<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(Rule 14d-101)
Solicitation/Recommendation Statement Under Section 14(d)(4)
of the Securities Exchange Act of 1934
(AMENDMENT NO. 1)
----------------
PRISM FINANCIAL CORPORATION
(Name of Subject Company)
PRISM FINANCIAL CORPORATION
(Name of Person(s) Filing Statement)
----------------
Common Stock, par value $0.01 per share
(Title of Class of Securities)
----------------
74264 Q 10 8
(CUSIP Number of Class of Securities)
----------------
Mark A. Filler
President and Chief Executive Officer
Prism Financial Corporation
440 North Orleans
Chicago, Illinois 60610
Telephone: (312) 494-0020
(Name, address and telephone number of person authorized to receive
notice and communication on behalf of the person(s) filing statement).
----------------
With a copy to:
Rodd M. Schreiber
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
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Prism Financial Corporation, a Delaware corporation (the "Company"), hereby
amends and supplements its Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9") filed with the Securities and Exchange Commission
on March 22, 2000, relating to the tender offer (the "Offer") by Prism
Acquisition Subsidiary, Inc., a Delaware corporation and a wholly owned,
indirect subsidiary of Royal Bank of Canada, a Canadian commercial bank, to
purchase all of the issued and outstanding shares of common stock, par value
$.01 per share, of the Company, including the associated rights to purchase
preferred stock issued pursuant to the Rights Agreement, dated as of January
27, 2000, between the Company and LaSalle Bank National Association, as Rights
Agent. This Amendment No. 1 to the Schedule 14D-9 is being filed solely for
the purpose of filing the exhibits to the Schedule 14D-9, portions of which
exhibits were inadvertently omitted from the March 22, 2000 filing of the
Schedule 14D-9 because of a technical error that caused certain exhibit material
submitted with the March 22 filing not to be accepted by the Commission's EDGAR
system.
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Item 9. Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S> <C>
1 Merger Agreement, dated March 10, 2000 by and among
Prism Financial Corporation, Royal Bank of Canada and
Rainbow Acquisition Subsidiary, Inc.
2 Stockholders' Agreement, dated as of March 10, 2000, by
and among Royal Bank of Canada, Rainbow Acquisition
Subsidiary, Inc. and the stockholders of Prism Financial
Corporation listed on Schedule I thereto
3 Confidentiality Agreement, dated as of January 31, 2000,
between Prism Financial Corporation and Royal Bank of
Canada
4 Letter to Stockholders from Richard L. Wellek, dated
March 22, 2000
5 Joint Press Releases issued by Prism Financial
Corporation and Royal Bank of Canada on March 14 and
March 10, 2000
6 Opinion of Friedman, Billings, Ramsey & Co., Inc., dated
March 10, 2000
7 Article Sixth of the Amended and Restated Certificate of
Incorporation of Prism Financial Corporation
8 Article Seventh of the Amended and Restated Certificate
of Incorporation of Prism Financial Corporation
9 Article VIII of the Second Amended and Restated Bylaws
of Prism Financial Corporation
10 Employment Agreement of Mark A. Filler
11 Employment Agreement of David A. Fisher
12 Employment Agreement of Eric A. Gurry
13 Stock Option Agreement of Mark A. Filler
14 Stock Option Agreement of Richard L. Wellek
15 Restricted Stock Agreement of Richard L Wellek
16 1999 Omnibus Stock Incentive Plan
17 2000 Stock Option Plan
18 Registration Rights Agreement
19 Rights Agreement, dated as of January 27, 2000, between
Prism Financial Corporation and LaSalle Bank National
Association, as Rights Agent
20 First Amendment to Rights Agreement, dated as of March
10, 2000, between Prism Financial Corporation and
LaSalle Bank National Association, as Rights Agent
</TABLE>
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
/s/ Mark A. Filler
-------------------------------------
Name: Mark A. Filler
Title: President and Chief Executive
Officer
Date: March 27, 2000
3
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S> <C>
1 Merger Agreement, dated March 10, 2000 by and among
Prism Financial Corporation, Royal Bank of Canada and
Rainbow Acquisition Subsidiary, Inc.
