000 shares of Company Common Stock and (y) 67% of the Maximum
Shares;
(H) Greater than or equal to $2.30 per share, and less than $2.35
per share, the Company shall issue the greater of (x) an aggregate of
777,000 shares of Company Common Stock and (y) 78% of the Maximum
Shares;
(I) Greater than or equal to $2.35 per share, and less than $2.40
per share, the Company shall issue the greater of (x) an aggregate of
888,000 shares of Company Common Stock and (y) 89% of the Maximum
Shares; and
(J) Greater than $2.40 per share, the Company shall issue the
greater of (x) an aggregate of 1,000,000 shares of Company Common Stock,
and (y) 100% of the Maximum Shares.
(ii) Except as otherwise provided in Section 4.06(c)(iii), the maximum
number of shares of Company Common Stock that the Earnout Participants in
the aggregate shall be entitled to receive for the Second Earnout Payment
shall be 1 million shares (the "Second Year Maximum Shares").
(iii) Subject to Section 4.06(c)(iv), if (x) no Earnout Shares, or (y)
fewer than the First Year Maximum Shares are issued to the Earnout
Participants for the First Earnout Period as a result of Company EPS being
less than the earnings amounts specified in Section 4.06(b)(i)(A)-(F), then
the number of shares of Company Common Stock represented by the difference
between (A) the number of Earnout Shares issued for such period pursuant
thereto, and (B) the First Year Maximum Shares (such amount, the "Remaining
Shares") shall be added to the Second Year Maximum Shares (with such
resulting number of shares being referred to herein as the "Maximum
Shares").
(iv) In the event that Company EPS for the First Earnout Period is (x)
greater than or equal to $1.60 per share, 100% of the Remaining Shares
shall be added to the Second Year Maximum Shares, (y) greater than or equal
to $1.40 per share, and less than $1.60 per share, 50% of the Remaining
Shares shall be added to the Second Year Maximum Shares, and (z) less than
$1.40 per share, no Remaining Shares shall be added to the Second Year
Maximum Shares.
(d) Issuance to Earnout Participants. Any Earnout Shares to be issued to
the Earnout Participants pursuant to this Section 4.06 shall be issued thereto
based on, or in the same proportion, as is represented by such participant's
percentage ownership interest with respect to CFG (the "Applicable Percentage")
as represented on Exhibit C.
(e) Calculation of Company EPS. The term "Company EPS" shall mean Basic
Earnings Per Share as defined by GAAP and as the same shall be incorporated in
the audited annual financial statements included in public filings made by the
Company with the SEC from time to time pursuant to the requirements of the
Exchange Act, but subject to adjustment as otherwise provided herein.
(i) If, during an applicable Earnout Period, the Company sells,
exchanges or otherwise disposes of any assets or liabilities of any Person,
which assets or liabilities do not principally involve real estate assets,
or do not involve the purchase, sale, operation, financing, or management
of real property (a "Material Disposition"), the Company (as represented by
the Special Committee) and the CFG/CA
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Representative shall within 30 Business Days after the consummation of such
transaction determine whether financial results based on such Material
Disposition are to be included in Company EPS. If the Company and the
CFG/CA Representative cannot agree within such required period, the Special
Committee shall make such determination; provided, however, that if the
CFG/CA Representative disagrees with such determination, the Company (as
represented by the Special Committee) and the CFG/CA Representative shall
select an independent, nationally recognized accounting firm mutually
acceptable to the Special Committee and the CFG/CA Representative to
resolve any dispute with regard to whether such financial results are to be
included in Company EPS, which accounting firm has not performed any
services for the Company or any of the Earnout Participants or any
Affiliates thereof or the Special Committee within the past 24 months. The
parties shall use their reasonable efforts to cause such accounting firm to
resolve such dispute no later than 30 Business Days after being selected.
If such parties are unable to agree on the choice of an accounting firm,
such accounting firm will be selected by lot from a list of nationally
recognized accounting firms, after excluding the regular outside accounting
firms of the Company and the Earnout Participants. The determination of any
accounting firm so selected will be set forth in writing and will be
conclusive and binding upon the parties. In the event that the parties
submit any unresolved objections to an accounting firm for resolution as
provided in this Section 4.06(e)(i), the fees and expenses of the
accounting firm shall be (x) borne by the objecting party if such
accounting firm determines that no additional payment is due to such party,
or (y) borne by the Company if such accounting firm determines that
additional payment is due to the Earnout Participants;
(ii) If, during the applicable Earnout Period, the Company purchases,
exchanges or otherwise acquires any assets or liabilities of any Person,
which assets or liabilities do not principally involve real estate assets,
or do not involve the purchase, sale, operation, financing, or management
of real property (a "Material Acquisition"), the Company (as represented by
the Special Committee) and the CFG/CA Representative shall within 30
Business Days after the consummation of such transaction determine whether
financial results based on such Material Acquisition are to be included in
Company EPS. If the Company and the CFG/CA Representative cannot agree
within such required period, the Special Committee shall make such
determination; provided, however, that if the CFG/CA Representative
disagrees with such determination, the Company (as represented by the
Special Committee) and the CFG/CA Representative shall select an
independent, nationally recognized accounting firm mutually acceptable to
the Special Committee and the CFG/CA Representative to resolve any dispute
with regard to whether such financial results are to be included in Company
EPS, which accounting firm has not performed any services for the Company
or any of the Earnout Participants or any Affiliates thereof or the Special
Committee within the past 24 months. The parties shall use their reasonable
efforts to cause such accounting firm to resolve such dispute no later than
30 Business Days after being selected. If such parties are unable to agree
on the choice of an accounting firm, such accounting firm will be selected
by lot from a list of nationally recognized accounting firms, after
excluding the regular outside accounting firms of the Company and the
Earnout Participants. The determination of any accounting firm so selected
will be set forth in writing and will be conclusive and binding upon the
parties. In the event that the parties submit any unresolved objections to
an accounting firm for resolution as provided in this Section 4.06(e)(ii),
the fees and expenses of the accounting firm shall be (x) borne by the
objecting party if such accounting firm determines that no additional
payment is due to such party, or (y) borne by the Company if such
accounting firm determines that additional payment is due to the Earnout
Participants. Notwithstanding the foregoing, any securitizations or sales
and purchases of Loans by the Company after the Effective Time shall not
constitute a Material Disposition or a Material Acquisition for purposes of
this Section 4.06 and shall be included for purposes of calculating Company
EPS;
(iii) Company EPS will exclude the effect of the following items:
(A) Any costs, expenses or adjustments arising out of, resulting
from or in any way connected with the Mergers or the Company's
forfeiture of its status as a Real Estate Investment Trust (other than
customary taxes on corporate income incurred after January 1, 2000 in
the ordinary course of business) including without limitation, the
effect of expensing all costs, expenses, fees and charges associated
with the CA Merger;
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<PAGE> 21
(B) Any other extraordinary or nonrecurring gain or loss or any
departure from the Company's prior methodology for determining
accounting estimates or any change in its accounting policies; and
(C) Company EPS will reflect any other adjustments mutually agreed
to in writing by the Company and the CFG/CA Representative.
(iv) The maximum pre-tax gain from the sale of assets owned by the
Company prior to December 31, 1999 that shall be included in the
calculation of Company EPS shall be (x) $9,771,000 for the First Earnout
Period, and (y) $15,750,000 for the Second Earnout Period and Company EPS
solely with respect to such maximum pre-tax gains will be calculated for
the applicable period using the greater of (x) the Company's effective tax
rate, and (y) 30%.
(f) Other Adjustments. The targeted earnings per share amounts specified
in Section 4.06(b)(i) and 4.06(c)(i) shall be adjusted to reflect any stock
split, buyback, issuances, dividends, or purchases, or any redemption,
reclassification, recapitalization, reorganization, exchange of shares,
adjustment or other similar change in or to the outstanding securities of the
Company.
(g) Determination of Company EPS. As soon as reasonably practicable (and
in no event later than 10 Business Days) following the preparation and
completion of the audit of the Company's financial statements for each of the
Company's fiscal years ending on December 31, 2000 and December 31, 2001, the
Company and its independent auditors will, in connection with their regular
audit procedures, complete an audit (each, an "Earnout Audit") of the Company's
financial statements for such period and will prepare and deliver to the CFG/CA
Representatives and to the Special Committee a computation of the Company EPS
for such period, in each case based on the results of the Earnout Audit and the
terms of this Section 4.06 (each, an "Earnout Statement"). The Earnout Statement
shall set forth the amount of Company EPS and the number of Earnout Shares, if
any, to be issued based thereon, based on the terms of Section 4.06(b) and
Section 4.06(c), and a reasonably detailed description and accounting of the
derivation of such Company EPS. The Company will (i) provide the CFG/CA
Representative and the Special Committee an opportunity to review each Earnout
Audit and will make available all records and work papers and personnel used in
preparing any Earnout Statement, subject to the execution of customary waivers
and releases, and (ii) at reasonable times and upon reasonable notice and so as
not to interrupt the Company's business operations, allow the CFG/CA
Representative or representatives of the Special Committee to meet with any
personnel of the Company or outside accountants who prepared the Earnout
Statement with respect to such preparation. If the CFG/CA Representative or the
Special Committee disagree with the computation of the Company EPS reflected on
any Earnout Statement, the CFG/CA Representative or the Special Committee may,
within 10 Business Days after receipt of the Earnout Statement, deliver a notice
(an "Objection Notice") to the Company setting forth in reasonable detail the
CFG/CA Representative's or the Special Committee's calculation of the Company
EPS for such period, as applicable and any other objections as to the Earnout
Statement. In the event an Objection Notice is not received within the required
period, the Company's calculation of Company EPS and the Earnout Payment, as set
forth in the Earnout Statement, shall be conclusive and binding on the parties.
The Company and the CFG/CA Representative or the Special Committee will use
reasonable efforts to resolve any disagreements as to the computation of Company
EPS for such period, but if they do not obtain a final resolution within 30 days
after the Company has received the Objection Notice, the Company, the CFG/CA
Representative and the Special Committee will select an independent, nationally
recognized accounting firm mutually acceptable to the Company and the CFG/CA
Representative and the Special Committee to resolve any remaining objections,
which firm has not performed any services for the Company or any of the Earnout
Participants or any Affiliates thereof or the Special Committee within the past
24 months. If such parties are unable to agree on the choice of an accounting
firm, such accounting firm will be selected by lot from a list of nationally
recognized accounting firms, after excluding the regular outside accounting
firms of the Company and the Earnout Participants. The determination of any
accounting firm so selected will be set forth in writing and will be conclusive
and binding upon the parties. In the event that the parties submit any
unresolved objections to an accounting firm for resolution as provided in this
Section 4.06(g), the fees and expenses of the accounting firm shall (i) be borne
by the objecting party if such accounting firm determines that no additional
payment is due to such party, or (ii) be
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borne by the Company if the shares of Company Common Stock that such accounting
firm determines to be due exceeds the Earnout Shares reflected on the Earnout
Statement.
(h) Information Rights. During the Earnout Period, the Company will
provide the CFG/CA Representative with copies of any management and/or financial
reports relating to the Company's results of operations, as prepared in the
ordinary course of the Company's business and which are delivered to the Board
of Directors of the Company.
(i) Control by the Company. The Earnout Participants acknowledge that the
Company and its designees to the Board of Directors of the Company will have the
power and right to control all aspects of the business and operations of the
Company, including the power and right to make or not make decisions as to the
choice of independent accountants and counsel for the Company, the hiring,
firing and compensation of employees, the incurrence or not of debt and the
prepayment or not of debt (including the refinancing or not of existing debt),
the expenditure or not of funds for research and development and product
promotion, the pricing and terms of sale of the Company's products and services,
the making or not of capital expenditures, the settlement or not of claims and
the management of all litigation and disputes with third parties (including
suppliers, customers, competitors, employees, consultants and agents). The
Earnout Participants further agree and acknowledge that the right to receive any
Earnout Shares is a vested right to receive a contingent payment pursuant to the
terms of this Section 4.06 and that neither the Company nor any of its officers,
directors, employee or any other party shall not be and shall be deemed to be, a
fiduciary on behalf of any such party or a guarantor as to the amount of any
payment or issuance with regard to any matters contained in this Section 4.06.
(j) Impact of Fundamental Changes. The Company (as represented by the
Special Committee) and the CFG/CA Representative agree to discuss in good faith
appropriate revisions, if any, to this Section 4.06 in the event that either (i)
the Company decides to fundamentally and substantially change the strategic
direction of the Company from that envisioned as of the date hereof, or (ii) it
is determined that any payments to be made under this Section 4.06 jeopardize
the tax status of the CFG Merger. This obligation to discuss in good faith such
revisions shall not constitute a binding commitment to make any such revisions
in the event that the Company and such shareholders do not mutually agree on
appropriate revisions. Any such revisions shall be subject to the final approval
of the Special Committee as it determines appropriate; provided, however, that
if the CFG/CA Representative disagrees with such revision, the Company (as
represented by the Special Committee) and the CFG/CA Representative shall select
an independent, nationally recognized accounting firm mutually acceptable to the
Special Committee and the CFG/CA Representative to resolve any dispute with
regard to whether such financial results are to be included in Company EPS,
which accounting firm has not performed any services for the Company or any of
the Earnout Participants or any Affiliates thereof or the Special Committee
within the past 24 months. The parties shall use their reasonable efforts to
cause such accounting firm to resolve such dispute no later than 30 Business
Days after being selected. If such parties are unable to agree on the choice of
an accounting firm, such accounting firm will be selected by lot from a list of
nationally recognized accounting firms, after excluding the regular outside
accounting firms of the Company and the Earnout Participants. The determination
of any accounting firm so selected will be set forth in writing and will be
conclusive and binding upon the parties. In the event that the parties submit
any unresolved objections to an accounting firm for resolution as provided in
this Section 4.06(j), the fees and expenses of the accounting firm shall be (x)
borne by the objecting party if such accounting firm determines that no
additional payment is due to such party, or (y) borne by the Company if such
accounting firm determines that additional payment is due to the Earnout
Participants.
(k) Change of Control. In the event that a Change of Control (as
hereinafter defined) occurs prior to January 1, 2002, the Company will, prior to
or at the time of such Change of Control, make appropriate provision or cause
appropriate provision to be made (in each case reasonably satisfactory to the
CFG/CA Representative) so that (i) Company EPS can be calculated and Earnout
Shares issued (if the targets for payment are met) following such Change of
Control, and (ii) the Company's obligations under this Section 4.06 are
expressly assumed by the acquiring Person. This Section 4.06, and the Company's
obligation hereunder, shall survive any Change of Control which is effected in
such a manner that the Company does not have the opportunity to comply with the
provisions of the first sentence of this Section 4.06(k). In the event
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that (x) the Company does not comply with the provisions of the first sentence
of this Section 4.06(k) in connection with a Change of Control, or (y) following
any Change of Control and prior to the end of the Second Earnout Period, the
acquiring Person (1) disposes of any material portion of the business conducted
by the Company as of the Change of Control so as to adversely affect Company
EPS, or (2) engages in any other transaction or reorganization that makes
calculation of Company EPS impossible or unduly burdensome (in each case, an
"Earnout Default"), then the Company shall issue to the Earnout Participants
such number of shares of Company Common Stock calculated in accordance with
Section 4.06(b) or 4.06(c), as the case may be, based on the Present Value (as
hereinafter defined) of the Company EPS assuming for purposes of such
calculation that the Company EPS would accrue at the same average per diem rate
as such Company EPS had accrued during the period commencing on the first day of
the applicable Earnout Period and the date of the Change of Control. Any such
amount shall become due and payable upon consummation of the Change of Control
in the case of clause (x) of this Section 4.06(k) or immediately upon occurrence
of the circumstances described in clause (y) of this Section 4.06(k). "Present
Value" means, with respect to any amount or amounts to be paid in the future,
that amount which, if allowed to accrue interest at a rate equal to 8%, would be
equal to the amount on such future date. "Change of Control" means a transaction
pursuant to which an independent third party or third parties acquire (i) more
than 50% of the outstanding capital stock of the Company after giving effect to
such transaction (whether by merger, consolidation or sale or transfer of the
Company's capital stock), or (ii) all of substantially all of the Company's
assets determined on a consolidated basis. For purposes of this Section 4.06(k),
a third party shall not be deemed to be an "independent third party" if any
Earnout Participants either directly or indirectly has any economic or voting
interest therein.
(l) Additional Payment. Contemporaneous with the issuance and delivery of
any Earnout Shares to the Earnout Participants, the Company shall pay each such
party in cash an amount (each, an "Additional Payment") equal to the product of
the (x)(i) 3.33% with respect to Earnout Shares earned for the First Earnout
Period, and (ii) 6.66% with respect to Earnout Shares earned for the Second
Earnout Period, times (y) the fair market value of the Earnout Shares delivered
to each CFG Common Shareholder as of the date of delivery thereof, which fair
market value shall be the closing price at which the Company's Common Stock is
traded or quoted on the NASDAQ/NMS on such date.
(m) No Rights Until Issued. Earnout Shares shall not possess any
attributes of Company Common Stock or any other security and shall not entitle
the holders thereof to any rights of any kind unless and until such shares have
been issued in accordance with the terms of this Agreement.
(n) Special Committee Approval. Notwithstanding any other provision of
this Section 4.06 or any other provision of this Agreement, the Company shall
not issue any shares of Company Common Stock pursuant to this Section 4.06
unless such issuance and the calculations that form the bases for any such
issuance shall have first been approved by the Special Committee. Wherever in
this Section 4.06 any party is required to deliver any calculation, computation,
objection or other communication to any other party hereto, such party shall
also provide such communication to the Special Committee. The Special Committee
shall be required to raise any objection to any of the calculations referred to
in this Section 4.06 within the time periods otherwise specified herein and any
dispute as to such issuance shall be resolved in accordance with Section
4.06(g).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CFG AND CA
CFG and CA hereby represent and warrant to the Company and Acquisition as
follows:
SECTION 5.01 Organization. Each of CFG and CA is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power and authority, to own,
operate and lease its properties, and to carry on its business substantially as
now conducted. Each of CFG and CA is duly qualified to do business and is in
good standing in each jurisdiction in which the character of its assets or
property owned, leased or operated by it or the nature of the business conducted
by it
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makes such qualification necessary, except where the failure to be so qualified
or to be in good standing has not had or would not have a Material Adverse
Effect on CFG and CA as the case may be, or on the ability of either CFG or CA
to consummate the transactions contemplated hereby. Each of CFG and CA has all
requisite power and authority, to enter into this Agreement and, subject to the
adoption of this Agreement by the stockholders of the Company and the receipt of
all requisite regulatory approvals and the expiration of any applicable waiting
periods, to consummate the transactions contemplated hereby. Each of CFG and CA
has provided to the Company a complete and correct copy of the Articles of
Incorporation or Certificate of Incorporation and the Bylaws, as amended or
restated, of CFG and CA, as the case may be. Neither CFG nor CA is in violation
of any of the provisions of its Articles of Incorporation, Certificate of
Incorporation or Bylaws, as amended or restated, or equivalent organizational
documents.
SECTION 5.02 Authorization; Enforceability. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby and
the consummation of the transactions contemplated hereby have been duly approved
and authorized by the Board of Directors of each of CFG and CA, and all
necessary corporate action on the part of such party with respect thereto has
been taken, subject to the adoption of this Agreement by the stockholders of the
Company. This Agreement has been duly executed and delivered by each of CFG and
CA and constitutes the valid and binding obligation of such party and is
enforceable against such party in accordance with its terms, except to the
extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
or doctrines.