2 Stockholders' Agreement, dated as of March 10, 2000, by
and among Royal Bank of Canada, Rainbow Acquisition
Subsidiary, Inc. and the stockholders of Prism Financial
Corporation listed on Schedule I thereto
3 Confidentiality Agreement, dated as of January 31, 2000,
between Prism Financial Corporation and Royal Bank of
Canada
4 Letter to Stockholders from Richard L. Wellek, dated
March 22, 2000
5 Joint Press Releases issued by Prism Financial
Corporation and Royal Bank of Canada on March 14 and
March 10, 2000
6 Opinion of Friedman, Billings, Ramsey & Co., Inc., dated
March 10, 2000
7 Article Sixth of the Amended and Restated Certificate of
Incorporation of Prism Financial Corporation
8 Article Seventh of the Amended and Restated Certificate
of Incorporation of Prism Financial Corporation
9 Article VIII of the Second Amended and Restated Bylaws
of Prism Financial Corporation
10 Employment Agreement of Mark A. Filler
11 Employment Agreement of David A. Fisher
12 Employment Agreement of Eric A. Gurry
13 Stock Option Agreement of Mark A. Filler
14 Stock Option Agreement of Richard L. Wellek
15 Restricted Stock Agreement of Richard L Wellek
16 1999 Omnibus Stock Incentive Plan
17 2000 Stock Option Plan
18 Registration Rights Agreement
19 Rights Agreement, dated as of January 27, 2000, between
Prism Financial Corporation and LaSalle Bank National
Association, as Rights Agent
20 First Amendment to Rights Agreement, dated as of March
10, 2000, between Prism Financial Corporation and
LaSalle Bank National Association, as Rights Agent
</TABLE>
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EXHIBIT 1
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MERGER
AGREEMENT
DATED AS OF MARCH 10, 2000
AMONG
ROYAL BANK OF CANADA,
PRISM FINANCIAL CORPORATION
AND
RAINBOW ACQUISITION SUBSIDIARY, INC.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 THE OFFER........................................................2
SECTION 1.1. THE OFFER........................................................2
SECTION 1.2. COMPANY ACTION...................................................3
SECTION 1.3. BOARDS OF DIRECTORS AND COMMITTEES; SECTION 14(F)................4
ARTICLE 2 THE MERGER.......................................................5
SECTION 2.1. THE MERGER.......................................................5
SECTION 2.2. CLOSING OF THE MERGER............................................6
SECTION 2.3. EFFECTIVE TIME...................................................6
SECTION 2.4. EFFECTS OF THE MERGER............................................6
SECTION 2.5. CERTIFICATE OF INCORPORATION AND BYLAWS..........................6
SECTION 2.6. DIRECTORS........................................................6
SECTION 2.7. OFFICERS.........................................................7
SECTION 2.8. CONVERSION OF SHARES.............................................7
SECTION 2.9. PAYMENT OF CASH MERGER CONSIDERATION.............................7
SECTION 2.10. STOCK OPTIONS....................................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................10
SECTION 3.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES....................10
SECTION 3.2. CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES..............11
SECTION 3.3. AUTHORITY RELATIVE TO THIS AGREEMENT; RECOMMENDATION............12
SECTION 3.4. SEC REPORTS; FINANCIAL STATEMENTS; ACCOUNTING PROCEDURES........12
SECTION 3.5. INFORMATION SUPPLIED............................................13
SECTION 3.6. CONSENTS AND APPROVALS; NO VIOLATIONS...........................14
SECTION 3.7. NO UNDISCLOSED LIABILITIES; ABSENCE OF CHANGES..................15
SECTION 3.8. LITIGATION......................................................15
SECTION 3.9 COMPLIANCE WITH LAWS............................................15
SECTION 3.10. FORMS; POLICIES AND PROCEDURES..................................16
SECTION 3.11. LICENSES AND PERMITS............................................16
SECTION 3.12. EMPLOYEE BENEFIT PLANS, LABOR MATTERS...........................17
SECTION 3.13. ENVIRONMENTAL LAWS AND REGULATIONS..............................19
SECTION 3.14. TAXES...........................................................20
SECTION 3.15. PROPERTIES .....................................................21
SECTION 3.16. MATERIAL CONTRACTS AND COMMITMENTS..............................22
SECTION 3.17. INTELLECTUAL PROPERTY...........................................24
SECTION 3.19. STOCK OPTIONS...................................................29
SECTION 3.20. INSURANCE ......................................................30
SECTION 3.21. POOL CERTIFICATIONS.............................................30
SECTION 3.22. BROKERS ........................................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION........30
SECTION 4.1. ORGANIZATION....................................................30
SECTION 4.2. AUTHORITY RELATIVE TO THIS AGREEMENT............................31
SECTION 4.3. INFORMATION SUPPLIED............................................31
SECTION 4.4. FINANCING; SHARE OWNERSHIP......................................31
SECTION 4.5. CONSENTS AND APPROVALS; NO VIOLATIONS...........................32
SECTION 4.6. BROKERS AND FINDERS.............................................32
SECTION 4.7. NATURE AND INTERIM OPERATIONS OF ACQUISITION....................32
ARTICLE 5 COVENANT........................................................33
SECTION 5.1. INTERIM OPERATIONS..............................................33
SECTION 5.2. STOCKHOLDERS' MEETING; ACTION BY CONSENT........................35
SECTION 5.3. TERMINATION OF REGISTRATION OF SHARES...........................36
SECTION 5.4. OTHER POTENTIAL ACQUIRERS.......................................36
SECTION 5.5. ACCESS TO INFORMATION...........................................38
SECTION 5.6. FURTHER ACTIONS.................................................38
SECTION 5.7. PUBLIC ANNOUNCEMENTS............................................39
SECTION 5.8. EMPLOYEE BENEFIT MATTERS........................................39
SECTION 5.9. EXPENSES........................................................40
SECTION 5.10. NOTIFICATION OF CERTAIN MATTERS.................................40
SECTION 5.11. GUARANTEE OF PERFORMANCE........................................40
SECTION 5.12. EFFECT OF PARENTS KNOWLEDGE.....................................41
SECTION 5.13. INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE.............41
ARTICLE 6 CONDITIONS TO THE OFFER.........................................42
SECTION 6.1. CONDITIONS TO THE OFFER.........................................42
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER........................44
SECTION 7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER.....44
ARTICLE 8 TERMINATION; AMENDMENT; WAIVER..................................44
SECTION 8.1. TERMINATION.....................................................44
SECTION 8.2. EFFECT OF TERMINATION...........................................45
SECTION 8.3. FEES AND EXPENSES...............................................45
SECTION 8.4. AMENDMENT.......................................................46
SECTION 8.5. EXTENSION; WAIVER...............................................47
ARTICLE 9 MISCELLANEOUS...................................................47
SECTION 9.1. ENTIRE AGREEMENT; ASSIGNMENT....................................47
SECTION 9.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................47
SECTION 9.3. VALIDITY........................................................47
SECTION 9.4. NOTICES.........................................................47
SECTION 9.5. GOVERNING LAW...................................................48
SECTION 9.6. DESCRIPTIVE HEADINGS............................................49
SECTION 9.7. PARTIES IN INTEREST.............................................49
SECTION 9.8. CERTAIN DEFINITIONS.............................................49
SECTION 9.9. PERSONAL LIABILITY..............................................49
SECTION 9.10. SPECIFIC PERFORMANCE............................................50
SECTION 9.11. WAIVER OF CONDITIONS............................................50
SECTION 9.12. COUNTERPARTS....................................................50
EXHIBIT A .................................................................52
EXHIBIT B .................................................................53
EXHIBIT C .................................................................54
</TABLE>
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<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C> <C>
1999 Option Plan.............................Section 2.10(a)........................................9
2000 Option Plan.............................Section 2.10(b)........................................9
Acquisition..................................Preamble...............................................1
Affiliate....................................Section 9.8(a)........................................49
Agencies.....................................Section 3.9(a)........................................15
Agency and Investor Requirements.............Section 3.4(c)........................................13
Agency.......................................Section 3.9(a)........................................15
Agreement....................................Preamble...............................................1
Bank Act.....................................Section 4.5...........................................32
Bank Holding Company Act.....................Section 4.5...........................................32
Board........................................Recitals...............................................1
Breakup Fee..................................Section 8.3(a)........................................45
Business Day.................................Section 9.8(b)........................................49
Cash Merger Consideration....................Section 2.8(a).........................................7
Certificates.................................Section 2.9(b).........................................8
Closing Time.................................Section 2.2............................................6
Code.........................................Section 3.12(c).......................................17
Company Assets...............................Section 3.15..........................................22
Company Disclosure Schedule..................Article 3.............................................10
Company Employee Plan........................Section 3.12(a).......................................17
Company Marks................................Section 3.17(b).......................................25
Company Option Plans.........................Section 2.10(b)........................................9
Company Personnel............................Section 3.12(a).......................................17