SECTION 5.03 Conflicts. Except as disclosed on Schedule 5.03 of the
Disclosure Schedule, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict with
or result in any violation, breach or termination of, or default or loss of a
material benefit under, or permit the acceleration of any obligation under, or
result in the creation of any material lien, charge or encumbrance on any of the
property or assets under, any provision of the Certificate of Incorporation or
Bylaws (or equivalent organizational documents) of either of CFG or CA, or any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, decree, statute, law, ordinance, rule or regulation
applicable to CFG or CA or their respective properties, other than any such
conflicts, violations, breaches or defaults which would not have a Material
Adverse Effect on each of CFG or CA or the ability of each of CFG or CA to
consummate the transactions contemplated hereby.
SECTION 5.04 Consents and Approvals. Except as set forth on Schedule 5.04
of the Disclosure Schedule, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority is required
by or with respect to CFG or CA in connection with the execution and delivery of
this Agreement or the consummation by such party of the transactions
contemplated hereby except for: (i) any filings or consents required to be made
by the Company, including without limitation, a proxy statement (the "Proxy
Statement") for use in connection with a meeting of the stockholders of the
Company to consider and vote on the terms of this Agreement and the Mergers (the
"Stockholders' Meetings"); (ii) the filing of a Certificate of Merger with the
Delaware Secretary of State in the case of the CA Merger and the Michigan
Secretary of State in the case of the CFG Merger, and the approval thereof;
(iii) any filings, approvals or no-action letters with or from state securities
authorities; and (iv) any antitrust filings (including filings required under
the HSR Act), or consents, waivers or approvals obtained with respect thereto.
SECTION 5.05 Anti-takeover Provisions Inapplicable. No "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation applicable to CFG or CA (i) applies to the Mergers, (ii) prohibits
or restricts the ability of CFG or CA to perform its obligations under this
Agreement or its ability to consummate the transactions contemplated hereby,
(iii) would have the effect of invalidating or voiding this Agreement or any
provision hereof, or (iv) would subject the Company or Acquisition to any
material impediment or condition in connection with the exercise of any of its
rights under this Agreement.
SECTION 5.06 Capitalization.
(a) The authorized capital stock of CFG consists of (i) 100,000 shares of
common stock, par value $1.00 per share (the "CFG Common Stock") of which 21,813
shares are issued and outstanding as of the date hereof, (ii) 40,000 shares of
Class A Convertible Preferred Stock, without par value per share (the "CFG
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<PAGE> 25
Preferred Stock") of which 15,792 shares are issued and outstanding as of the
date hereof, (iii) warrants to acquire 7,949 shares of CFG Common Stock, and
(iv) options and incentive stock options to acquire 7,825 shares of CFG Common
Stock, all as more fully set forth on Schedule 5.06 of the Disclosure Schedule.
The authorized capital stock of CA consists of 10,000 shares of common stock, no
par value per share (the "CA Common Stock") of which 1,000 shares are issued and
outstanding as of the date hereof. All of the issued and outstanding shares of
the CFG Common Stock and the CA Common Stock are (i) duly and validly authorized
and issued, (ii) fully paid and nonassessable, and (iii) free from any
preemptive rights of current or past stockholders. The shareholders of each of
CFG and CA and the Option Holders and Warrant Holders of CFG are listed on
Schedule 5.06 with the number of shares of CFG Stock, CA Stock, Options or
Warrants opposite such party's name.
(b) Except as set forth in this Section 5.06, as of the date hereof, there
are no shares of capital stock or other equity securities of CFG or CA
outstanding nor are there any outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of CFG or CA, or contracts, commitments, understandings, or arrangements
by which CFG or CA is or may be bound to issue additional shares of its capital
stock or options, warrants, or rights to purchase or acquire any additional
shares of its capital stock.
SECTION 5.07 Investments; Subsidiaries. Except as set forth on Schedule
5.07 of the Disclosure Schedule, neither of CFG nor CA is, directly or
indirectly, a partner or joint venturer in any partnership or joint venture
arrangement. Except as set forth on Schedule 5.07 of the Disclosure Schedule,
neither of CFG nor CA has, directly or indirectly, any Subsidiaries or is the
beneficial owner of any equity or debt securities or has any other ownership
interest in any Person.
SECTION 5.08 Financial Statements; No Material Adverse Change.
(a) CFG has furnished to the Company true and complete copies of its
audited financial statements (including balance sheets, statements of income,
statements of changes in stockholders' equity and statements of changes in
financial position) as of and for the years ended March 31 for each of 1999,
1998, 1997, and 1996 accompanied by the related opinions of CFG's official
independent auditors as of such dates and for such periods (collectively, the
"Audited CFG Financial Statements"). The Audited CFG Financial Statements,
together with the notes thereto, fairly present, in all material respects, the
financial position of CFG at the dates of, and the results of the operations and
the changes in stockholders' equity and financial position for CFG for the
periods covered by, the Audited CFG Financial Statements, all in accordance with
GAAP consistently applied with prior periods except as indicated in the
accompanying opinion of CFG's official independent auditors and subject, in the
case of interim financial statements, to annual year-end adjustments.
(b) CFG has furnished to the Company true and complete copies of the
unaudited balance sheets of CFG as at June 30, 1999 and September 30, 1999 and
the related statements of income, statements of changes in stockholders' equity
and statements of changes in financial position of CFG as of and for the period
then ended (collectively, the "Unaudited CFG Financial Statements"). The
Unaudited CFG Financial Statements fairly present in all material respects, the
financial position of CFG at the dates of, and the results of the operations and
the changes in stockholders' equity and financial position for CFG for the
periods covered by, the Unaudited CFG Financial Statements. Such Unaudited CFG
Financial Statements have been prepared in accordance with GAAP consistently
applied with prior periods, except that the Unaudited CFG Financial Statements
do not contain any or all of the footnotes required by GAAP, are condensed and
are subject to year-end adjustments consistent with prior practice.
(c) CA has furnished to the Company true and complete copies of its
unaudited financial statements (including balance sheets, statements of income,
statements of changes in stockholders equity and statements of changes in
financial position) as of and for the year ended December 31, for 1998, as well
as its unaudited balance sheets as at March 31, 1999, June 30, 1999 and
September 30, 1999 and the related statements of income, statements of changes
in stockholders' equity and statements of changes in financial position of CA as
of and for the period then ended (collectively, the "CA Financial Statements"
and with the Audited CFG Financial Statements and Unaudited CFG Financial
Statements, the "CFG/CA Financial Statements"). The CA Financial Statements
fairly present, in all material respects, the financial position of CA at the
dates of,
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and the results of the operations and the changes in stockholders' equity and
financial position for CA for the periods covered by, the CA Financial
Statements, all in accordance with GAAP consistently applied with prior periods,
except that the CA Financial Statements do not contain any or all of the
footnotes required by GAAP, are condensed and are subject to year-end
adjustments consistent with prior practice.
(d) Since March 31, 1999, except as disclosed on Schedule 5.08 of the
Disclosure Schedule, and except for the execution, delivery and performance of
this Agreement and any other agreements to be entered into or contemplated
hereby and the transactions contemplated hereby and thereby, (i) neither CFG nor
CA has incurred any obligations, contingent or non-contingent liabilities,
liabilities for Taxes, levies, liens, claims or other charges, long-term leases
or unusual forward or long-term commitments (whether absolute, accrued,
contingent or otherwise, known or unknown, whether due or to become due, except
liabilities and obligations which (x) are adequately accrued or reserved against
in the CFG/CA Financial Statements or disclosed in the notes thereto or are not
required to be reflected in such statements under GAAP, (y) were incurred after
March 31, 1999 with regard to CFG or December 31, 1998 with regard to CA in the
ordinary course of business or otherwise are not in the aggregate material to
CFG or CA or would not be material to the Surviving Corporations assuming the
transactions contemplated hereby are consummated, or (z) have been discharged or
paid in full, (ii) no contract, lease or other agreement or instrument has been
entered into by CFG or CA or has become binding upon CFG or CA or its assets
which, individually or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect on CFG or CA or the Surviving Corporations or
the ability of CFG or CA to consummate the transactions contemplated hereby, and
(iii) neither of CFG nor CA is in default, and to CFG's and CA's knowledge no
third party is in default, under any Material Agreement which, individually or
in the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on CFG or CA or the Surviving Corporations assuming the
transactions contemplated herein are consummated or on the ability of the CFG or
CA to consummate the transactions contemplated hereby, and (iv) each of CFG and
CA has been operated in the ordinary course of business. To the knowledge of CFG
or CA, since March 31, 1999 no event has occurred, which alone or together with
other events, could reasonably be expected to have a Material Adverse Effect on
CFG or CA or the Surviving Corporations assuming the transactions contemplated
hereby are consummated or on the ability of CFG or CA to consummate the
transactions contemplated hereby, except as disclosed on Schedule 5.08 and
except to the extent resulting from (x) any changes in general economic
conditions in the United States, or (y) any changes affecting the real estate
and/or real estate investment trust industries in general.
SECTION 5.09 Compliance with Laws; Permits.
(a) The business of each of CFG and CA has been and is being conducted in
compliance in all material respects with all laws, ordinances and regulations of
Governmental Authorities, including, without limitation, federal and state
securities laws, laws and regulations relating to financial statements and
reports, truth-in-lending, truth-in-savings, usury, fair credit reporting,
consumer protection, occupational safety, fair employment practices, fair labor
standards and laws and regulations relating to employees and employee benefits,
and any statutes or ordinances relating to the properties occupied or used by
CFG or CA, except where the failure to so comply would not have a Material
Adverse Effect on CFG or CA or the ability of CFG or CA to consummate the
transactions contemplated hereby. Each of the CFG and CA is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary for CFG or CA
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "CFG/CA Permits") and no suspension, revocation or
cancellation of any of the CFG/CA Permits is pending or, to the knowledge of CFG
or CA or threatened, except where the failure to hold any CFG/CA Permits or the
suspension, revocation or cancellation thereof would not have a Material Adverse
Effect on CFG or CA or the ability of CFG or CA to consummate the transactions
contemplated hereby.
(b) Except for pending tax audits disclosed in Schedule 5.13 of the
Disclosure Schedule, no investigation or review by any Governmental Authority
with respect to CFG or CA is pending or, to the knowledge of CFG or CA,
threatened.
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SECTION 5.10 Litigation. Except as disclosed on Schedule 5.10 of the
Disclosure Schedule, there is no action, suit, investigation or proceedings,
legal, quasi-legal, administrative or otherwise, pending or, to the knowledge of
CFG or CA, threatened against CFG or CA or any property of CFG or CA in any
court or before any arbitrator of any kind or before or by any Governmental
Authority except for such actions, suits, investigations or legal proceedings
that would not have a Material Adverse Effect on CFG or CA or which would affect
the ability of CFG or CA to consummate the transactions contemplated hereby.
Neither CFG nor CA is in default with respect to any judgment, order, writ,
injunction or decree of any arbitrator, court or Governmental Authority, and
there are no unsatisfied judgments against CFG or CA except for such defaults or
unsatisfied judgments as would not have a Material Adverse Effect on CFG or CA
or the ability of CFG or CA to consummate the transactions contemplated hereby.
SECTION 5.11 Compensation and Employee Matters. Each of CFG and CA has
previously provided to the Company, a true, correct and complete list of all
directors, officers and personnel of such party, and the annual salary, bonuses
paid or accrued for the year ending December 31, 1998, and for the period from
January 1, 1999 through November 30, 1999, and any commitments by CFG or CA
entered into on or prior to the date hereof to pay any further bonuses for or
increase the salary of any such person, which list shall be updated as of the
Closing Date.
SECTION 5.12 Employee Benefit Plans; Labor Matters.
(a) Schedule 5.12 contains a true and complete list of all employee plans,
programs, practices and arrangements, including, without limitation, all
employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), employment
agreements, and health, medical, dental, welfare, accident, disability, life
insurance, stock purchase, bonus, equity and equity-type compensation, severance
pay and other employee benefit or fringe benefit plans maintained or contributed
to by CFG or CA or any of its ERISA Affiliates or with respect to which CFG or
CA or any of its ERISA Affiliates has any fixed or contingent, direct or
indirect liability (collectively, the "Plans"). For purposes of this Agreement,
the term "ERISA Affiliate" means any Affiliate or Subsidiary of CFG or CA and
any other Person that would be treated as under common control or a single
employer with CFG or CA under Section 4001 of ERISA or Section 414 of the Code.
Each of CFG and CA has delivered or made available to the Company copies of each
of its Plans and all amendments thereto and, if applicable, the summary plan
description and any summaries of material modifications, any other material
employee communications, the most recent determination letters and any other
rulings, the three most recent annual reports on Internal Revenue Service Form
5500, and the three most recent actuarial reports and/or statements of trust
assets with respect to each such Plan (or such lesser number if such Plans have
been in existence for less than three years).
(b) Except as set forth on Schedule 5.12 of the Disclosure Schedule, (i)
neither CFG or CA nor any of its ERISA Affiliates maintains, has maintained or
has been obligated to contribute to any Plan that is subject to Title IV of
ERISA; (ii) there is no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA and Section 412 of the Code with
respect to any Plan that is subject to such sections; (iii) no "prohibited
transaction" (other than those for which there is an available exemption) (as
such terms are defined in ERISA and the Code, as applicable) has occurred with
respect to any Plan during the five years preceding the Effective Time; (iv)
each Plan is and has been operated in compliance in all respects with the
presently applicable provisions of ERISA, the Code and other applicable law
except for such non-compliance as would not have a Material Adverse Effect on
CFG or CA or the ability of CFG or CA to consummate the transactions
contemplated hereby; (v) with respect to any insurance contract providing
funding under any Plan, there is no liability for any retroactive rate
adjustment arising from events occurring prior to the Effective Time except for
such liability as would not have a Material Adverse Effect on CFG or CA or the
ability of CFG or CA to consummate the transactions contemplated hereby; (vi)
the IRS has issued, with respect to each Plan intended to be tax qualified under
Sections 401(a) and 501(a) of the Code, a letter determining that such Plan is
qualified and its related trust is exempt from United States federal income tax
under Sections 401(a) and 501(a) of the Code, respectively, and, to the
knowledge of CFG or CA, there has been no occurrence affecting the form or
operation of any Plan since the date of any such determination letter that is
likely to adversely affect such qualification; and (vii) no Plan is a "welfare
benefit fund" (within
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the meaning of Section 419(e) of the Code), a "multiple employer plan" (within
the meaning of Section 413(c) of the Code) or a "multiemployer plan" (as defined
in Section 3(37) of ERISA), and no withdrawal liability has been incurred by or
asserted against CFG or CA or any of its ERISA Affiliates with respect to any
employee pension benefit plan which is a multiple employer plan or a
multiemployer plan.
(c) Each Plan that is a "group health plan" (as defined in Section 4980B of
the Code) has been operated in compliance with Section 4980B of the Code and the
secondary payor requirements of Section 1862(b)(1) of the Social Security Act
except where the failure to so comply would not have a Material Adverse Effect
on CFG or CA or the ability of CFG or CA to consummate the transactions
contemplated hereby. To the knowledge of CFG or CA, no medical claim in excess
of $50,000 has been incurred but is unpaid under any Plan. Except as provided in
Schedule 5.12 of the Disclosure Schedule and except as required by Section 4980B
of the Code, neither of CFG or CA nor any of its ERISA Affiliates has any
obligation or liability to provide medical, life insurance or supplemental
pension benefits in respect of any current or former employees or independent
contractors of CFG or CA or any such ERISA Affiliate beyond their retirement.
Except as set forth on Schedule 5.12 of the Disclosure Schedule, no Plan
provides for severance pay, unemployment compensation or any similar payment
with respect to any current or former employee or independent contractor of CFG
or CA or any of its ERISA Affiliates. Except as provided in Schedule 5.12 of the
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any such Person to severance pay, unemployment
compensation or any other similar payment; (ii) accelerate the time of payment
or vesting of any amount; (iii) create a contractual obligation or other
commitment or requirement to increase the amount of compensation due to any such
Person; (iv) constitute a "prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the Code); or (v) entitle any such Person to an "excess
parachute payment" within the meaning of Section 280G of the Code. Each of CFG
or CA and each of its ERISA Affiliates, as applicable, have reserved all rights
necessary to amend each Plan and to terminate its participation in each Plan.
(d) Except as set forth on Schedule 5.12 of the Disclosure Schedule, there
are no actions or claims existing or pending (other than routine claims for
benefits) or threatened with respect to any Plan, and neither of CFG or CA nor
any of its ERISA Affiliates has been notified of any audit or investigation of a
Plan by any Governmental Authority.
(e) All contributions required to be made by CFG or CA or any of its ERISA
Affiliates under applicable laws or the terms of any Plan or collective
bargaining agreement to each Plan have been made within the time prescribed by
such laws, Plan or collective bargaining agreement.
(f) Each of CFG and CA and each of its ERISA Affiliates (except as a result
of any actions taken by the Company) (i) is in compliance with all applicable
laws respecting employment, employment practices, terms and conditions of
employment and wages and hours (including, but not limited to, the Worker
Adjustment Retraining Notification Act, the Age Discrimination in Employment
Act, the Civil Rights Act of 1964, the Equal Pay Act, the Occupational Safety
and Health Act, the Fair Labor Standards Act, the Americans with Disability Act
of 1990, the Family and Medical Leave Act of 1993, and any other federal, state
or local law regulating employment or protecting employee rights), in each case,
with respect to current and former employees and independent contractors of CFG
and CA and such ERISA Affiliates except where the failure to so comply would not
have a Material Adverse Effect on CFG or CA or the ability of CFG or CA to
consummate the transactions contemplated hereby (ii) has withheld all amounts
required by applicable laws or by agreement to be withheld from the wages,
salaries and other payments to such current and former employees and independent
contractors, (iii) is not liable for any arrears of wages or any Taxes or any
penalty for failure to comply with any of the foregoing except for such
liabilities as would not have a Material Adverse Effect on CFG or CA or the
ability of CFG or CA to consummate the transactions contemplated hereby, and
(iv) is not liable for any payment to any trust or other fund or to any
Governmental Authority, with respect to unemployment compensation benefits,
social security or other benefits for such current or former employees and
independent contractors except for such payments as would not have a Material
Adverse Effect on CFG or CA or the ability of CFG or CA to consummate the
transactions contemplated hereby.
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(g) Except as set forth on Schedule 5.12 of the Disclosure Schedule, (i) no
employees of CFG or CA is represented by any labor organization and, to the
knowledge of CFG or CA, there is no union organizational activity currently
underway threatened, with respect to any employees of CFG or CA, (ii) neither
CFG nor CA has received any written notice during the current or preceding year
of, any unfair labor practice, and no such complaint is pending before the
National Labor Relations Board or any other agency having jurisdiction thereof,
(iii) neither CFG nor CA is engaged in, or has received any notice of, any
grievances arising under any collective bargaining agreements, or any pending
arbitration proceedings under any collective bargaining agreements, (iv) during
the immediately preceding 24 calendar months there has not been any, and there
is no threatened, labor strike, work stoppage or slowdown pending against any
portion of the business of CFG nor CA, and there is no pending lockout by CFG or
CA. Each of CFG and CA has satisfied and performed in all material respects its
obligations under each collective bargaining agreement, and under any order,
conciliation contract or settlement contract by which any of them is bound or to
which any of them is subject concerning employment related matters. Neither of
CFG nor CA is engaged in, or has received notice of, any local, state and/or
federal charge, complaint, lawsuit or other action, pertaining to the violation
of any employment law, statute, ordinance or regulation, except for such as
would not have a Material Adverse Effect on CFG or CA or on the ability of CFG
or CA to consummate the transactions contemplated hereby, and no such charge,
complaint, lawsuit or other action is pending before any agency or
administrative body responsible for administering such employment law, statute,
ordinance or regulation.
SECTION 5.13 Tax Matters.