Company SEC Reports..........................Section 3.4(a)........................................13
Company Securities...........................Section 3.2(a)........................................11
Company Stock Options........................Section 2.10(a)........................................9
Company......................................Preamble...............................................1
CompanyTrade Secrets.........................Section 3.17(e).......................................26
Confidentiality Agreement....................Section 5.5...........................................38
Consumer Credit Law..........................Section 3.9(a)........................................16
Continuing Directors.........................Section 1.3(a).........................................5
Continuing Employees.........................Section 5.8(a)........................................39
Contracts....................................Section 3.16(a).......................................22
DGCL.........................................Section 1.2(a).........................................3
Disclosure Statements........................Section 3.5...........................................13
Effective Time...............................Section 2.3............................................6
Environmental Claim..........................Section 3.13(b).......................................20
Environmental Laws...........................Section 3.12(a).......................................20
ERISA Affiliate..............................Section 3.12(a).......................................17
</TABLE>
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<TABLE>
<S> <C> <C>
ERISA........................................Section 3.12(a).......................................17
Exchange Act.................................Section 1.1(a).........................................2
Fannie Mae...................................Section 3.9(a)........................................15
Freddie Mac..................................Section 3.9(a)........................................15
GAAP.........................................Section 3.4(a)........................................13
GNMA.........................................Section 3.9(a)........................................15
Governmental Entity..........................Section 3.6...........................................14
HSR Act......................................Section 3.6...........................................14
HUD..........................................Section 3.9(a)........................................15
Indemnified Parties..........................Section 5.13..........................................41
Initial Expiration Date......................Section 1.1(b).........................................2
Intellectual Property Assets.................Section 3.17(a)(ii)...................................24
Intellectual Property Rights.................Section 3.17(a)(i)....................................24
Invention Disclosures........................Section 3.17(e).......................................26
Investor.....................................Section 3.8...........................................15
Knowledge....................................Section 3.8...........................................15
Licensed Intellectual Property...............Section 3.17(h)(vi)...................................29
Licensed Software Agreements.................Section 3.17(h).......................................28
Licensed Software............................Section 3.17(f).......................................27
Licensed Technology Agreements...............Section 3.17(h).......................................28
Lien.........................................Section 3.2(b)........................................12
Marks........................................Section 3.17(a)(i)(A).................................24
Material Adverse Effect......................Section 3.1(a)........................................10
Merger Certificate...........................Section 2.3............................................6
Merger Fund..................................Section 2.9(a).........................................8
Merger.......................................Section 2.1............................................5
Minimum Condition............................Section 1.1(a).........................................2
Mortgage Loan................................Section 3.9(b)........................................16
Offer Documents..............................Section 1.1(c).........................................3
Offer........................................Recitals...............................................1
Options......................................Section 8.3(c)........................................46
Other Licensed Technology Agreements.........Section 3.17(h).......................................28
Owned Copyrights.............................Section 3.17(d)(i)....................................26
Owned Software...............................Section 3.17(f).......................................27
Parent Material Adverse Effect...............Section 4.1(a)........................................30
Parent.......................................Preamble...............................................1
Patents......................................Section 3.17(a)(i)(B).................................24
Payment Agent................................Section 2.9(a).........................................7