(a) Each of CFG and CA has filed when due all material federal, foreign,
state, and local Tax returns, Tax information returns, reports, and estimates
(all federal, foreign, state, and local Tax returns, Tax information returns,
reports, and estimates in the case of income Taxes or other Taxes based upon the
income of CFG or CA, as the case may be) required to be filed for all years and
periods (and portions thereof) for which the due date (with extensions) is on or
before the Effective Time. All such returns, reports and estimates (i) were
prepared in the manner required by law, (ii) are true, correct and complete in
all material respects, and (iii) reflect the liability for Taxes of CFG or CA,
as the case may be, in all material respects. All Taxes shown to be payable on
such returns, reports, and estimates, and all assessments received by CFG and CA
before the Effective Time, have been paid when due.
(b) CFG and CA have paid, or have provided a sufficient reserve on the
CFG/CA Financial Statements for the payment of, all federal, state, local, and
foreign Taxes with respect to all periods, or portions thereof, ending on or
prior to September 30, 1999; and such Taxes paid or provided for include those
for which CFG and CA may be liable in their own right, or as the transferee of
the assets of, or as successor to, any other corporation, association,
partnership, joint venture, or other entity.
(c) Each of CFG and CA have withheld amounts from their respective
employees and filed all federal foreign, state, and local returns and reports
with respect to employee income Tax withholding and social security and
unemployment Taxes for all periods (or portions thereof) ending before the
Effective Time in compliance with the provisions of the Code, and other
applicable federal, foreign, state, and local laws.
(d) Schedule 5.13 hereto sets forth all federal income Tax Returns for CFG
and CA, whether separate returns or consolidated returns for an affiliated group
of corporations of which such party is or was a member corporation includible in
such return, that before the Effective Time are not closed by the applicable
statutes of limitations; and all assessments or proposed deficiencies, including
interest and penalties thereon, made as a result of any examinations of any such
return that has been examined have been paid or provided for on the CFG/CA
Financial Statements.
(e) Except as set forth in Schedule 5.13 hereto, there are no examinations,
investigations or material claims by any taxing authority ("Taxing Authority")
pending or, to the knowledge of CFG or CA, threatened against CFG or CA for any
Taxes due before the Effective Time; and before the Effective Time there has
been no waiver of any applicable statute of limitations or extension of the time
for the assessment of any Tax against CFG or CA.
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(f) Neither CFG nor CA has before the Effective Time made, signed, or filed
any consent under Section 341(f) of the Code.
(g) Except as set forth on Schedule 5.13, neither CFG nor CA has ever been,
nor is such party currently, a party to any agreement relating to the sharing of
any liability for, or payment of, Taxes.
(h) Except for liens for real and personal property Taxes that are not yet
past due, there are no liens for any Taxes owed by either CFG or CA upon any
assets of such entities.
(i) With respect to any taxable period ended on or before the date of this
Agreement, (i) neither CFG nor CA has filed an amended federal or state income
Tax Return, except as set forth on Schedule 5.13; and (ii) after the date of
this Agreement and before the Effective Time, neither CFG nor CA, without the
Company's consent, which may not be unreasonably withheld, (A) will file, except
as required by law (and then only if a copy of such amended return is supplied
to the Company fifteen (15) days prior to such filing), an amended federal or
state income Tax Return, or (B) will enter into any settlement agreement with
any Taxing Authority or otherwise comprise any federal or state income Tax
liability, if such amended return, settlement, or compromise will result in an
increase in a federal or state income Tax liability of CFG or CA for a taxable
year, or portion thereof, ending after the Effective Time.
(j) Except as set forth on Schedule 5.13, neither CFG nor CA has granted a
power of attorney to any Person relating to any Tax matter with respect to any
taxable year ending after the Effective Time.
(k) True and complete copies of all returns of Taxes and all schedules
thereto filed by, on behalf of, or with respect to CFG and CA with any Taxing
Authority for all taxable years or periods, all written communications with any
Taxing Authority and any written communications with such party's accountants
relating to all such returns (including revenue agents' reports, settlement
agreements, compromise agreements and similar items), has been made available to
the Company for inspection prior to the date hereof.
(l) The Mergers will not cause any payment to be made to any Person by the
Surviving Corporations to be non-deductible, in whole or in part, for federal
income Tax purposes by reason of Section 280G of the Code.
SECTION 5.14 Real Property Owned or Leased. Schedule 5.14 of the
Disclosure Schedule sets forth a complete and accurate list or description of
all real property (including a general description of fixtures located at such
property and specific identification of any such fixtures not owned by the CFG
or CA) that CFG or CA owns or leases, has agreed (or has an option) to purchase,
sell or lease, or may be obligated to purchase, sell or lease and any title
insurance or guarantee policies with respect thereto, specifying in the case of
leases, the name of the lessor, licensor or other grantor, the approximate
square footage covered thereunder, the basic annual rental and other amounts
paid or payable with respect thereto and a summary of the other terms thereof.
True copies of all such leases for real property have been delivered to the
Company prior to the date hereof. No consent to the consummation of the
transactions contemplated by this Agreement is required from the lessor of any
such real property.
SECTION 5.15 Undisclosed Liabilities. As of the date hereof and as of the
Effective Time, except as and to the extent reflected, reserved against or
otherwise disclosed on the CFG/CA Financial Statements or the notes thereto or
not required to be reflected in such statements under GAAP, or set forth in
Schedule 5.15 of the Disclosure Schedule, and except for those incurred in the
ordinary course of business, neither CFG nor CA has any indebtedness or
liability of any nature, whether accrued, absolute, contingent or otherwise,
whether due or to become due.
SECTION 5.16 Absence of Certain Changes or Events. Since September 30,
1999, except as contemplated by this Agreement or disclosed on the CFG/CA
Financial Statements or the notes thereto or as set forth in Schedule 5.16 of
the Disclosure Schedule, each of CFG and CA has conducted its business only in
the ordinary course and, since such date, there has not been:
(a) any changes in the business, financial condition or results of
operations of such party having or reasonably likely to have a Material Adverse
Effect;
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(b) any damage, destruction or loss (whether or not covered by insurance)
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect;
(c) except for such changes in policies and procedures as were or are
required to be made in order to ensure compliance with accounting policies and
procedures promulgated by the SEC, any material change by such party in its
accounting methods, principles or practices;
(d) any revaluation by such party of any of its material assets, including
but not limited to writing down the value of inventory or writing off notes or
accounts receivable;
(e) any entry by such party into any commitment or transactions material to
such party (other than commitments or transactions entered into in the ordinary
course of business);
(f) any declaration, setting aside or payment of any dividends or
distributions in respect of the capital stock of such party;
(g) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including without limitation the granting of stock options, stock appreciation
rights, performance awards, or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, or any other increase in the
compensation payable or to become payable to any present or former directors,
officer or key employees of such party, except for increases in base
compensation or the payment of any bonus or other incentive payments in the
ordinary course of business, or pursuant to any employment, consulting or
severance agreement or arrangement previously entered into with any such present
or former directors, officers or key employees; or
(h) any other action which, if it had been taken after the date hereof,
would require the consent of the Company hereunder.
SECTION 5.17 Assets.
(a) Each of CFG and CA has good and marketable title to their real
properties, including any leaseholds and ground leases, and their other assets
and properties, all as reflected as owned or held by CFG and CA respectively, in
the CFG/CA Financial Statements as of the latest applicable dates thereof, and
those acquired since such date, except for (i) assets and properties disposed of
since such date in the ordinary course of business, and (ii) Permitted Liens,
none of which, in the aggregate, except as set forth in the CFG/CA Financial
Statements or in Schedule 5.17 of the Disclosure Schedule, would have a Material
Adverse Effect on CFG or CA, respectively, or the Surviving Corporations
assuming the transactions contemplated hereby are consummated. All buildings,
structures, fixtures and appurtenances comprising part of the real properties of
CFG and CA (whether owned or leased) are in good operating condition, reasonable
wear and tear excepted. Title to all real property owned by CFG and CA is held
in fee simple, except as otherwise noted in the CFG/CA Financial Statements or
as set forth in Schedule 5.17 of the Disclosure Schedule. CFG and CA have title
or other rights to its assets sufficient in all material respects for the
conduct of their respective businesses as presently conducted, and except as set
forth in the CFG/CA Financial Statements or in Schedule 5.17 of the Disclosure
Schedule, such assets are free, clear and discharged of and from any and all
liens, charges, encumbrances, security interests and/or equities which are
material to CFG and CA, other than Permitted Liens, except that all property
that is owned by CFG that is leased to third parties is subject to the terms and
conditions set forth in each of the leases between CFG and each respective
lessee.
(b) All leases and licenses pursuant to which CFG and CA, as lessee or
licensee, leases or licenses real property, personal property or Intellectual
Property are, to the knowledge of CFG and CA, valid, effective, and enforceable
against the lessor or licensor or in accordance with their respective terms
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization, receivership, conservatorship or similar laws
relating to or affecting the enforcement of creditors' rights generally, and by
general principles of equity, whether applied by a court of law or equity.
Except for such defaults as would not have a Material Adverse Effect on CFG or
CA or the ability of CFG or CA to consummate the transactions contemplated
hereby, there is not under any of such leases or licenses any existing material
default, or any event which with notice or lapse of time, or both, would
constitute a material default, with respect to either
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CFG or CA, or to the knowledge of CFG or CA, any other party thereto. Except as
disclosed in Schedule 5.17 of the Disclosure Schedule, none of such leases
provide for a rental payment of more than $50,000 annually and none of such
licenses contains a prohibition against assignment by CFG or CA, by operation of
law or otherwise, or any other provision which would preclude the Surviving
Corporations from possessing and using the leased premises or licensed property
(including Intellectual Property) for the same purposes and upon the same rental
and other terms upon the consummation of the Mergers as are applicable to the
use by CFG or CA as of the date of this Agreement.
SECTION 5.18 Books and Records. The respective minute books of CFG and CA,
as previously made available to the Company and its representatives, contain
records of all meetings of and all corporate actions or written consents taken
by the respective shareholders and board of directors of CFG and CA that are
complete and correct in all material respects. Except as set forth on Schedule
5.18 of the Disclosure Schedule, neither CFG nor CA has any of their respective
records, systems, controls, data or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and therefrom)
are not under the exclusive ownership and control of CFG and CA, as the case may
be.
SECTION 5.19 Proxy Statement. The information to be provided by CFG or CA
for inclusion in the Proxy Statement will not on the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
Company's Stockholders, at the time of the Stockholders Meeting, and at the
Effective Time, contain any statement that, in the light of the circumstances
under which it is made, is false or misleading with respect to any material
fact, omit to state a material fact necessary in order to make the statements
made therein not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting that has become false
or misleading. If at any time prior to the Effective Time, any event relating to
either CFG or CA or their respective officers or directors is discovered by CFG
or CA that either entity believes should be set forth in a supplement to the
Proxy Statement, CFG or CA shall promptly inform the Company thereof.
SECTION 5.20 Brokers and Finders. Except for the fees and expenses paid or
to be paid to Prudential Securities pursuant to the terms of its engagement
letter with CFG, which fees and expenses shall be paid by the Company, each of
CFG and CA represents and warrants to the other parties hereto that no broker,
finder, investment bankers, agent or similar intermediary has acted directly or
indirectly on its behalf in connection with this Agreement or the transactions
contemplated hereby, and that no brokerage commissions, finders' fees,
investment banker, or similar fees or commissions and/or expenses are payable or
to be paid in connection therewith based on any agreement, arrangement or
understanding with it or any action taken by it. Each of CFG and CA agrees to
indemnify and hold the other parties hereto harmless from any and all claims,
losses, liabilities, expenses (including reasonable attorney fees), demands or
commissions or other compensation by any broker, finder, investment bankers,
agent or similar intermediary claiming to have been employed by or on behalf of
such party.
SECTION 5.21 Full Disclosure. None of this Agreement, the CFG/CA Financial
Statements, or any Schedule, Exhibit or certificate delivered in accordance with
the terms hereof or any other document or instrument in writing that has been
supplied by or on behalf of CFG or CA in connection with the transactions
contemplated hereby contains an untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made. There is no fact known to CFG or CA with regard to CFG or CA that has had
or could reasonable be expected to have a Material Adverse Effect on CFG or CA
or the Surviving Corporations assuming the transactions contemplated hereby are
consummated or their respective property or assets and that has not been
disclosed herein or in the Schedules, Exhibits or certificates furnished in
connection with the consummation of the transactions contemplated hereby.
SECTION 5.22 Environmental Matters. Except as set forth in Schedule 5.22:
(i) CFG and CA are and have been in compliance in all material respects with all
Environmental Laws, except for such
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noncompliance which would not result in Environmental Liabilities which could
reasonably be expected to have a Material Adverse Effect on CFG or CA or the
Surviving Corporations assuming the transactions contemplated hereby are
consummated; (ii) CFG and CA have obtained, and are in compliance in all
material respects with, all Environmental Permits required by Environmental Laws
for the operations of their respective businesses as presently conducted or as
proposed to be conducted, except where the failure to so obtain or comply with
such Environmental Permits would not result in Environmental Liabilities which
could reasonably be expected to have a Material Adverse Effect on CFG or CA or
the Surviving Corporations assuming the transactions contemplated hereby are
consummated; (iii) neither of CFG or CA are involved in operations or know of
any facts, circumstances or conditions, including any Releases of Hazardous
Materials, that are likely to result in any Environmental Liabilities of CFG or
CA or which could reasonably be expected to have a Material Adverse Effect on
CFG or CA or the Surviving Corporations assuming the transactions contemplated
hereby are consummated, and none of CFG or CA has permitted any current or
former tenant of such Person to engage in any such operations, except as would
not reasonably be expected to have a Material Adverse Effect on CFG or CA or the
Surviving Corporations assuming the transactions contemplated hereby are
consummated; (iv) neither CFG nor CA has received any Environmental Claim, nor
to their knowledge is any Environmental Claim threatened, which would result in
a Material Adverse Effect on CFG or CA or the Surviving Corporations assuming
the transactions contemplated hereby are consummated; (v) neither CFG nor CA has
assumed, contractually or by operation of law, any material liabilities under
any Environmental Laws which could reasonably be expected to have a Material
Adverse Effect on CFG or CA or the Surviving Corporations assuming the
transactions contemplated hereby are consummated, and (vi) neither CFG nor CA
has entered into, has agreed to, or is subject to any material judgment, decree,
order or other similar requirement of any Governmental Authority under any
Environmental Laws, including without limitation those relating to compliance
with Environmental Laws or with respect to the investigation, cleanup,
remediation or removal of any Hazardous Material.
SECTION 5.23 Insurance Disclosure. CFG and CA maintain insurance on CFG's
and CA's respective assets and upon their respective businesses and operations
against loss or damage, risks, hazards and liabilities as are consistent with
customary practices and standards of companies engaged in business similar to
CFG and CA. Such insurance is with insurers that in the reasonable judgment of
management of CFG and CA are sound and reputable. CFG and CA maintain in effect
all insurance required to be carried by law or by any agreement by which they
are bound. All material claims under all policies of insurance maintained by CFG
and CA have been filed in due and timely fashion. Each of CFG and CA has taken
or will timely take all requisite action (including without limitation the
making of claims and the giving of notices) pursuant to its directors' and
officers' liability insurance policy or policies in order to preserve all rights
thereunder with respect to all matters (other than matters arising in connection
with this Agreement and the transactions contemplated hereby) occurring prior to
the Effective Time. Neither CFG nor CA has, during the past three years, had an
insurance policy cancelled or been denied insurance coverage for which such
company has applied.
SECTION 5.24 Allowance for Possible Loan Losses. The reserve for losses
shown on the CFG/CA Financial Statements as of September 30, 1999 was adequate
in all material respects to provide for possible losses of a level consistent
with historic practice and based on current economic conditions and information
available to CFG and CA, and are considered adequate under GAAP and standards
applied to the specialty finance business conducted by CFG. To the knowledge of
CFG, the aggregate principal amount of all loans and leases contained in the
loan and lease portfolio of CFG as of September 30, 1999, in excess of such
reserve, was fully collectible.
SECTION 5.25 Year 2000 Compliance. Except as set forth on Schedule 5.25 of
the Disclosure Schedule, all of CFG's and CA's Internal MIS Systems and
Facilities are Year 2000 Compliant except where the failure to be so compliant
will not have a Material Adverse Effect on CFG or CA or on the ability of CFG or
CA to consummate the transactions contemplated hereby. CFG and CA have furnished
the Company with true, correct and complete copies of all internal
investigations, memoranda, budget plans, forecasts, or reports concerning the
Year 2000 Compliance of the products, services, operations, systems, supplies,
and facilities of CFG and CA.
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SECTION 5.26 Material Agreements. Each of CFG and CA has made available to
the Company a true and correct copy of all Material Agreements. Each Material
Agreement is valid, binding, in full force and effect and enforceable by CFG and
CA as the case may be in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors generally and by general equitable principles
and except to the extent where the inability to enforce such Material Agreements
in accordance with their terms will not have a Material Adverse Effect on CFG or
CA or the ability of CFG or CA to consummate the transactions contemplated
hereby. Except as disclosed in Schedule 5.26, CFG and CA are not (with or
without the lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder and, to the knowledge of CFG and CA, no other
party to any of the Material Agreements is (with or without the lapse of time or
the giving of notice, or both) in breach or default in any material respect
thereunder.
SECTION 5.27 Intellectual Property.
(a) Schedule 5.27 of the Disclosure Schedule contains a list of all
Intellectual Property used by each of CFG or CA in its business. Each of CFG and
CA owns or has a valid license to use, in the manner currently used, all
Intellectual Property used in its business.
(b) No claims with respect to CFG's or CA's Intellectual Property have been
asserted, or to the knowledge of CFG or CA are threatened, by any third party
nor are there valid grounds, to the knowledge of CFG or CA, for any bona fide
claims (i) that any distribution, license, sublicense, use or licensing of the
Intellectual Property infringes the rights of any third parties, (ii) against
the use of any Intellectual Property as used in CFG's or CA's business as
currently conducted, or (iii) challenging the ownership, validity or
effectiveness of the Intellectual Property, except as could not reasonably be
expected to have a Material Adverse Effect on CFG or CA or the Surviving
Corporations assuming the transactions contemplated hereby are consummated. To
CFG's or CA's knowledge, all registered trademarks, servicemarks, copyrights and
patents held by CFG or CA, if any, are valid and subsisting except as could not
reasonably be expected to have a Material Adverse Effect on CFG or CA or the
Surviving Corporations assuming the transactions contemplated hereby are
consummated. None of the Intellectual Property owned by CFG or CA is subject to
any outstanding decree, order, judgment or stipulation restricting in any manner
the licensing thereof by CFG or CA except as could not reasonably be expected to
have a Material Adverse Effect on CFG or CA or the Surviving Corporations
assuming the transactions contemplated hereby are consummated.
(c) To CFG's or CA's knowledge, there is no material unauthorized use,
infringement or misappropriation of any of such party's Intellectual Property by
any third party, except as could not reasonably be expected to have a Material
Adverse Effect on CFG or CA or the Surviving Corporations assuming the
transactions contemplated hereby are consummated.
SECTION 5.28 Absence of Certain Business Practices. None of CFG, CA, or
any officer, employee or agent thereof, nor any other Person acting on behalf of
CFG or CA, has, directly or indirectly, within the past five years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person or entity who is or may be in a position
to help or hinder CFG or CA (or assist CFG or CA in connection with any actual
or proposed transaction) which (i) subjects any party to any damage or penalty
in any civil, criminal or governmental litigation or proceeding which would have
a Material Adverse Effect on CFG or CA or the Surviving Corporations assuming
the transactions contemplated hereby are consummated, (ii) if not given in the
past, could have had a Material Adverse Effect on CFG or CA, or (iii) if not
continued in the future, could have a Material Adverse Effect on CFG or CA or
the Surviving Corporations assuming the transactions contemplated hereby are
consummated.
SECTION 5.29 Affiliate Transactions. Schedule 5.29 of the Disclosure
Schedule sets forth (i) all contracts, agreements, other arrangements or
transactions existing or occurring at any time after December 31, 1997 between
CFG or CA, on the one hand, and any of CFG's or CA's Affiliates (including
officers, directors, or employees) or any holder of 10% of the outstanding
common stock of CFG or CA or a family member of such a Person, on the other
hand, or any of their respective Affiliates, other than agreements relating to
services provided as an officer or director of the Company other than relating
to any extraordinary bonuses, and (ii) a description of all payments made to or
received from, CFG or CA, on the one hand, and any of the
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Company's Affiliates (including officers, directors, or employees) or any holder
of 10% of the outstanding common stock of CFG or CA or a family member of such a
Person, on the other hand, or any of their respective Affiliates, since December
31, 1997, except for dividends paid or distributions made with respect to any
outstanding class or series of securities of such party and payments of salary
or other regular compensation for services in the ordinary course.
SECTION 5.30 Loans; Investments.
(a) The following terms shall have the meaning ascribed to them for
purposes of this Section 5.30:
(i) "Investor" means any Person (including any securitization vehicle)
that has acquired or hereinafter acquires a Loan from CFG, other than the
Company.
(ii) "Investor Requirements" means any outstanding contractual, legal
and regulatory obligation of CFG to any Investor, including but not limited
to, the representations, warranties and covenants made by CFG to any
Investor.
(iii) "Loan" means any loan or lease (whether such lease is a
"financing" lease or a "true" lease) at any time held, serviced or sold by
CFG to the extent that CFG could have any liability, obligation or duties
with respect thereto.
(iv) "Loans Held for Sale" means all Loans currently held and
hereinafter acquired or originated by CFG where beneficial ownership has
not been transferred to an Investor.
(v) "Loan Documents" means the note, mortgage, deed of trust, security
agreement, or other instrument securing the note or lease contract and the
related documents for each Loan.
(vi) "Mortgage Loan" shall mean a loan secured by a mortgage.
(vii) "Portfolio Loan" means all Loans currently owned or hereinafter
owned for investment by CFG.
(viii) "Serviced Loans" means all Loans currently and hereinafter
serviced by CFG for its own account or for others.
(ix) "Servicing Requirements" means prudent practice and industry
standards together with any contractual, legal or regulatory obligation of
CFG relating to the Serviced Loans or any Loan previously serviced by CFG.
(b) Except as set forth on Schedule 5.30(b) of the Disclosure Schedule,
neither CFG nor CA has any Portfolio Loan. Except as set forth on Schedule
5.30(b) of the Disclosure Schedule, all Loans owned by CFG are Loans Held for
Sale, except Loans held as collateral for a securitization.
(c) To the knowledge of CFG, the Loan Documents evidencing each Loan (other
than Serviced Loans that have never been owned by CFG) that is currently
outstanding constitute the legal, valid and binding obligations of the parties
thereto and are enforceable against such parties in accordance with their terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of lending institutions or
creditors generally and by general equitable principles. To the knowledge of
CFG, no Loan is subject to any legally enforceable right of rescission, set-off,
counterclaim or defense, including the defense of usury or lack of legal
capacity of any borrower or guarantor, nor will the operation of any of the
terms of any Loan, or the exercise of any legally enforceable right thereunder,
render any Loan or any of the Loan Documents unenforceable, in whole or in
material part, or subject to any right of rescission, set-off, counterclaim or
defense, including the defense of usury or, to the knowledge of CFG, lack of
legal capacity of any borrower or guarantor, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect to any Loan Held
for Sale or any Loan for which there is any recourse against, or responsibility
or exposure of, CFG.
(d) The Loan Documents for each Loan (other than Serviced Loans that have
never been owned by CFG) have been duly executed by CFG and recorded, or are in
the process of being recorded, and are in due and proper form, and, to the
knowledge of CFG, the information contained therein was true, accurate and
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complete in all material respects at the time such Loan Documents were executed.
CFG has at all times maintained the Loan Documents in all material respects in
accordance with Investor Requirements, Servicing Requirements and otherwise in
accordance with all legal and regulatory requirements and contractual
obligations.
(e) To the knowledge of CFG, and except as set forth on Schedule 5.30(e),
all outstanding Loans sold and/or securitized by CFG complied in all material
respects with Investor Requirements on the date of sale.
(f) CFG has at all times been and is in compliance in all material respects
with the Servicing Requirements relating to the Serviced Loans and Loans
previously serviced by it.
(g) Except as set forth in Schedule 5.30(g) of the Disclosure Schedule, CFG
has no advances outstanding with respect to any Loan, except for advances made
under the Servicing Requirements or the requirements of the Loan Documents, the
aggregate amount of which is not material.
(h) CFG is not in material default with respect to any of its obligations
under any Loan.
(i) To the knowledge of CFG, CFG is not in violation in any material
respect of any applicable federal, state, or local law, statute, ordinance,
rule, regulation, order or guideline pertaining to the Loans, its origination or
production practices, or otherwise relating to its purchase or sale of Loans or
its lending business, including but not limited to, real estate settlement
procedures, fair credit reporting, and every other prohibition against unlawful
discrimination or governing consumer credit, and also including, without
limitation the Consumer Credit Reporting Act, Equal Credit Opportunity Act of
1975 and Regulation B, Fair Credit Reporting Act, Truth in Lending Law, in
particular, Regulation Z as amended, the Flood Disaster Protection Act of 1973,
and state consumer credit codes and laws. The Company has not received notice
from any governmental, quasi-governmental or private agency of pending or
threatened actions or investigations relating to origination or production
practices.
(j) All pools relating to Loans that require certification have been
initially certified, finally certified and/or recertified in accordance with
applicable guidelines, and if any "trailing documents" are outstanding, the lack
of such documents does not have any Material Adverse Effect on the ability of
the securitized pool to enforce its rights with respect thereto. The net
investment value or principal balance, as applicable, outstanding and owing on
the Serviced Loans in each pool equals or exceeds the amount owing to the
corresponding security holders of such pool.
(k) Set forth in Schedule 5.30(k) is a list of all interest rate swaps,
caps, floors and option agreements and other interest rate risk management
arrangements to which CFG is a party or by which any of their properties or
assets may be bound. All interest rate swaps, caps, floors and option agreements
and other interest rate risk management arrangements to which CFG is a party or
by which any of its properties or assets may be bound were entered into in the
ordinary course of business and for the purpose of hedging or managing a risk
specifically relating to the Loans and, to the knowledge of CFG, in accordance
with then-customary practice and all applicable rules and regulations and with
counterparties believed to be financially responsible at the time and are legal,
valid and binding obligations and are in full force and effect, except as the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization, receivership, conservatorship or similar laws relating to or
affecting the enforcement of creditors' rights generally, and by general
principles of equity, whether applied by a court of law or equity except to the
extent that the unenforceability or invalidity of any such arrangements would
not have a Material Adverse Effect on CFG. CFG has duly performed in all
material respects all of its obligations thereunder to the extent that such
obligations to perform have accrued, and to the knowledge of CFG, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party thereunder.
(l) The terms of each Loan have not been impaired, waived, altered or
modified in any material respect from the date of its origination except by a
written instrument, which written instrument has been recorded if recordation is
necessary to protect the interests of the owner thereof. The substance of any
such waiver, alteration or modification has been communicated to and approved in
writing by: (i) the relevant Investor, to the extent required by the relevant
Investor Requirements; and (ii) the title insurer, to the extent required by the
relevant policies, and its terms are reflected in the Loan Documents. Except as
authorized by the
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applicable Investor, where the Investor's authorization is required, CFG has
not: (i) subordinated the lien of any Mortgage Loan to any other mortgage or
lien or given any other mortgage or lien equal priority with the lien of a
mortgage loan; or (ii) executed any instrument of release, cancellation or
satisfaction with, in whole or in part, respect to any Mortgage Loan.
(m) As of the date hereof, except as set forth in Schedule 5.30(m), CFG is
not subject to and has not been notified of any currently existing repurchase
obligation under any Loan.
(n) All escrows required to be maintained pursuant to the terms of the
Mortgage Loans have been maintained by CFG and, to the knowledge of CFG, all
prior servicers, in all material respects in accordance with all applicable
legal rules and Investor Requirements and in accordance with the mortgage
servicing agreements and the Loan Documents related thereto. CFG has credited to
the account of mortgagors all interest required to be paid on any escrow
account. All escrow, custodial, and suspense accounts related to the owned
Mortgage Loans are held in CFG's name or in the Investor's name. With respect to
escrow deposits and payments which are required to be collected, all such
payments are in the possession of, or under the control of, CFG, and there exist
no material deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. No escrow deposits or
other charges or payments have been capitalized under any mortgage or the
related mortgage note.
(o) Except as set forth on Schedule 5.30(o) of the Disclosure Schedule, CFG
has not received written notice of a servicing default for any Loan, and each
Loan serviced by CFG has been properly serviced and accounted for in all
material respects in accordance with the applicable Servicing Requirements. To
the extent that any applicable legal requirement in any jurisdiction or any
Investor Requirement requires the payment of interest on escrow accounts with
respect to any particular Loan, all such interest has been properly paid or
arrangements for such payment have been made. All amounts payable in respect of
a Loan, or the property covered by a mortgage which CFG is responsible for
paying, directly or on behalf of a mortgagor, have, in all material respects,
been paid prior to becoming delinquent. All pools for which CFG is responsible
are in compliance in all material respects with all applicable Investor
Requirements, procedures, rules, regulations and guidelines.
(p) Schedule 5.30(p) contains (i) the characteristics of the Loans
currently held for securitization, presented in a manner consistent with the
characteristics of the Loans listed on pages 61 through 69 of the Offering
Circular; (ii) a list of all Loans to Affiliates of CFG and description of
affiliation; and (iii) the historical delinquency and loss experience as of
November 30, 1999 presented in a manner consistent with pages 44 and 45 of the
Offering Circular. Each Loan satisfies the eligibility requirements of pages 103
through 106 of the Offering Circular and the sale agreement related thereto.
(q) Schedule 5.30(q) contains a list of all securitizations sponsored by
CFG or an Affiliate, and provides the following as to each securitization: (1)
original net investment value ("NIV") or principal balance, as applicable, of
the Loans; (2) current "NIV" or principal balance, as applicable, of the Loans;
(3) original principal balances of each class of securities issued; (4) current
principal balances of each class of securities issued; (5) current delinquency
levels and the "trigger events," "reserve account increase events" and service
termination percentages that apply to the related securitization; (6) the
outstanding amounts of servicing advances for each securitization; (7) indicate
whether the overcollateralization targets have been reached and, if not, the
anticipated date they will be reached; and (8) whether any securitizations
cross-collateralize other securitizations. To the knowledge of CFG, no facts
currently exist with respect to existing securitizations heretofore undertaken
by CFG that would be reasonably likely to materially and adversely affect the
ability of the Surviving Corporations to continue to service any of the existing
securitizations or to do securitizations in the future in accordance with
existing practices assuming the transactions contemplated hereby are
consummated.
(r) As to each securities offering document relating to a securitization,
at the time prepared and delivered to investors and the placement agent and as
of any date with respect to which the Company may have been obligated to deliver
any such offering document to an investor or the placement agent, such offering
document did not include any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
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were made, not misleading. To the knowledge of CFG, no offer or sale of any
securities relating to any securitization was made in violation of any state or
federal securities laws.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ACQUISITION
The Company and Acquisition hereby represent and warrant to CFG and CA as
follows:
SECTION 6.01 Organization. Each of the Company and Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite power and authority, to own,
operate and lease its properties, and to carry on its business substantially as
now conducted. Each of the Company and Acquisition is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the assets or 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 in good standing has not had or would not have a
Material Adverse Effect on the Company or Acquisition taken as a whole, or on
the ability of either the Company or Acquisition to consummate the transactions
contemplated hereby. Each of the Company and Acquisition has all requisite power
and authority, to enter into this Agreement and, subject to the adoption of this
Agreement by the stockholders of the Company and the receipt of all requisite
regulatory approvals and the expiration of any applicable waiting periods, to
consummate the transactions contemplated hereby.
SECTION 6.02 Authorization; Enforceability. The execution, delivery and
performance of this Agreement and all other agreements contemplated hereby and
the consummation of the transactions contemplated hereby have been duly approved
and authorized by the Board of Directors of each of the Company and Acquisition,
and all necessary corporate action on the part of such party with respect
thereto has been taken, subject to the adoption of this Agreement by the
stockholders of the Company. This Agreement has been duly executed and delivered
by each of the Company and Acquisition and constitutes the valid and binding
obligation of such party and is enforceable against such party in accordance
with its terms, except to the extent that enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
or equitable principles or doctrines.
SECTION 6.03 Conflicts. The execution and delivery of this Agreement does
not, and the consummation of the transactions contemplated hereby will not,
conflict with or result in any violation, breach or termination of, or default
or loss of a material benefit under, or permit the acceleration of any
obligation under, or result in the creation of any material lien, charge or
encumbrance on any of the property or assets under, any provision of the
Certificate of Incorporation or Bylaws (or comparable constitutive documents) of
either the Company or Acquisition, or any mortgage, indenture, lease, agreement
or other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or Acquisition or their respective properties, other than any such
conflicts, violations, breaches or defaults which would not have a Material
Adverse Effect on the Company or Acquisition taken as a whole or on the ability
of either the Company or Acquisition to consummate the transactions contemplated
hereby.
SECTION 6.04 Consents and Approvals. Except as set forth on Schedule 6.04,
no consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Authority is required by or with respect to the
Company or Acquisition in connection with the execution and delivery of this
Agreement or the consummation by such party of the transactions contemplated
hereby except for: (i) any filing or consent required to be made by the Company,
including without limitation, the Proxy Statement with the SEC for use in
connection with the Stockholders' Meeting to approve the Mergers; (ii) the
filing of a certificate of merger with the Delaware Secretary of State in the
case of the CA Merger and the Michigan Secretary of State in the case of the CFG
Merger, and the approval thereof; (iii) any filings, approvals or no-action
letters with or from state securities authorities; and (iv) any antitrust
filings (including filings required under the HSR Act), or consents, waivers or
approvals obtained with respect thereto.
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SECTION 6.05 Anti-takeover Provisions Inapplicable. No "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation applicable to the Company or Acquisition (i) applies to the
Mergers, (ii) prohibits or restricts the ability of the Company or Acquisition
to perform its obligations under this Agreement or its ability to consummate the
transactions contemplated hereby, (iii) would have the effect of invalidating or
voiding this Agreement or any provision hereof, or (iv) would subject CFG or CA
to any material impediment or condition in connection with the exercise of any
of its rights under this Agreement.
SECTION 6.06 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 40,000,000
shares of Company Common Stock, of which 9,508,108 shares are issued and
outstanding as of the date hereof, and (ii) 10,000,000 shares of Preferred
Stock, par value $0.01 per share, none of which are issued and outstanding as of
the date hereof. The authorized capital stock of Acquisition consists of 100
shares of Acquisition Common Stock, all of which are issued and outstanding and
owned by the Company. All of the issued and outstanding shares of Company Common
Stock and Acquisition Common Stock are, and all shares of Company Common Stock
issuable under stock option plans of the Company, and all of the shares of the
Company Common Stock to be issued pursuant to and in accordance with Article IV
of this Agreement will be, if and when issued (i) duly and validly issued, (ii)
fully paid and non-assessable, and (iii) free from any preemptive rights of
current or past stockholders. All of the issued and outstanding shares of
Company Common Stock will be entitled to vote to adopt this Agreement other than
Company Common Stock owned by any officer, director or Affiliate of CFG and/or
CA or any Affiliate of such officer, director or Affiliate.
(b) As of the date hereof, the Company had 1,070,000 shares of the Company
Common Stock reserved for issuance under its stock benefit plans for the benefit
of officers, directors and employees of the Company, pursuant to which awards
covering 930,000 shares of the Company Common Stock are outstanding.
(c) Except as set forth in this Section 6.06, as of the date hereof, there
are no shares of capital stock or other equity securities of the Company or
Acquisition outstanding nor are there any outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of the Company or Acquisition, or contracts,
commitments, understandings, or arrangements by which the Company or Acquisition
is or may be bound to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its capital
stock.
SECTION 6.07 Financial Statements; No Material Adverse Change.
(a) The financial statements of the Company included in its Annual Report
on Form 10-K for the fiscal year ended December 31, 1998, and its Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 1999, June 30,
1999, and September 30, 1999 (collectively, the "Financial Statements") comply
as to form in all material respects with the applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP during the periods covered thereby
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q of the SEC, or for normal
year-end adjustments), and fairly present in all material respects the financial
position of the Company as at the dates thereof and the results of its
operations and cash flows for the periods then ended. Since December 31, 1998,
there has not been any declaration, setting aside or payment of a dividend or
other distribution with respect to shares of capital stock of the Company except
for dividends distributed to shareholders in the ordinary course of business or
any material change in accounting methods or practices by the Company. The
Company has delivered to CFG and CA the Financial Statements prior to the date
hereof.
(b) Since December 31, 1998, except as disclosed in the SEC Documents filed
prior to the date hereof, and except for the execution, delivery and performance
of this Agreement and any other agreements to be entered into or contemplated
hereby and the transactions contemplated hereby and thereby, (i) the Company has
not incurred any obligations, contingent or non-contingent liabilities,
liabilities for Taxes, levies, liens, claims or other charges, long-term leases
or unusual forward or long-term commitments (whether absolute,
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accrued, contingent or otherwise, known or unknown, whether due or to become
due, except liabilities and obligations which (x) are adequately accrued or
reserved against in the Financial Statements or disclosed in the notes thereto
or are not required to be reflected in such statements under GAAP, (y) were
incurred after September 30, 1999 in the ordinary course of business or
otherwise are not in the aggregate material to the Company, or (z) have been
discharged or paid in full, (ii) no contract, lease or other agreement or
instrument has been entered into by the Company or has become binding upon the
Company or its assets which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect on the Company or the
ability of the Company to consummate the transactions contemplated hereby, (iii)
the Company is not in default, and to the Company's knowledge no third party is
in default, under any Material Agreement which, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company or the ability of the Company to consummate the
transactions contemplated hereby, and (iv) the business of the Company has been
operated in the usual and ordinary course consistent with past practice. Since
December 31, 1998 no event has occurred, which alone or together with other
events, could reasonably be expected to have a Material Adverse Effect on the
Company or the ability of the Company to consummate the transactions
contemplated hereby, except as disclosed in the SEC Documents filed after
December 31, 1998 and prior to the date hereof and except to the extent
resulting from (x) any changes in general economic conditions in the United
States, or (y) any changes affecting the real estate and/or real estate
investment trust industries in general.
SECTION 6.08 No Prior Activities; Assets of Acquisition. Acquisition was
formed solely for the purpose of effecting the CFG Merger and engaging in the
transactions contemplated hereby. Acquisition has neither incurred any
obligations or liabilities nor engaged in any business or activities of any type
or kind whatsoever or entered into any agreements or arrangements with any
Person except in connection with its organization and this Agreement.
SECTION 6.09 Compliance with Laws.
(a) The business of each of the Company and Acquisition has been and is
being conducted in compliance in all material respects with all laws, ordinances
and regulations of Governmental Authorities, including, without limitation,
federal and state securities laws, laws and regulations relating to financial
statements and reports, occupational safety, fair employment practices, fair
labor standards and laws and regulations relating to employees and employee
benefits, and any statutes or ordinances relating to the properties occupied or
used by the Company or Acquisition.
(b) No investigation or review by any Governmental Authority with respect
to the Company or Acquisition is pending or, to the knowledge of the Company or
Acquisition, threatened, nor has any Governmental Authority indicated to the
Company or Acquisition an intention to conduct the same.
SECTION 6.10 SEC Reports. The Company has filed and made available to CFG
and CA a true and complete copy of each report, schedule, filing, registration
statement and definitive proxy statement required to be filed by the Company
with the SEC since November 1, 1997 (the "SEC Documents"). As of their
respective dates, the SEC Documents, after giving effect to any amendments and
supplements thereto filed prior to the date hereof, complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, applicable to such SEC Documents. None of the SEC Documents when
filed, after giving effect to any amendments an supplements thereto filed prior
to the date hereof, contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 6.11 Litigation. There is no action, suit, investigation or
proceeding, legal, quasi-legal, administrative or otherwise, pending or, to the
knowledge of the Company or Acquisition, threatened against the Company or
Acquisition or any property of the Company or Acquisition in any court or before
any arbitrator of any kind or before or by any Governmental Authority except for
such actions, suits, investigations or legal proceedings that would not have a
Material Adverse Effect on the Company or Acquisition taken as a whole or which
would not materially affect the ability of the Company or Acquisition to
consummate the transactions contemplated hereby. Neither the Company nor
Acquisition is in default with respect to any
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judgment, order, writ, injunction or decree of any arbitrator, court or
Governmental Authority, and there are no unsatisfied judgments against the
Company or Acquisition except for such defaults or unsatisfied judgments as
would not have a Material Adverse Effect on the Company or Acquisition taken as
a whole or the ability of the Company and Acquisition to consummate the
transactions contemplated hereby.
SECTION 6.12 Proxy Statement. The information to be provided by the
Company and Acquisition for inclusion in the Proxy Statement will not, on the
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the Company's stockholders, at the time of the Stockholders
Meeting, and at the Effective Time, contain any statement that, in the light of
the circumstances under which it is made, is false or misleading with respect to
any material fact, omit to state any material fact necessary in order to make
the statements made therein not false or misleading or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders' Meetings that
has become false or misleading. If at any time prior to the Effective Time, any
event relating to either the Company or Acquisition or their respective officers
or directors is discovered by the Company or Acquisition that either entity
believes should be set forth in a supplement to the Proxy Statement, the Company
shall promptly inform CFG and CA and such amendment or supplement will be
promptly filed with the SEC and, as required by law, disseminated to the
Company's stockholders. Notwithstanding the foregoing, the Company and
Acquisition make no representation or warranty with respect to any information
supplied by CFG and/or CA that is to be contained in the Proxy Statement. The
Proxy Statement will (with respect to the Company) comply in all material
respects as to form and substance with the requirements of the Exchange Act and
the rules and regulations thereunder.
SECTION 6.13 Brokers and Finders. Except for the fees and expenses paid or
to be paid by the Company to (i) Bradford, and (ii) Prudential Securities with
respect to engagement letters entered into with the Company and CFG and such
firms, each of the Company and Acquisition represents and warrants to the other
parties hereto that no broker, finder, investment bankers, agent or similar
intermediary has acted directly or indirectly on its behalf in connection with
this Agreement or the transactions contemplated hereby, and that no brokerage
commissions, finders' fees, investment banker, or similar fees or commissions
and/or expenses are payable or to be paid in connection therewith based on any
agreement, arrangement or understanding with it or any action taken by it. Each
of the Company and Acquisition agrees to indemnify and hold the other parties
hereto harmless from any and all claims, losses, liabilities, expenses
(including reasonable attorney fees), demands or commissions or other
compensation by any broker, finder, investment bankers, agent or similar
intermediary claiming to have been employed by or on behalf of such party.
ARTICLE VII
COVENANTS AND AGREEMENTS OF THE PARTIES
SECTION 7.01 Conduct of the Business. During the period from the date of
this Agreement to the Effective Time, each of CFG and CA will not take any
action that adversely affects its ability to, and each of CFG and CA covenants
and agrees that it will (i) pursue its business in the ordinary course, (ii)
seek to preserve intact its current business organization, (iii) keep available
the services of its current officers and employees, and (iv) use its reasonable
commercial effects to preserve its relationships with customers, suppliers and
others having business dealings with it. During such period, neither CFG nor CA
will, and will not permit any officer or director thereof to, without the
Company's prior written consent:
(a) issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, disposition or pledge or
other encumbrances of (i) any shares of any class of its capital stock, or
any securities or rights convertible into, exchangeable for or evidencing
the right to subscribe for any shares of its capital stock, or any rights,
warrants, options, calls, commitments or any other agreements of any
character to purchase or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for or evidencing the
right to subscribe for any shares of its capital stock, or (ii) any other
securities in respect of, in lieu of, or in substitution for, any shares of
its capital stock outstanding on the date hereof;
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(b) directly or indirectly redeem, purchase or otherwise acquire, or
propose to redeem, purchase or otherwise acquire, any of its outstanding
capital stock or any profit or loss or any beneficial interest therein;
(c) split, combine, subdivide or reclassify any shares of its capital
stock or otherwise make any payments to its shareholders other than the
payments referred to in Section 4.01(e);
(d) (i) grant any increases in the compensation of any of its
directors, officers or employees, (ii) pay or agree to pay any pension or
retirement allowance or other employee benefit not required or contemplated
by any Plan as in effect on the date hereof to any such director, officer
or employee, whether past or present, (iii) enter into any new or amend any
existing employment or severance agreement or any change of control
agreement with any such director, officer or employee, (iv) pay or agree to
pay any bonus to any director, officer or employee (whether in the form of
cash, capital stock or otherwise), or (v) except as may be required to
comply with applicable law, amend any existing, or become obligated under
any new, Plan, except in the case of the foregoing clauses (i) - (v);
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, reclassification, restructuring, recapitalization or
other reorganization (other than as contemplated hereby) or otherwise
effect the same;
(f) declare or pay any dividend or make any other distribution with
respect to its capital stock, whether in cash, stock or other property;
(g) make any acquisition, by means of merger, consolidation or
otherwise, of any direct or indirect ownership interest in, or assets
comprising, any business enterprise or operation or enter into any joint
venture, partnership, or strategic alliance agreement with any Person;
(h) adopt any amendments to its Certificate of Incorporation or Bylaws
or comparable governing documents;
(i) directly or indirectly incur any indebtedness for borrowed money
or guarantee such indebtedness or agree to become contingently liable, by
guaranty or otherwise, for the obligations or indebtedness of any Person or
make or commit to make any loans, advances or capital contributions to, or
investments in, any Person or to any other Person, except for bank deposits
and other investments in marketable securities and cash equivalents made in
the ordinary course of its business, or refinance or restructure any
existing loan;
(j) engage in the conduct of any business the nature of which is
materially different from the business in which it is currently engaged or
outside the ordinary course of business;
(k) enter into any agreement providing for acceleration of payment or
performance or other consequence as a result of a change of control of CFG
or CA, as the case may be;
(l) enter into any contract, arrangement or understanding requiring
the purchase of equipment, materials, supplies or services over a period
greater than 12 months which is not cancelable without penalty on 30 or
fewer days' notice, except in the ordinary course of business;
(m) foreclose upon or otherwise take title to or possession or control
of any real property without first obtaining a phase one environmental
report thereon or adequate environmental insurance with respect thereto;
(n) except as previously disclosed to the Company in writing, forgive
any indebtedness owed to such party or convert or contribute by way of
capital contribution any such indebtedness owed or cancel any claims that
it may possess or waive any rights of material value;
(o) make any changes in its policies or practices concerning loan
underwriting and credit scoring;
(p) enter into any securities transaction for its own account or
purchase or otherwise acquire any investment security for its own account
other than securities backed by the full faith and credit of the United
States or an agency thereof;
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(q) enter into, modify or extend any agreement, contract or commitment
(other than Loans or securities) involving an expenditure in excess of
$50,000 in the aggregate;
(r) place on any of its assets or properties any mortgage, pledge,
lien, charge, or other encumbrance;
(s) except in the ordinary course of business, sell or otherwise
dispose of any real property or any material amount of tangible or
intangible personal property other than properties acquired in foreclosure
or otherwise in the ordinary collection of indebtedness;
(t) enter into any new, or modify, amend or extend the terms of any
existing, contracts relating to the purchase or sale of financial or other
futures, or any put or call option relating to cash, securities or
commodities or any interest rate swap agreements or other agreements
relating to the hedging of interest rate risk, except in the ordinary
course of business consistent with past practices and prudent business
practices;
(u) knowingly take any action that would (A) materially impede or
delay the consummation of the transactions contemplated by this Agreement
or the ability of the parties hereto to obtain any approval of any
regulatory authority required for the transactions contemplated by this
Agreement or to perform its covenants and agreements under this Agreement,
or (B) prevent the transactions contemplated hereby from qualifying as a
reorganization within the meaning of Section 368 of the Code;
(v) make any material changes in its pricing policies;
(w) authorize or enter into any agreement providing for management or
advisory services to be provided by such party to any third-party or an
increase in management or advisory fees paid by any third-party under
existing management agreements;
(x) mortgage, pledge, encumber, sell, lease or otherwise transfer or
dispose of any of its assets;
(y) authorize or announce an intention to do any of the foregoing, or
enter any contract, agreement, commitment or arrangement to do any of the
foregoing; or
(z) perform any act or omit to take any action that would make any of
the representations or warranties contained in this Agreement inaccurate or
materially misleading as of the Effective Time or that would cause a breach
of any of the covenants or agreements of this Agreement.
SECTION 7.02 Officers and Employees. Each of CFG and CA severally agree
that, prior to the Effective Time, it will use its reasonable efforts to
encourage its officers and employees to the extent they are in good standing to
become employees of the Company or to maintain their employment with CFG and CA,
as the case may be, as determined by the Company in its sole discretion.
SECTION 7.03 Meeting of Shareholders. The Company, and each of CFG and CA
to the extent it has not already done so, hereby covenants and agrees that it
shall, as promptly as practicable, take all action necessary in accordance with
applicable law and its Certificate of Incorporation (or comparable governing
documents) and Bylaws to convene a meeting of its stockholders and shall use all
commercially reasonable efforts to hold such meeting as promptly as practicable
after the date hereof. The purpose of such meeting shall be, among other things,
to consider and vote upon the approval of the respective Mergers and the
transactions contemplated hereby. Notwithstanding the foregoing, CFG and CA
shall be deemed to have fulfilled the foregoing requirements if their respective
stockholders act by written consent in lieu of such meeting pursuant to the
provisions of applicable law. Subject to the fiduciary duties of the Company's
Board of Directors under applicable law as advised by counsel, the Board of
Directors of the Company shall recommend and declare advisable such approval and
the Company shall take all lawful action to solicit such approval, including,
without limitation, the inclusion of the recommendation of the Board of
Directors and the Special Committee of the Company in the Proxy Statement that
the stockholders of the Company vote in favor of the approval of the Mergers and
the adoption of this Agreement.
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SECTION 7.04 Proxy Materials.
(a) As soon as practicable after the date hereof, the Company shall
promptly prepare, and CFG and CA shall cooperate in the preparation of, and the
Company shall file with the SEC as soon as practicable, the Proxy Statement and
a form of proxy in connection with the vote of the Company's shareholders with
respect to each of the Mergers and the issuance of the Company's Common Stock in
connection with the Mergers. The Company will use all reasonable efforts to
cause the Proxy Statement to be declared effective by the SEC and mailed to
shareholders of the Company at the earliest practicable date as permitted by the
SEC.
(b) If at any time prior to the Effective Time, any event relating to or
affecting the Company, CFG or CA shall occur as a result of which it is
necessary, in the opinion of counsel for the Company, CFG or CA, to supplement
or amend the Proxy Statement in order to make such document not misleading in
light of the circumstances existing at the time approval of the shareholders of
the Company is sought, the Company, CFG or CA, respectively, will notify the
other parties hereto thereof and, in the case of CFG or CA, it will cooperate
with the Company in preparing, and, in the case of the Company, it will prepare
and file, an amendment or supplement with the SEC and, if required by law or the
rules and regulations under the Exchange Act, applicable state securities
authorities and each national securities exchange upon which the Company Common
Stock is then listed for trading and/or quotation system on which such stock is
quoted such that such document, as so supplemented or amended, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
existing at such time, not misleading, and the Company will, as required by law,
disseminate to its shareholders such amendment or supplement.
SECTION 7.05 Filings; Other Action. The Company, CFG and CA shall: (a) to
the extent required, promptly make all filings and thereafter make any other
required submissions under the HSR Act with respect to the Mergers; (b) use all
reasonable efforts to cooperate with one another to (i) determine which
Authorizations are required to be made or obtained prior to the Effective Time
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, and (ii) timely make and
seek all such Authorizations; (c) use all reasonable efforts to obtain in
writing any consents required from third parties in form reasonably satisfactory
to the Company, CFG and CA necessary to effectuate the Mergers; (d) use all
reasonable efforts to promptly take, or cause to be taken, all other actions and
do, or cause to be done, all other things necessary, proper or appropriate to
satisfy the conditions set forth in Article VIII and to consummate and make
effective the transactions contemplated by this Agreement on the terms and
conditions set forth herein as soon as practicable (including seeking to remove
promptly any injunction or other legal barrier that may prevent such
consummation); and (e) not take any action which might reasonably be expected to
impair the ability of the parties to consummate the Mergers at the earliest
possible time.
SECTION 7.06 Access to Information.
(a) From the date hereof until the Effective Time, CFG and CA (i) will give
the Company, its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of CFG
and CA during reasonable business hours, (ii) will furnish copies to the
Company, its counsel, financial advisor, auditors and other authorized
representatives such financial and operating data and other information as such
persons may reasonably request, and which is in the possession of or can be
obtained by CFG or CA without undue expense, and (iii) will instruct their
respective employees, counsel, financial advisors and accountants to cooperate
with the Company in its investigation of the business of CFG and CA.
(b) From the date hereof until the Effective Time, the Company (i) will
give CFG and CA, their respective counsel, financial advisors, auditors and
other authorized representatives full access to the offices, properties, books
and records of the Company during reasonable business hours, (ii) will furnish
copies to CFG and CA, their respective counsel, financial advisor, auditors and
other authorized representatives such financial and operating data and other
information as such parties may reasonably request, and which is in the
possession of or can be obtained by the Company without undue expense, and (iii)
will instruct its employees, counsel and financial advisors and accountants to
cooperate with CFG and CA in its investigation of the business of the Company.
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SECTION 7.07 Advisory Agreement. The Company shall pay to CA all fees
accrued and unpaid and reimbursable expenses payable to CA under the Advisory
Agreement in respect of periods up to the Effective Time.
SECTION 7.08 Intellectual Property Rights. Prior to the Effective Time, CA
and CFG shall use all reasonable efforts to cooperate with the Company in
obtaining all assignments or other consents necessary with respect to
Intellectual Property, to the extent not already owned by CFG or CA, including
all interests that may hereafter become Intellectual Property prior to the
Effective Time.
SECTION 7.09 Tax Matters.
(a) Each of the Company, CFG, and CA agrees to report the Mergers on all
Tax Returns and, if applicable, other filings as a reorganization under Section
368(a) of the Code to the extent permitted by law.
(b) The Company shall prepare at its sole cost and expense, any federal,
state, and local Tax Returns required to be filed with respect to any short
taxable year of CFG or CA ending as of the Effective Time.
(c) If the IRS or any other taxing authority initiates an audit or
examination of any Tax Return of CFG or CA or any consolidated or combined group
of which such entity was a member or required to be included as a member (a "Tax
Matter"), CFG, as the case may be, shall:
(i) promptly, but not less frequently than quarterly, provide the
Company and the Special Committee with a summary of each issue raised in
each unresolved Tax Matter;
(ii) as requested by the Company or the Special Committee, provide
additional information sufficient to inform the Company and the Special
Committee as to the nature of each such issue, and to permit the Company
and the Special Committee to exercise its rights described in this Section
7.09(c);
(iii) keep the Company and the Special Committee regularly and
promptly advised of the course of each such issue that has been reasonably
determined by the Company or the Special Committee to be a Company Tax
Issue (as hereinafter defined) pursuant to the procedure described in this
Section 7.09(c);
(iv) provide the Company and the Special Committee (not later than 10
Business Days prior to the anticipated date of delivery or filing, or
promptly after receipt as applicable) with a copy of all pleadings or other
documents to be delivered to, received from, or filed with, any court or
other tribunal, the IRS or other taxing authority with respect to (A) any
Company Tax Issue, and (B) any Tax Matter which had not previously been
summarized for the Company and the Special Committee or with respect to
which the Company and the Special Committee had requested and not received
additional information (excluding from clause (B) documents or pleadings
not filed by or on behalf of CFG or CA or any consolidated or combined
group of which such entity is a member);
(v) cooperate with the Company and the Special Committee and its
counsel, accountants and other representatives in connection with each such
the Company Tax Issue;
(vi) in connection with each such CFG Tax Issue or CA Tax Issue, not
submit to the IRS, any taxing authority or any court or other tribunal any
pleading or other document without the written consent of the Company and
the Special Committee; provided, however, that the Company and the Special
Committee (A) shall be deemed to so consent if it has not communicated
written notice of its non-consent to CFG or CA, as the case may be, before
the close of business on the 10th Business Day following its receipt of
such pleading or other document, and (B) shall so consent unless it
reasonably determines that any position taken in such pleading or other
document, if accepted, could jeopardize the Company's status as a real
estate investment trust under the Code unless the parties agree that as
part of the transactions contemplated hereby the Company shall cease to be
a real estate investment trust. The determination of the Company or the
Special Committee that a position taken in a pleading or other document
could jeopardize its status as a real estate investment trust shall be
deemed reasonable for this purpose if such determination is based on the
advice of its counsel or accountants, which advice shall be presented to
CFG or CA in writing within five Business Days after the Company or Special
Committee communicates its notice of non-consent to CFG or CA (or such
earlier time not sooner than the second
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Business Day thereafter as CFG or CA shall reasonably determine to be
necessary) unless CFG or CA agrees to waive its right to receive such
advice in writing, to the effect that the position taken, if accepted,
would give the IRS a reasonable basis for asserting that the Company failed
to continue to qualify as a real estate investment trust under the Code as
a consequence of its acquisition of CFG or CA; and
(vii) not settle, compromise or consent to the entry of any order,
decree or judgment with respect to any CFG Tax Issue or CA Tax Issue or
fail to pursue an available appeal of any such CFG Tax Issue or CA Tax
Issue (a "Resolution") without the written consent of the Company or the
Special Committee; provided, however, that the Company and the Special
Committee (A) shall be deemed to so consent if it has not communicated
written notice of its non-consent to CA before the close of business on the
10th Business Day following its receipt of notice of such proposed
settlement, compromise or consent, and (B) shall so consent unless it
reasonably determines that such Resolution would jeopardize the Company's
status as a real estate investment trust under the Code unless the parties
agree that as part of the transactions contemplated hereby the Company
shall cease to be a real estate investment trust. The determination of the
Company or the Special Committee that a Resolution would jeopardize its
status as a real estate investment trust shall be deemed reasonable for
this purpose if such determination is based on the advice of its counsel or
accountants, which advice shall be delivered to CFG or CA in writing within
five Business Days after the Company of the Special Committee communicates
its notice of non-consent to CFG or CA (or such earlier time not sooner
than the second Business Day thereafter as CA shall reasonably determine to
be necessary) unless CFG or CA agrees to waive its right to receive such
advice in writing, to the effect that the Resolution would give the IRS a
reasonable basis for asserting that the Company failed to continue to
qualify as a real estate investment trust under the Code as a consequence
of its acquisition of CFG or CA.
(viii) An issue raised in a Tax Matter shall be identified as a "CFG
Tax Issue" or a "CA Tax Issue" if the Company or the Special Committee
communicates written notice to CFG or CA, as the case may be, that it has
determined, with respect to a particular issue, that it is possible that
the resolution of such issue could jeopardize its status as a real estate
investment trust under the Code unless the parties agree that as part of
the transactions contemplated hereby the Company shall cease to be a real
estate investment trust. The determination of the Company or the Special
Committee that a possible resolution of a Tax Matter could jeopardize its
status as a real estate investment trust shall be deemed reasonable for
this purpose if such determination is based on the advice of its counsel or
accountants, which advice shall be delivered to CFG or CA in writing within
five Business Days after the Company or the Special Committee communicates
its determination to CFG or CA (or such earlier time not sooner than the
second Business Day thereafter as CFG or CA shall reasonably determine to
be necessary) unless CFG or CA agrees to waive its right to see such advice
in writing, to the effect that a possible Resolution would give the IRS a
reasonable basis for asserting that the Company failed to continue to
qualify as a real estate investment trust under the Code as a consequence
of its acquisition of CFG and CA. In any such CFG Tax Issue or CA Tax
Issue, the Company or the Special Committee may at its expense engage
counsel, accountants, or other representatives. Any CFG or CA tax or
financial information revealed to the Company, the Special Committee, its
employees or any of its representatives in connection with matters
described in this Section 7.09(c) shall be treated as strictly confidential
by the Company, the Special Committee, its employees and such
representatives.
(d) After the Effective Time, the Company shall make available to CFG and
CA and their respective shareholders, as reasonably requested, all information,
records or documents relating to tax liabilities or potential tax liabilities of
CFG and CA as the case may be and shall preserve all such information, records
and documents until the expiration of any applicable statute of limitations or
extensions thereof.
SECTION 7.10 Reorganization. From and after the date hereof and prior to
the Effective Time, except for the transactions contemplated or permitted
herein, none of the Company, Acquisition, CFG or CA shall take any action that
would be inconsistent with the representations and warranties made by it herein,
including, but not limited to, taking any action, or failing to take any action,
that is known to cause disqualification of the Mergers as a reorganization
within the meaning of Section 368(a) of the Code. Furthermore, from and after
the date hereof and prior to the Effective Time, except for the transactions
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contemplated or permitted herein or as otherwise mutually agreed by the Company,
CFG and CA, each of the Company, CFG and CA shall use reasonable efforts to
conduct its business and file Tax Returns in a manner that would not jeopardize
the qualification of the Company after the Effective Time as a real estate
investment trust as defined within Section 856 of the Code.
SECTION 7.11 Further Actions; Cooperation. Subject to the terms and
conditions provided in this Agreement, each party shall use reasonable
commercial efforts to take promptly, or cause to be taken, all actions, and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and to remove
any injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement and to cooperate with the other parties hereto; provided,
however, that notwithstanding anything to the contrary in this Agreement, no
party nor any of its Affiliates shall be required to make any disposition of, or
enter into any agreement to hold separate, any asset or business and no party
hereto nor any of their Affiliates shall be required to make any payment of
money nor shall any party or its Affiliates be required to comply with any
condition or undertaking or take any action which, individually or in the
aggregate, would materially adversely affect the economic benefits to such party
of the transactions contemplated hereby, taken as a whole, or materially
adversely affect any other business of such party.
SECTION 7.12 Notice of Certain Events. Each party hereto shall promptly
notify the other party of: (i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; (ii) any notice or other
communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement; (iii) any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge, threatened
against, relating to, or involving or otherwise affecting, such party which, if
pending on the date of this Agreement, would have been required to have been
disclosed or which relate to the consummation of the transactions contemplated
by this Agreement, and (iv) any event or matter known to or directly involving
such party that would result in a breach of this Agreement, is reasonably likely
to result in a Material Adverse Effect on such party or impair the ability of
such party to consummate the transactions contemplated hereby.
SECTION 7.13 Certain Actions.
(a) Neither CFG nor CA (i) shall solicit, initiate, participate in
discussions of, or encourage or take any other action to facilitate (including
by way of the disclosing or furnishing of any information that it is not legally
obligated to disclose or furnish) any inquiry or the making of any proposal
relating to any Acquisition Proposal (as hereinafter defined) with respect to
itself or (ii) shall (A) solicit, initiate, participate in discussions of, or
encourage or take any other action to facilitate any inquiry or proposal, or (B)
enter into any agreement, arrangement, or understanding (whether written or
oral) regarding any proposal or transaction providing for or requiring it to
abandon, terminate or fail to consummate this Agreement, or compensating it
under any of the instances described in this clause. CFG and CA shall
immediately instruct and otherwise use its reasonable best efforts to cause its
directors, officers, employees, agents, advisors (including, without limitation,
any investment banker, attorney, or accountant retained by it), consultants and
other representatives to comply with such prohibitions. CFG and CA shall
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any parties conducted heretofore with respect
to such activities. CFG and CA shall promptly notify the Company orally and in
writing in the event it receives any such inquiry or proposal and shall provide
reasonable detail of all relevant facts relating to such inquiries.
(b) "Acquisition Proposal" shall, with respect to CFG and CA, mean any of
the following (other than the Mergers): (i) a merger or consolidation, or any
similar transaction of any entity with either CFG or CA or any Subsidiary of CFG
or CA or party that owns the capital stock of CFG or CA, (ii) a purchase, lease
or other acquisition of a material portion of all the assets of either CFG or CA
or any Subsidiary of CFG or CA, (iii) a purchase or other acquisition of
"beneficial ownership" by any "person" or "group" (as such terms are defined in
Section 13(d)(3) of the Exchange Act) (including by way of merger,
consolidation, share exchange, or otherwise) which would cause such person or
group to become the beneficial owner of any
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securities of either CFG or CA or any Subsidiary of CFG or CA, (iv) the filing
of an application or notice with any federal or state regulatory authority
(which application has been accepted for processing) seeking approval to engage
in one or more of the transactions referenced in clauses (i) through (iv) above.
SECTION 7.14 Current Information. During the period from the date of this
Agreement to the Effective Time, each party shall promptly furnish the other
parties hereto with copies of all monthly and other interim financial statements
produced in the ordinary course of business as the same become available and
shall cause one or more of its designated representatives to confer on a regular
and frequent basis with representatives of the other party.
SECTION 7.15 Reservation of Shares to Satisfy Contingent Payment
Obligation. The Company shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Company Common Stock as may be
required to be issued pursuant to the terms of Section 4.06.
SECTION 7.16 Indemnification and Insurance. From and after the Effective
Time, the Company shall at its cost and expense cause the individuals serving as
officers and directors of CFG and CA immediately prior to the Effective Time to
be covered for a period for two (2) years from the Effective Time by directors'
and officers' liability insurance policies maintained by CFG and CA, as
applicable, prior to the Effective Time (provided that the Company may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are not less advantageous than either of
such policies) with respect to acts or omissions occurring prior to the
Effective Time that may have been committed by such officers and directors in
their capacity as such; provided, however, that in no event shall the Company be
required to expend more than 150% of the current amount expended by CFG and CA
(the "Insurance Amount") to maintain or procure insurance coverage pursuant
hereto; and provided, further that if the Company is unable to maintain or
obtain the insurance called for in this Section 7.16, the Company shall use its
reasonable best efforts to obtain as much comparable insurance as available for
the Insurance Amount.)
SECTION 7.17 Certain Employment Matters. Until such time as the Company
enters into new employment agreements with the key employees of CFG, if ever,
such key employees shall continue to receive compensation from CFG in a manner
consistent with past practice, irrespective of any covenants or agreements to
the contrary contained in any existing agreements or commitments between such
key employees and the Company.
SECTION 7.18 Disclosure Schedule. Notwithstanding any provision in this
Agreement to the contrary, the Disclosure Schedule and the signatures of the
individual shareholders of both CFG and CA listed on the signature pages hereto
not otherwise provided on the date hereof shall be delivered by CFG and CA to
the Company not later than ten (10) Business Days following the date of
execution of this Agreement. Upon delivery, the Disclosure Schedule and such
signatures shall be deemed for all purposes under this Agreement to have been
delivered effective as of the date of this Agreement. The Company shall have
seven (7) Business Days following the date of delivery of the Disclosure
Schedule to review the Disclosure Schedule. If, CFG or CA do not provide the
Disclosure Schedule or such signatures as provided herein, or if, prior to 5:00
p.m. on the seventh Business Day following the date of delivery of the
Disclosure Schedule, the Company determines, in its sole and absolute
discretion, that it wishes to terminate this Agreement it shall be entitled to
do so in accordance with the terms and provisions of Section 10.01. If the
Company fails to terminate this Agreement by 5:00 p.m. on the seventh Business
Day following the date of delivery of the Disclosure Schedule then the Company
shall be deemed to have irrevocably waived such right of termination referred to
herein.
SECTION 7.19 Tax Certificates. The parties agree that, prior to the
Effective Time, they shall exchange such certificates or other documentation
with regard to certain tax matters related to the CFG Merger and the CA Merger
as shall be mutually agreed to by the parties.
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ARTICLE VIII
CONDITIONS TO THE MERGERS
SECTION 8.01 Conditions to Each Party's Obligations. The performance of
the obligations of each of the Company and Acquisition and CFG and CA to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Effective Time of each of the following
conditions, which conditions may be waived only with the consent of both (x) the
Company and Acquisition, and (y) CFG and CA:
(a) Effectiveness of Proxy Statement. The Proxy Statement shall have
been declared effective by the SEC under the Exchange Act, and no stop
order suspending the effectiveness of the Proxy Statement shall have been
issued by the SEC and no proceedings with respect thereto shall have been
initiated or threatened by the SEC.
(b) Company Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved by the requisite holders
of Common Stock of the Company in accordance with applicable provisions of
the DGCL and the Company's Certificate of Incorporation and Bylaws;
provided, however, that the shares of Company Common Stock beneficially
owned by any officer, director, or Affiliate of the Company who or that is
also an officer, director or Affiliate of either CFG or CA shall not be
counted for purposes of determining whether the requisite holders shall
have approved this Agreement and the transactions contemplated hereby.
(c) Governmental Filings and Consents. Except for the filing of the
Certificates of Merger, all governmental filings required to be made prior
to the Effective Time by the Company, Acquisition, CFG, and/or CA with, and
all governmental consents required to be obtained prior to the Effective
Time by the Company, Acquisition, CFG, and/or CA from, Governmental
Authorities in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby shall have
been made or obtained, except where the failure to make such filing or
obtain such consent would not reasonably be expected to have a Material
Adverse Effect on the Company, Acquisition, CFG, and/or CA or the ability
of such parties to consummate the transactions contemplated hereby, and any
waiting periods or extensions thereof under the HSR Act shall have expired
or been terminated.
(d) Third-Party Consents. All required authorizations, consents and
approvals of any third party (other than a Governmental Authority), the
failure of which (either individually or in the aggregate) to obtain would
have Material Adverse Effect on the Company, Acquisition, CFG, and/or CA or
the ability of such party to consummate the transactions contemplated
hereby, shall have been obtained.
(e) No Injunction or Proceedings. There shall not be in effect any
judgment, writ, order (including any temporary restraining order),
injunction or decree (collectively, an "Order") of any court or
Governmental Authority of competent jurisdiction restraining, enjoining or
otherwise preventing consummation of the transactions contemplated by this
Agreement or permitting such consummation only subject to a condition or
restriction unacceptable to either of (x) the Company, or (y) CFG and CA,
each in its reasonable judgment, nor shall there be pending or threatened
by any Governmental Authority any suit, action or proceeding seeking to
restrain or restrict the consummation of the transactions contemplated
hereby or seeking damages in connection therewith, which, in the reasonable
judgment of either (x) the Company, or (y) CFG or CA, could have (i) a
Material Adverse Effect on (x) the Company or Acquisition, or (y) CFG or CA
after the Effective Time, or (ii) a material adverse effect on the ability
of (x) the Company or Acquisition, or (y) CFG or CA to perform their
respective obligations under this Agreement, nor shall there be pending any
cause of action or other proceeding commenced by a Governmental Authority
of competent jurisdiction seeking the imposition of an Order.
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SECTION 8.02 Additional Conditions to Obligation of the Company and
Acquisition.
The performance of the obligations of each of the Company and Acquisition
hereunder is subject to the fulfillment at or prior to the Effective Time of the
following conditions (all or any of which may be waived in whole or in part by
the Company and Acquisition acting by unanimous written consent):
(a) Representations and Warranties. Each of the representations and
warranties of each of CFG or CA made in this Agreement which are not, by
their terms, qualified by a materiality standard, shall have been true and
correct in all material respects as of the date hereof and shall be true
and correct in all material respects on and as of the Effective Time as
though made on and as of the Effective Time (and the representations and
warranties of each of CFG and CA contained in this Agreement which are, by
their terms, qualified by a materiality standard, shall have been true and
correct on the date hereof and shall be true and correct on and as of the
Effective Time as though made on and as of the Effective Time), except for
representations and warranties specifically relating to a time or times
other than the date hereof or thereof, which shall be true and correct in
all material respects (to the extent they are not, by their terms,
qualified by a materiality standard, and shall be true and correct to the
extent they are so qualified) at such specified time or times, and except
for changes thereto permitted or contemplated by this Agreement.
(b) Compliance with Covenants and Agreements. Each of CFG and CA
shall have performed and complied in all material respects with all terms,
covenants, agreements, undertakings, acts, conditions and obligations
required by this Agreement to be performed or complied with by them prior
to or at the Effective Time.
(c) Officer's Certificate. The Company shall have received a
certificate from each of CFG and CA, dated as of the Effective Time,
executed by the President or any Senior Vice President of each of CFG and
CA, certifying that (i) the board of directors thereof has duly adopted
resolutions, copies of which shall be attached to such certificate,
authorizing and approving the transactions contemplated hereby (A)
approving the terms of this Agreement and any agreement to be delivered in
accordance with this Agreement and authorizing the consummation of the
transactions contemplated hereby and thereby, and (B) authorizing an
officer thereof to execute and deliver this Agreement and all ancillary
documents, (ii) all of such resolutions are in full force and effect, and
(iii) none of such resolutions has been amended or modified. The Company
shall also have received a certificate from such officer of each of CFG and
CA certifying that the representations and warranties of such party
contained in this Agreement that are not, by their terms, qualified by a
materiality standard, were true and correct in all material respects when
made and are true and correct in all material respects on and as of the
Effective Time as though made on and as of the Effective Time (and that the
representations and warranties of such party contained in this Agreement
that are, by their terms, qualified by a materiality standard, were true
and correct when made and are true and correct on and as of the Effective
Time as though made on and as of the Effective Time), except to the extent
they relate to a particular date and except for changes permitted or
contemplated by this Agreement, and that such party has complied with or
performed in all material respects all terms, covenants, agreements,
undertakings, acts, conditions and obligations to be complied with or
performed by it on or prior to the Effective Time.
(d) Incumbency Certificate. The Company shall have received a
certificate from each of CFG and CA, signed by its Secretary or Assistant
Secretary and dated the Effective Time, certifying as to the person
executing this Agreement on behalf of such party that (i) such person is an
officer thereof holding the office or offices specified therein, and (ii)
the signature of each such person set forth on such certificate is his or
her genuine signature.
(e) Material Adverse Change. No event, change or development shall
exist or have occurred since March 31, 1999 with regard to CFG or CA,
including the filing of any action, claim, suit, cause of action, or
litigation commenced by any third party against either of CFG or CA, that
has had or reasonably could be expected to have a Material Adverse Effect
on CFG or CA or on the Company or Acquisition assuming the transactions
contemplated hereby were consummated, or on the ability of (x) the Company
or Acquisition, or (y) CFG or CA to consummate the transactions
contemplated hereby.
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(f) Approvals; Fairness Opinion.
(i) The Board of Directors of the Company, at a meeting duly called
and held, shall have (A) determined that this Agreement, the Mergers and
the transactions contemplated hereby are fair to, and in the best
interest of the Company and its shareholders, and (B) approved this
Agreement, the Mergers, and the transactions contemplated hereby and
thereby and such action shall not have been withdrawn, modified, or
revoked in any manner.
(ii) The Board of Directors of the Company shall have received an
opinion from Bradford to the effect that the consideration to be paid by
the Company to the shareholders of CFG and CA in the Mergers is fair,
from a financial point of view, and such opinion shall not have been
withdrawn, modified or revoked in any manner.
(g) Disclosure Schedules; Other Signatures. CFG and CA shall have
delivered the Disclosure Schedule and signatures referenced in Section
7.18.
SECTION 8.03 Additional Conditions to Obligation of CFG and CA. The
performance of the obligations of each of CFG and CA hereunder is subject to the
fulfillment at or prior to the Effective Time, of each of the following
conditions (all or any of which may be waived in whole or in part by CFG and CA
acting by unanimous consent):
(a) Representations and Warranties. Each of the representations and
warranties of the Company and Acquisition made in this Agreement which are
not, by their terms, qualified by a materiality standard, shall have been
true and correct in all material respects as of the date hereof and shall
be true and correct in all material respects on and as of the Effective
Time as though made on and as of the Effective Time (and the
representations and warranties of each of the Company and Acquisition
contained in this Agreement which are, by their terms, qualified by a
materiality standard, shall have been true and correct on the date hereof
and shall be true and correct on and as of the Effective Time as though
made on and as of the Effective Time), except for representations and
warranties specifically relating to a time or times other than the date
hereof or thereof, which shall be true and correct in all material respects
(to the extent they are not, by their terms, qualified by a materiality
standard, and shall be true and correct to the extent they are so
qualified) at such specified time or times, and except for changes thereto
permitted or contemplated by this Agreement.
(b) Compliance with Covenants and Agreements. The Company and
Acquisition shall have performed and complied in all material respects with
all terms, covenants, agreements, undertakings, acts, conditions and
obligations required by this Agreement to be performed or complied with by
them prior to or at the Effective Time.
(c) Officer's Certificate. Each of CFG and CA shall have received a
certificate from each of the Company and Acquisition, dated as of the
Effective Time, executed by the President or any Vice-President of the
Company and Acquisition, certifying that: (i) the board of directors
thereof has duly adopted resolutions, copies of which shall be attached to
such certificate, (A) approving the terms of this Agreement and any
agreement to be delivered in accordance with this Agreement and authorizing
the consummation of the transactions contemplated hereby and thereby, and
(B) authorizing an officer thereof to execute and deliver this Agreement
and all necessary ancillary documents, (ii) all of such resolutions are in
full force and effect, and (iii) none of such resolutions has been amended
or modified. Each of CFG and CA shall also have received a certificate from
such person certifying that the representations and warranties of the
Company and Acquisition contained in this Agreement that are not, by their
terms, qualified by a materiality standard, were true and correct in all
material respects when made and are true and correct in all material
respects on and as of the Effective Time as though made on and as of the
Effective Time (and that the representations and warranties of such party
contained in this Agreement that are, by their terms, qualified by a
materiality standard, were true and correct when made and are true and
correct on and as of the Effective Time as though made on and as of the
Effective Time), except to the extent they relate to a particular date and
except for changes permitted or contemplated by this Agreement, and that
the Company and Acquisition has complied with or performed
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in all material respects all terms, covenants, agreements, undertakings,
acts, conditions and obligations to be complied with or performed by it on
or prior to the Effective Time.
(d) Incumbency Certificate. Each of CFG and CA shall have received a
certificate from each of the Company and Acquisition, signed by its
Secretary or Assistant Secretary and dated as of the Effective Time,
certifying as to the person executing this Agreement on behalf of such
party that (i) such person is an officer thereof holding the office or
offices specified therein, and (ii) the signature of each such person set
forth on such certificate is his or her genuine signature.
(e) Registration Rights Agreement. The CFG Preferred Shareholders and
the Company shall have executed and delivered the Registration Rights
Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01 CFG and CA Indemnities to the Company. Subject to Section
9.03 and Section 9.06 hereof, from and after the Effective Time, the CFG Common
Shareholders, the Option Holders and the Individual Warrant Holders with respect
to CFG, and the CA Shareholders with respect to CA shall, severally but not
jointly, based on the percentage interests represented in Schedule 9.01
indemnify, defend and hold harmless the Company, its officers, directors,
Affiliates and their respective successors and permitted assigns (collectively,
the "Company Indemnitees"), from and against any and all demands, claims,
actions, losses, damages, liabilities, and expenses (including reasonable
attorneys' fees and disbursements related thereto) (collectively, "Company
Losses"), based upon, arising out of or otherwise resulting from:
(a) any material inaccuracy in any representation or any material
breach of any warranty by CFG or CA, as the case may be, in this Agreement
or in any agreement or instrument delivered in connection herewith; and
(b) any nonfulfillment of any material covenant or agreement of CFG or
CA, as the case may be, contained in this Agreement or in any agreement
delivered in connection herewith by CFG or CA; provided, however, that, in
order to qualify to receive indemnification under this Agreement, (x) any
claim for indemnification under clause (a) and (b) of this Section 9.01
shall be made no later than the date that is the earlier of (i) 15 months
following the date of the Effective Time, or (ii) 20 Business Days
following the date of delivery to the Company of its audited financial
statements with respect to the fiscal year ended December 31, 2000, and (y)
any claim for indemnification with respect to Section 5.13 shall be made no
later than the date that is three (3) months after the expiration date of
the longest statute of limitations applicable to any such Taxes. For
purposes of this Article IX, all representations and warranties of CFG and
CA shall be deemed to have been made at the dates on which they are
required to be true and correct in all material respects for the purposes
of Section 8.02.
SECTION 9.02 Company's Indemnities to CFG and CA. Subject to Section 9.03
hereof and Section 9.06 hereof, from and after the Effective Time, the Company
shall indemnify, defend and hold harmless the CFG Shareholders, the Option
Holders, the Individual Warrant Holders and the CA Shareholders and their
respective officers, directors, Affiliates, successors and permitted assigns, if
any ("Seller Indemnitees"), from and against any and all demands, claims,
actions, losses, damages, liabilities, and expenses (including reasonable
attorneys' fees and disbursements related thereto) (collectively, "Seller
Losses"), based upon, arising out of or otherwise resulting from:
(a) any material inaccuracy in any representation or any material
breach of any warranty by the Company or Acquisition in this Agreement or
in any agreement delivered in connection herewith; and
(b) any nonfulfillment of any material covenant or agreement of the
Company or Acquisition contained in this Agreement or in any agreement
delivered in connection herewith by the Company or Acquisition; provided,
however, that, in order to qualify to receive indemnification under this
Agreement, any claim for indemnification under clause (a) and (b) of this
Section 9.02 shall be made no later than the date that is the earlier of
(i) 15 months following the date of the Effective Time, or (ii) 20 Business
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Days following the date of delivery to the Company of its audited financial
statements with respect to the fiscal year ended December 31, 2000. For the
purposes of this Section 9.02, all representations and warranties of the
Company shall be deemed to have been made at the dates on which they are
required to be true and correct in all material respects for the purposes
of Section 8.03.
SECTION 9.03 Notice and Opportunity to Defend. Promptly after receipt by
any of CFG, CA, or the CFG Shareholders, Option Holders or Individual Warrant
Holders or the CA Shareholders on the one hand or the Company on the other hand
(in any case, the "Indemnitee") of the commencement of, or notice of any demand,
claim or circumstance that, with the lapse of time, would give rise to a claim
or the commencement (or threatened commencement) of, any action, proceeding,
litigation, or investigation against it by a third party (an "Asserted
Liability") that may give rise to any indemnification obligation under Section
9.01 or 9.02, the Indemnitee shall promptly give written notice thereof to the
Company, CFG or CA, or the CFG Shareholders Option Holders or Individual Warrant
Holders or the CA Shareholders, as the case may be (the "Indemnifying Party"),
describing the Asserted Liability in reasonable detail and indicating the amount
(estimated, if necessary) for which the Indemnitee may be liable. Failure to
give timely notice under this Section 9.03 shall not preclude the Indemnitee
from receiving indemnification from the Indemnifying Party unless the
Indemnitee's failure has materially prejudiced the Indemnifying Party's ability
to defend against the Asserted Liability.
(a) Opportunity to Defend. The Indemnifying Party shall have fifteen
(15) days (or earlier if required to avoid a default judgment) after
receipt of the aforementioned notice to undertake to settle or defend, at
its own expense and by counsel of its own choosing, which counsel shall be
reasonably satisfactory to the Indemnitee, such Asserted Liability. If the
Indemnifying Party so elects to settle or defend such Asserted Liability,
it shall promptly notify the Indemnitee of its intent to do so. So long as
the Indemnifying Party is reasonably contesting such Asserted Liability in
good faith, the Indemnitee may not settle or pay such Asserted Liability.
After notice from the Indemnifying Party to the Indemnitee of its election
to assume the defense of such claim or action, the Indemnifying Party will
not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense
thereof; provided, however, that the Indemnitee may participate, at its
sole expense, in the settlement of, or defense against, such Asserted
Liability provided that the Indemnifying Party in all such instances shall
be responsible for directing and controlling the settlement of, or defense
against, such action. If the Indemnifying Party elects not to undertake to
settle or defend against the Asserted Liability, fails to notify the
Indemnitee of its election as herein provided, or does not accept its
obligation to indemnify under this Agreement, the Indemnitee may settle,
compromise or defend such Asserted Liability in the exercise of its
exclusive discretion at the expense of the Indemnifying Party and the
Indemnifying Party shall promptly reimburse the Indemnitee for the amount
of all costs and expenses incurred by the Indemnitee in connection with the
settlement of or defense against the Asserted Liability to the extent
provided in Section 9.01 or 9.02, as the case may be. If no settlement of
the Asserted Liability is entered into, the Indemnifying Party shall
promptly reimburse the Indemnitee for the amount of any judgment rendered
with respect to such Asserted Liability and all related and bona fide
expenses incurred by the Indemnitee in defense against such action to the
extent recoverable under Section 9.01 or 9.02, as the case may be.
(b) Other Matters. Neither the Indemnifying Party nor the Indemnitee
shall, in the defense of any Asserted Liability, consent to entry of any
judgment or enter into any settlement agreement, except with the written
consent of the other party, which does not include as an unconditional term
thereof the giving by the claimant or the plaintiff to both the Indemnitee
and the Indemnifying Party of a release from all liability in respect of
such Asserted Liability. The Indemnifying Party and the Indemnitee shall
each use all commercially reasonable efforts to cooperate with each other
in connection with the settlement of, or the defense against, any Asserted
Liability and make available to the other all books, records and other
documents within its control that are reasonably necessary or appropriate
for such defense. Notwithstanding anything contained in this Agreement, the
Indemnitee shall have the right to pay or settle at any time any Asserted
Liability, provided that (as a result thereof, and except where the
Indemnifying Party elects not to undertake to settle or defend against the
Asserted Liability, fails to notify the Indemnitee of its
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election, or does not accept its obligation to indemnify under this
Agreement), the Indemnitee shall also be deemed to have waived any right to
indemnification therefor by the Indemnifying Party.
SECTION 9.04 Survival of Representations and Warranties. The
representations and warranties of the parties contained herein or in any
certificate or other document or instrument delivered pursuant hereto or in
connection herewith shall not survive the Closing, but any claim with respect
thereto shall survive for the periods specified in the provisos contained in
Sections 9.01(b) and 9.02(b) respectively. The covenants and agreements set
forth in this Agreement shall not survive the Closing except in such cases where
such covenants and agreements by their terms contemplate performance after the
Effective Time. Notwithstanding the preceding sentences, any covenant,
agreement, representation or warranty in respect of which indemnity may be
sought shall survive the time at which it would otherwise terminate pursuant to
the preceding provisions of this Section 9.04, if written notice of the
inaccuracy or breach thereof shall have been given to the party against whom
such indemnity may be sought prior to the expiration of such time period. If any
Governmental Authority asserts a deficiency with respect to a Tax matter which,
if accurate or conceded, could result in a claim for which indemnity could be
sought pursuant to Section 5.13, the Company shall be permitted to give notice
of the breach of a representation, warranty, covenant, or agreement of CFG or
CA, as the case may be, and specify Company Losses in the amount so asserted
(including applicable interest and penalties), notwithstanding Company's intent
to dispute such claims. The amount of the claim shall be deemed to be the amount
of the settlement or adjudicated damages.
SECTION 9.05 Right of Set-off. The parties acknowledge and agree that,
subject to the limitations set forth in Section 9.06, in the event the Company
has made a claim for indemnification hereunder, which claim is determined to be
recoverable, the Company's right to any such indemnification shall include the
right to set-off such amount against any unissued Earnout Shares the Company may
be obligated to issue to the CFG Common Shareholders, the Option Holders, and
the Warrant Holders under Section 4.06 hereof. In the event the Company
exercises its right of set-off provided for in this Section 9.05, the number of
shares of Company Common Stock (rounded up to the next highest whole number)
equaling the aggregate dollar amount of any indemnification to be provided to
the Company hereunder (based on the average sale price of the Company Common
Stock for the 20 Business Days immediately preceding the date of such set-off
using for each such Business Day the last reported sales price of the Company
Common Stock on the NASDAQ National Market System) shall be subtracted from the
aggregate number of shares of the Company Common Stock that otherwise would be
issuable pursuant to the terms of Section 4.06.
SECTION 9.06 Limitations on Indemnification.
(a) Indemnification pursuant to the terms of Section 9.01 and 9.02 shall be
the sole and exclusive remedy of the Company Indemnitees and the Seller
Indemnitees under this Agreement; provided, however, that nothing in this
Agreement will limit the availability of specific performance or other equitable
remedies to any party hereto.
(b) The amount of any Company Losses or Seller Losses as to which Company
Indemnitees or Seller Indemnitees may seek indemnification hereunder shall be
reduced by proceeds from any insurance policies maintained by the Company
Indemnitees or the Seller Indemnitees and actually received by such party to the
extent that such proceeds are attributable to the act, event, state of facts,
condition or circumstance giving rise to such party's right to such
indemnification hereunder.
(c) The CFG Common Shareholders, the Option Holders, the Individual Warrant
Holders and the CA Common Shareholders shall not have any liability to the
Company Indemnitees, and the Company shall not have any liability to the Seller
Indemnitees, unless and until the aggregate of all Company Losses and Seller
Losses, as the case may be, exceeds the sum of $500,000, in which event any
amounts in excess of such $500,000 shall be recoverable.
(d) Any indemnification obligation of the CFG Common Shareholders, the
Option Holders, the Individual Warrant Holders, and the CA Common Shareholders
may be satisfied in cash or with shares of Company Common Stock; provided that
at the time of any such election by the CFG Common Shareholders, the Option
Holders, the Individual Warrant Holders, and/or the CA Common Shareholders, the
Company
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shall have received the favorable opinion of its legal counsel that the Company
meets all statutory and other legal requirements to accept shares of the Company
Common Stock from the CFG Common Shareholders, the Option Holders, the
Individual Warrant Holders, and/or the CA Common Shareholders in satisfaction of
any such indemnification obligation. In the event the CFG Common Shareholders,
the Option Holders, the Individual Warrant Holders, and/or the CA Common
Shareholders elect to satisfy such indemnification obligation with shares of
Company Common Stock, the per share dollar value of such stock to be applied
against such indemnification claim shall be as mutually agreed between the
CFG/CA Representative and the Company (acting through the Special Committee). In
the event such parties cannot reach mutual agreement with respect to such dollar
value within ten Business Days of such election, the CFG Common Shareholders,
the CA Common Shareholders, the Option Holders, the Individual Warrant Holders,
and/or the CA Common Shareholders shall be required to use cash to satisfy such
claim.
(e) (i) The maximum aggregate amount of Company Losses that the Company
Indemnitees may recover under this Agreement from the CFG Common Shareholders,
the Option Holders, and the Individual Warrant Holders shall equal the lesser of
(i) 70% of the fair market value (determined as of the Effective Time) of the
shares of Company Common Stock received by the CFG Shareholders, the Option
Holders, and the Warrant Holders on or immediately after the date of the
Effective Time pursuant to the transactions contemplated hereby, but
specifically excluding the Earnout Shares, and (ii) 70% of the fair market value
(determined as of the date of indemnification) of the shares of Company Common
Stock received by the CFG Shareholders, the Option Holders, and the Warrant
Holders on or immediately after the date of the Effective Time pursuant to the
transactions contemplated hereby, but specifically excluding any Earnout Shares.
(ii) The maximum aggregate amount of Company Losses that the Company
Indemnitees may recover under this Agreement from the CA Common Shareholders
shall be equal to the lesser of (i) 100% of the fair market value (determined as
of the Effective Time) of the shares of Company Common Stock received by the CA
Common Shareholders on or immediately after the date of the Effective Time
pursuant to the transactions contemplated hereby, and (ii) 100% of the fair
market value (determined on the date of indemnification) of the shares of
Company Common Stock received by the CA Common Shareholders on or immediately
after the date of the Effective Time pursuant to the transactions contemplated
hereby, but specifically excluding the Earnout Shares.
(iii) The maximum aggregate amount of Seller Losses that the Seller
Indemnitees may recover from the Company shall be $1 million.
ARTICLE X
TERMINATION
SECTION 10.01 Termination. This Agreement may be terminated and the
transactions contemplated in this Agreement may be abandoned at any time prior
to the Effective Time, whether before or after approval by the stockholders of
the Company of this Agreement, the Mergers, and the issuance of the Company
Common Stock in accordance with Article IV:
(a) by mutual written consent of the Company, Acquisition, CFG, and
CA;
(b) by either CFG and CA (acting by unanimous written consent) or the
Company and Acquisition (acting by unanimous written consent) if, on the
Effective Time, any condition precedent to the obligations of the
terminating party set forth in Section 8.02 in the case of the Company and
Acquisition and Section 8.03 in the case of CFG and CA shall not have been
satisfied (or waived by the terminating party); provided, however, that no
party shall have the right to terminate this Agreement pursuant to this
Section 10.01(b) if such party is then in breach of any material
representation or warranty contained herein or is in default in any
material respect in the observance or in the timely performance of any of
its covenants or agreements contained herein;
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(c) by either CFG and CA (acting by unanimous written consent) or the
Company and Acquisition (acting by unanimous written consent) if there
shall be in effect any permanent injunction or action by a court of
competent jurisdiction or other Governmental Authority preventing the
consummation of the Mergers that shall have become final and nonappealable;
(d) by either CFG and CA (acting by unanimous written consent) or the
Company and Acquisition (acting by unanimous written consent) if the
Effective Time shall not have occurred on or before March 30, 2000 (time is
of the essence with respect to such date); provided, however, that no party
shall have the right to terminate this Agreement pursuant to this Section
10.01(d) if such party is then in breach of any material representation or
warranty contained herein or is in default in any material respect in the
observance or in the timely performance of any of its covenants or
agreements contained herein
(e) by either the Company and Acquisition (acting by unanimous written
consent) or CFG and CA (acting by unanimous written consent) if this
Agreement and the Mergers shall fail to receive the requisite vote for
approval and adoption by the stockholders of the Company at the
Stockholders Meeting;
(f) by CFG and CA (acting by unanimous written consent) if the Board
of Directors of the Company shall withdraw, modify or change its
recommendation of this Agreement or the Mergers in a manner adverse to CFG
and CA or shall have resolved to do any of the foregoing;
(g) by the Company if (i) the Board of Directors or the shareholders
of CFG or CA shall withdraw, modify or change its approval or
recommendation of this Agreement or the Mergers in a manner adverse to the
Company or shall have resolved to do any of the foregoing, or any Person
shall have acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) other than
the current shareholders of CFG and CA shall have been formed which
beneficially owns, or has the right to acquire beneficial ownership of, any
of the outstanding shares of capital stock of CFG or CA; or
(h) by the Company in accordance with the terms of Section 7.18.
SECTION 10.02 Notice. If a party elects to terminate this Agreement
pursuant to an applicable provision of Section 10.01, such party shall give
written notice of its election to the other parties hereto at least two (2)
Business Days before such termination shall become effective.
SECTION 10.03 Effect of Termination. Upon termination of this Agreement
pursuant to Section 10.01, (a) if none of the Company, Acquisition, CFG, or CA
is in breach of any material provision of this Agreement, this Agreement shall
become void and no longer be of any force or effect and there shall be no
liability on the part of any party or its respective directors, officers or
stockholders to the other parties hereto, and (b) if any of the Company,
Acquisition, CFG, or CA is in breach of any material provision of this
Agreement, which breach has caused the terminating party to terminate this
Agreement, or to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement, the non-breaching party or parties
will have such rights and remedies as are available to such party at law or in
equity.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01 Expenses. Except as otherwise expressly provided herein,
whether or not the transactions contemplated hereby are consummated, each party
shall bear its own expenses, including the fees and expenses of any attorneys,
accountants, investment bankers, brokers, finders or other intermediaries or
Persons engaged by it incurred in connection with the preparation, negotiation
and execution of this Agreement and the transactions contemplated hereby and no
other party shall have any liability with respect thereto; provided, however,
that the Company shall bear all costs and expenses arising out of or incurred in
connection with the preparation, negotiation and execution of the Proxy
Statement and the Shareholders
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Meeting, including all printing, mailing, solicitation, legal, accounting and
other fees and expenses incurred with respect thereto.
SECTION 11.02 Notices, Etc. All notices, requests, demands or other
communications required by or otherwise permitted with respect to this Agreement
shall be in writing and shall be deemed to have been duly given to any party if
delivered by any of the following means of delivery, and shall be deemed to have
been duly delivered and received on the date (or the next Business Day if
delivery is not made on a Business Day) of personal delivery or facsimile
transmission or on the date (or the next Business Day if delivery is not made on
a Business Day) of receipt, if mailed by registered or certified mail, postage
prepaid and return receipt requested, or on the date (or the next Business Day
if delivery is not made on a Business Day) of a stamped receipt, if sent by
overnight delivery service, and to the following addresses (or to such other
address as any party may request, in the case of the Company notifying CFG or
CA, and in the case of CFG or CA notifying the Company.
If to the Company:
Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48160
Attention: W. Ross Martin
Facsimile: (734) 994-1376
with a copy to:
Brown & Wood LLP
1666 K Street, N.W.
Washington, DC 20006-4004
Attention: John K. Hughes
Facsimile: (202) 533-1399
and
Baker & Hostetler LLP
3200 National Center
1900 East 9th Street
Cleveland, Ohio 44114
Attention: Edward G. Ptaszek, Jr.
Facsimile: (216) 696-0740
If to CFG and/or CA:
Captec Financial Group, Inc.
24 Frank Lloyd Wright Drive
Ann Arbor, Michigan 48160
Attention: Gary A. Bruder
Facsimile: (734) 994-8355
with a copy to:
Shumaker Loop & Kendrick
1000 Jackson Street
Toledo, Ohio 43624
Attention: James F. White, Jr.
Facsimile: (419) 241-6894
SECTION 11.03 Binding Effect; No Assignment. This Agreement is binding
upon, shall inure to the benefit of, and be enforceable by, each of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights and/or obligations of any party hereunder may be
assigned or delegated to any Person without the prior written consent of the
other parties hereto.
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SECTION 11.04 Entire Agreement. Except as otherwise specifically provided
herein, this Agreement, including the Schedules contained in the Disclosure
Schedule and any other written agreements by the parties hereto that are
expressly contemplated hereby to be entered into, constitutes the entire
agreement and understanding among the parties with regard to the subject matter
hereof and supersedes all prior negotiations, agreements, arrangements, or
understandings, written or oral, relating to the matters provided for herein or
therein.
SECTION 11.05 Remedies Cumulative; Specific Performance. Except as
expressly provided herein, all rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not exclusive, and the exercise or commencement of the exercise
of any such remedies by any party hereunder shall not preclude the simultaneous
or subsequent exercise of any other such right, power or remedy by such party.
The parties acknowledge that money damages would not be adequate remedy for
violations of this Agreement and any party may, in its sole discretion, apply to
a court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper to enforce this Agreement or
to prevent any violation hereof.
SECTION 11.06 Waiver. Any party to this Agreement may extend the time for
the performance of any of the obligations or other acts of any other party
hereto, or waive compliance with any of the agreements of any other party or
with any condition to the obligations hereunder, in any case only to the extent
that such obligations, agreements and conditions are intended for its benefit.
The failure of any party hereto to exercise any right, power or remedy provided
under this Agreement or otherwise available in respect hereof at law or in
equity or to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom, practice, or course of dealing with the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right at any time to exercise any such or other right, power or
remedy or to demand such compliance.
SECTION 11.07 No Third-Party Beneficiaries. Except as expressly provided
in this Agreement, nothing contained herein is intended to or shall confer on
any Person other than the parties hereto and their successors and permitted
assigns any rights, benefits, remedies, or claims under or by reason of this
Agreement.
SECTION 11.08 Governing Law. This Agreement and all disputes hereunder
shall be governed by, and interpreted and construed in accordance with, the
internal laws of the State of Delaware without regard to principles of conflict
of laws.
SECTION 11.09 Section Headings; Interpretation. Reference in this
Agreement to a Section, Article, or Schedule, unless otherwise indicated, shall
constitute references to a Section or an Article of this Agreement or a Schedule
to the Disclosure Schedule. The table of contents, section headings and article
titles contained in this Agreement are for convenience of reference only and do
not form a part thereof and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "herein," "hereinafter," and
"hereunder," and words of similar import used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of this Agreement.
The parties agree that this Agreement is the product of negotiations among
sophisticated parties, all of whom were represented by counsel, and each of whom
had an opportunity to participate in, and did participate in the drafting of
each provision hereto. Accordingly, ambiguities in this Agreement, if any, shall
not be construed strictly against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
SECTION 11.10 Severability. If any term of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such term to the other parties or circumstances shall not be affected thereby
and shall be enforced to the fullest extent permitted by applicable law,
provided that in such event the parties shall negotiate in good faith in an
attempt to agree to another provision (in lieu of the term or application held
to be invalid or unenforceable) that will be valid and enforceable and will
carry out the parties' intentions hereunder.
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SECTION 11.11 Amendment. This Agreement may be amended at any time by
written agreement signed by each of the parties hereto; provided, however, that
any amendment to this Agreement made subsequent to the adoption by the
shareholders of the Company of this Agreement shall not alter or change (i) the
amount or kind of consideration to be paid by the Company in exchange for all or
any of the securities of CFG or CA, (ii) any term of the Certificate of
Incorporation of the Company, or (iii) any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the shareholders
of the Company.
SECTION 11.12 Further Assurances. Each of the parties hereto agrees that,
at any time and from time to time after the date hereof, it shall, upon written
request from any other party or parties hereto, and without further
consideration, perform such other and further acts, and execute, acknowledge and
deliver, or cause to be delivered, such further instruments, documents or
assurances as such other party or parties reasonably may request for the purpose
of carrying out this Agreement.
SECTION 11.13 Public Announcements. Each of the parties will consult with
each other party before issuing, and provide such other party the opportunity to
review and comment upon, any press release, advertisement or other public
announcement with respect to the transactions contemplated by this Agreement and
no such party shall issue any press release or news release or make any other
public statement prior to such consultation, review, and comment, except as may
be required in the written opinion of such party's counsel by applicable law,
court process, or the rules of any securities exchange or automatic quotation
system on which its securities are traded; provided, however, that even in such
circumstance the party required to make such statement shall use reasonable
efforts to provide a copy of any such statement to the other party prior to
release thereof and afford such party the opportunity to comment thereon.
SECTION 11.14 Exhibits and Schedules. The Exhibits and the Schedules
contained in the Disclosure Schedule are being separately delivered to the
Company and such receipt is being acknowledged by each of the parties to this
Agreement. All Exhibits and Schedules referred to in this Agreement are an
integral part of and are hereby incorporated into this Agreement by reference.
SECTION 11.15 CFG/CA Representative. Each of CFG and CA, as applicable,
represent to the Company that the CFG Shareholders, the Option Holders, the
Individual Warrant Holders, and the CA Shareholders have, pursuant to a separate
written agreement by and among such parties and CFG and CA (the "Representation
Agreement"), a copy of which shall have been provided to the Company prior to
the Effective Time, constituted and appointed Patrick L. Beach (the "CFG/CA
Representative") as their sole and exclusive representative with respect to all
matters arising out of, resulting from, pertaining to, or in any way connected
with, this Agreement, any documents or instruments executed or delivered in
connection herewith, and any of the transactions contemplated herein or therein.
After the date hereof, the Company and the Special Committee shall be entitled
to rely completely upon any actions taken or failed to be taken, or any
statement made by the CFG/CA Representative, without any investigation or
inquiry whatsoever, with respect to such aforementioned parties and matters. The
Company shall not incur any liability whatsoever as a result of such reliance
until further notified that Mr. Beach no longer acts as the CFG/CA
Representative.
SECTION 11.16 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same instrument. Each
counterpart may consist of a number of copies, each signed by less than all, but
together signed by all, the parties hereto and this Agreement shall be effective
when each of the parties hereto has exchanged executed signature pages with each
of the other parties hereto.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
CAPTEC NET LEASE REALTY, INC.
By: /s/ ALBERT T. ADAMS
------------------------------------
Name: Albert T. Adams
Title: Chairman, Special Committee
CAPTEC ACQUISITION, INC.
By: /s/ GARY A. BRUDER
------------------------------------
Name: Gary A. Bruder
Title: Secretary
CAPTEC FINANCIAL GROUP, INC.
By: /s/ W. ROSS MARTIN
------------------------------------
Name: W. Ross Martin
Title: Senior Vice President and
Chief Financial Officer
CAPTEC NET LEASE REALTY
ADVISORS, INC.
By: /s/ PATRICK L. BEACH
------------------------------------
Name: Patrick L. Beach
Title: President and Chief
Executive Officer
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The undersigned CFG Shareholders and
CA Shareholders join in this Agreement
solely for the purpose of being bound
by, and obtaining the benefits of, the
provisions applicable thereto in
Section 4.06 and Article IX.
By:
------------------------------------
Name: Patrick L. Beach
By:
------------------------------------
Name: W. Ross Martin
By:
------------------------------------
Name: H. Reid Sherard
By:
------------------------------------
Name: Gary A. Bruder
By:
------------------------------------
Name: George R. Beach
By:
------------------------------------
Name: Kenneth S. Milne
By:
------------------------------------
Name: Joanna A. Milne
By:
------------------------------------
Name: Robert Bruce
By:
------------------------------------
Name: William McPherson
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By:
----------------------------------
Name: Beth A. Abbott
By:
------------------------------------
Name: Lori B. Hoffman
By:
------------------------------------
Name: Robert V. Schradar
By:
------------------------------------
Name: Aaron Acker
By:
------------------------------------
Name: Susan Passeno
By:
------------------------------------
Name: Milton Trust
56
<PAGE> 1
EXHIBIT 99
CAPTEC NET LEASE REALTY, INC.
24 FRANK LLOYD WRIGHT DRIVE
LOBBY L, 4TH FLOOR - P.O. BOX 544
ANN ARBOR, MI 48106
WWW.CAPTEC.COM
NASDAQ: CRRR
<TABLE>
<S> <C> <C> <C>
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD:
Patrick L. Beach W. Ross Martin Leslie Hunziker Claire Koeneman Judith Sylk-Siegel
President & CEO Chief Financial Officer General Info. Analysts/Investors Media Inquiries
(734) 994-5505 (734) 994-5505 (312) 640-6760 (312) 640-6784 (212) 455-0940
[email protected] [email protected]
</TABLE>
FOR IMMEDIATE RELEASE
MONDAY, DECEMBER 20, 1999
CAPTEC NET LEASE REALTY TO MERGE AFFILIATES, CREATING LEADING
REAL ESTATE SPECIALTY FINANCE COMPANY;
PLANS TO CONVERT TO C CORP STATUS
STOCK REPURCHASE PROGRAM AUTHORIZED
HIGHLIGHTS
- Mergers Broaden Real Estate Opportunities
- Creates Fully Integrated Management Team
- C Corp Structure Positions Company for Higher Growth and Enhanced
ROE
- Transaction Anticipated to be Substantially Accretive to 2000
Earnings
- New Quarterly Dividend Policy in Effect Upon Completion of
Transaction
ANN ARBOR, MI, DECEMBER 20, 1999 - CAPTEC NET LEASE REALTY, INC. (NASDAQ:CRRR)
today announced a series of strategic actions designed to enhance its growth
opportunities and increase shareholder value. Principal among these is the
signing of a definitive agreement to merge with its affiliates, Captec Financial
Group, Inc. (CFG), a specialty finance company with more than $200 million in
assets that serves the franchise restaurant market, and Captec Net Lease Realty
Advisors, Inc. (Advisor), the company's external advisor. Upon completion of the
merger, the company will assume the name Captec Financial Group, Inc. The
combined company will be a market leading, fully integrated real estate
specialty finance company focused on the net lease and franchise finance
sectors. The company strategy will focus on value-added opportunities through a
combination of investments in restaurant and retail properties net-leased to
national and regional chains as well as the origination, securitization and
servicing of loans to operators of franchised restaurants.
In merging these affiliates, Captec is adopting new business strategies that are
inconsistent with the real estate investment trust (REIT) format. Subject to
shareholder approval of these transactions, Captec plans to change its tax
status from a REIT to C Corporation, allowing significantly greater flexibility
in operating its business, selling assets
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to maximize its return on investment and investing in a broader variety of
assets. Additionally, as a C Corp, Captec will no longer be required to
distribute 95 percent of its taxable income to shareholders, enabling the
company to use retained earnings to expand upon and accelerate its growth
strategies. Under this new business model, Captec does not anticipate any need
in the near future to access the public equity markets to generate a higher
level of growth.
"Our strategic restructuring recognizes that the net lease business is
fundamentally a finance business that can operate more effectively without being
subject to restrictive REIT rules," said Patrick Beach, chairman and chief
executive officer. "Conversion to a C Corp structure will allow us to switch
from a "buy and hold," income-oriented strategy to a profit-maximizing mode
focused on producing significantly higher EPS growth and return on equity (ROE).
CFG's business of originating and securitizing long-term real estate and
enterprise loans complements this strategy. We have significant opportunities to
grow the company, as evidenced by the more than 100 percent growth in our
property development and acquisition pipeline since the beginning of the year.
Unfortunately, REIT regulations and limited capital have kept us from fully
benefiting from these opportunities."
The merger will also result in a fully integrated and focused management team
serving one company, thus eliminating Captec's externally advised structure. The
restructured company intends to pay a quarterly cash dividend of $0.11 per
share, or $0.44 per share annually, once the transaction is completed.
Separately, Captec announced that its board of directors approved a
500,000-share buy back.
NEW STRATEGIC PLAN
Captec's new strategy will be to focus on high-return investments in the net
lease and specialty lending sectors. The combined business will offer a broad
array of products to its customers including real estate net lease and mortgage
financing, construction financing, equipment leasing and lending, and other
synergistic and complementary products. The company will have the opportunity to
utilize CFG's customer base and products to cross-sell Captec's products and
customer base, and to enter into new, related lines of high-margin businesses,
thereby diversifying its revenue stream.
- - Property Investment Business - Captec will continue to own a substantial
portfolio of net leased real estate, including retail and restaurant
properties, which will generate stable earnings. At the same time, Captec
will seek opportunities for increased returns, including funding property
development through its network of preferred developers, acquiring
properties at "wholesale" capitalization rates, selling mature assets from
the existing portfolio, acquiring properties to immediately sell at a
profit, and dealing in credit-tenant leases.
- - Finance Business - As a combined entity with significant equity capital,
Captec can rapidly grow CFG's existing finance business. Through
securitizing the loans it originates, Captec expects to produce significant
profits and "turn" its balance sheet several times each year through the
securitization process. The company also expects to expand into other
similar financial products and markets.
Combined, Captec and CFG currently have a pipeline of more than $550 million of
property acquisition and development opportunities and loan commitments.
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POSITIVE FINANCIAL IMPACT
The company expects the transaction to be substantially accretive to 2000
earnings per share, and to allow Captec to grow at a significantly accelerated
pace going forward. While the company will forego the tax advantage that all
REITs enjoy - the exclusion from paying federal and certain state corporate
income taxes - this benefit should be more than offset by the following
advantages:
- - Removal of REIT distribution requirements allows for a more effective use
of the company's earnings, which can be "recycled" into value-added
investments.
- - Flexibility to operate at higher leverage ratios in line with other
publicly traded finance companies.
- - Ability to "turn" the company's balance sheet by selling properties and
securitizing loans.
- Captec expects to generate proceeds from an aggressive program of
asset dispositions. Management has initially identified approximately
$50 million in properties that it expects to offer for sale early in
2000 in conjunction with the termination of its REIT status, and
intends to accelerate its property sales effort throughout the year.
Captec plans to be a continuous seller of the net lease properties
that it develops and acquires, focusing on buyers in the dynamic 1031
tax-free exchange market. Property sales to date have been limited by
REIT regulations.
- CFG securitizes its loan portfolio periodically to reduce its
financial exposure and to profit from gains on sales. It already has
successfully closed five franchise loan and/or lease securitizations
and expects to close a sixth securitization of over $200 million
during the first quarter of 2000.
"Our shareholders will benefit as a result of the company having more
flexibility to pursue value-added investments including the opportunity to exit
investments when profits can be maximized and subsequently reinvested," said
Beach. "In our current format, we have not been rewarded by the market for the
value we've been creating. With the new structure and strategies in place,
Captec will be able to better demonstrate this value in the form of growth in
earnings per share.
NEW QUARTERLY DIVIDEND POLICY
Due to Captec's emphasis on conserving internal cash flow to finance growth, the
Board expects to pay a quarterly dividend of $0.11 per share, or $0.44 per share
annually, upon consummation of the transaction. Meanwhile, for the 1999 fourth
quarter, a regular cash dividend of $0.38 per share of common stock is expected
to be declared and paid to shareholders of record, in keeping with the company's
present dividend policy.
TRANSACTION TERMS
Pursuant to the definitive agreement, at closing, Captec will issue 2.75 million
common shares to shareholders of CFG and the Advisor plus $2.5 million in cash
payments to certain institutional warrant holders. In addition, the company will
issue up to 2.0 million common shares pursuant to an earn-out agreement if it
achieves certain performance targets. "This earn-out arrangement gives
management proper incentives to achieve substantial EPS growth without diluting
our
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Captec Net Lease Realty Inc.
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existing shareholders. If we are not able to achieve returns above those which
Captec would realize on its own, then there will be no additional shares
issued," stated Beach.
The merger was structured and negotiated by the Independent Committee of the
Board, which excluded Messrs. Beach, W. Ross Martin and Reid Sherard. Albert T.
Adams, chairman of the Cleveland office of Baker & Hostetler LLP, who has been a
member of the Board since 1998, chaired the Independent Committee. "We have
struggled with the REIT structure at the Board level for some time trying to
reconcile a net lease buy-and-hold strategy with our shareholders' goal of
maximizing value," Adams said. "This strategic restructuring resolves that
dilemma, creating an integrated, high-growth real estate specialty finance
company. The Independent Committee unanimously agreed that this is the right
strategy and direction for the company."
Following the merger and tax reclassification, the company will continue to be
governed by its existing Board of Directors. Chairman and Chief Executive
Officer, Patrick Beach, and Executive Vice President and Chief Financial
Officer, W. Ross Martin, will maintain leadership of the senior management team,
which will include Reid Sherard, senior vice president - sales and marketing,
Thomas Moir, senior vice president - net lease investments and Gary Bruder,
senior vice president - general counsel. "We have a great management team that
has significant experience in all facets of the net lease and specialty finance
business. The fact that our team has worked together for so long will ensure the
effective implementation of our new strategic plan," said Beach. The executive
team of the combined company will be supported by approximately 90 employees.
TIMING AND APPROVALS
The merger and conversion to a C Corp are subject to the approval of the
shareholders of the company and customary closing conditions. Captec expects to
hold a special shareholder meeting during the first quarter of 2000. Captec is
seeking to file a proxy statement by early January.
Captec and CFG were advised in the merger by Prudential Securities Incorporated.
J.C. Bradford & Co. advised and rendered a fairness opinion to Captec's
Independent Committee.
STOCK REPURCHASE PROGRAM
In a separate action, the Board of Directors passed a resolution authorizing the
repurchase of up to 500,000 shares of Captec's outstanding common stock. The
share repurchases are expected to be funded through a combination of currently
available cash and proceeds from property sales. The repurchases may be made
from time to time in the open market or in privately negotiated transactions at
the discretion of management. No minimum number or value of shares to be
repurchased has been fixed.
"We believe that our common stock, at recent levels, represents an excellent
buying opportunity, and we intend to acquire Captec shares from time to time
whenever doing so would be beneficial to our shareholders," said Beach.
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CAPTEC FINANCIAL GROUP
CFG, a privately owned commercial finance company, is one of the largest
providers of financing to the franchise industry. It currently manages more than
$1.3 billion of assets. CFG "banks" the franchise restaurant and retail
petroleum community by offering a broad array of financing products, including
mortgages and leasehold mortgages, business enterprise loans, construction loans
and equipment financing.
CAPTEC NET LEASE REALTY, INC.
Captec Net Lease Realty, Inc. is currently a real estate investment trust (REIT)
that invests in long-term net leased restaurant and retail properties. At
September 30, 1999, Captec owned and/or managed a diversified portfolio of 257
freestanding restaurant, retail and entertainment properties throughout the
United States with an average occupancy rate of 95 percent.
SAFE HARBOR STATEMENT
Statements in this press release, which are not strictly historical, are
"forward-looking" statements. Forward-looking statements involve known and
unknown risks, which may cause the company's actual results in the future to
differ materially from expected results. These risks include, among others,
general economic conditions; local real estate conditions; construction delays
or other delays; and the availability of capital to finance planned growth; the
ability of the company to achieve property disposition targets; competition
within the financial services and real estate markets; the ability of the
company to originate new investments; the ability of the company to maintain
developer/tenant relationships; possible financial difficulties of tenants,
creditors or loan customers resulting in defaulted loans or leases; fluctuations
in interest rates; and fluctuations in debt capital markets as described in the
company's filings with the Securities and Exchange Commission. Consequently,
such forward-looking statements should be regarded solely as reflections of the
company's current operating and development plans and estimates. Actual
operating results may differ materially from what is expressed or forecast in
this press release.
FOR MORE INFORMATION ABOUT CAPTEC TOLL-FREE VIA FAX, DIAL 1-800-PRO-INFO
(1-800-776-4636), FOLLOW THE VOICE MENU PROMPTS AND ENTER THE
COMPANY CODE "CRRR" (2777) ON ANY TOUCH TONE PHONE.
VISIT THE CAPTEC WEB SITE AT: WWW.CAPTEC.COM
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