</TABLE>
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<TABLE>
<S> <C> <C>
Per Share Amount.............................Recitals...............................................1
Person.......................................Section 9.8(d)........................................49
Pools........................................Section 3.21..........................................30
Potential Proposal...........................Section 5.4(a)........................................36
Prism Mortgage...............................Section 1.3(a).........................................5
Proxy Statement..............................Section 3.5...........................................13
Remaining Shares.............................Section 8.3(d)........................................46
Rights Agreement.............................Recitals...............................................1
Rights.......................................Recitals...............................................1
Schedule 14D-9...............................Section 1.2(b).........................................4
SEC..........................................Section 1.1(b).........................................2
Securities Act...............................Section 3.4(a)........................................13
Shares.......................................Section 3.2(a)........................................11
Software.....................................Section 3.17(a)(iii)..................................24
Stock........................................Section 9.8(c)........................................49
Stockholders' Agreement......................Recitals...............................................1
Stockholders' Meeting........................Section 5.2(a)(i).....................................35
Subsidiaries.................................Section 9.8(e)........................................49
Subsidiary...................................Section 9.8(e)........................................49
Superior Proposal Notice.....................Section 8.3(d)........................................46
Superior Proposal............................Section 5.4(b)........................................37
Surviving Corporation........................Section 2.1............................................5
Tax Return...................................Section 3.14(a).......................................20
Tax..........................................Section 3.14(a).......................................20
Taxes........................................Section 3.14(a).......................................20
Tender Offer Purchase Time...................Section 1.3(a).........................................4
Third Party Acquisition......................Section 5.4(b)........................................37
Third Party..................................Section 5.4(b)........................................37
Trade Secrets................................Section 3.17(a)(i)(C).................................24
VA...........................................Section 3.9(a)........................................15
</TABLE>
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MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Agreement") dated as of March 10,
2000, is among PRISM FINANCIAL CORPORATION, a Delaware corporation ("Company"),
ROYAL BANK OF CANADA, a Canadian commercial bank("Parent"), and RAINBOW
ACQUISITION SUBSIDIARY, INC., a Delaware corporation and a wholly owned,
indirect subsidiary of Parent ("Acquisition").
WHEREAS, the Board of Directors of the Company (the "Board") has,
in light of and subject to the terms and conditions set forth herein,
(i)determined that each of the Offer and the Merger (each as defined below) is
advisable and is fair to the stockholders of the Company and in the best
interests of such stockholders and (ii) approved and adopted this Agreement and
the transactions contemplated hereby and resolved to recommend acceptance of the
Offer and approval and adoption by the stockholders of the Company, if
necessary, of this Agreement;
WHEREAS, in furtherance thereof, it is proposed that Acquisition
shall promptly commence a tender offer (the "Offer") to acquire all of the
issued and outstanding Shares (defined in Section 3.2(a)), at a price of $7.50
per Share together with any associated rights (the "Rights") issued pursuant to
the Rights Agreement dated as of January 27, 2000, between the Company and
LaSalle Bank National Association (the "Rights Agreement") (such amount being
hereinafter referred to as the "Per Share Amount"), net to the seller in cash,
less any required withholding of taxes, in accordance with the terms and subject
to the conditions provided herein; and
WHEREAS, as a condition of and inducement to Parent's and
Acquisition's entering into this Agreement and incurring the obligations set
forth herein, certain stockholders of the Company concurrently herewith are
entering into a stockholders' agreement (the "Stockholders' Agreement") dated as
of the date hereof, with Parent and Acquisition, substantially in the form of
Exhibit A to this Agreement.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained and
intending to be legally bound hereby, the Company, Parent and Acquisition hereby
agree as follows,
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated
in accordance with Section 8.1 and none of the events or conditions set forth in
Article 6 shall have occurred and be existing, as promptly as practicable after
the date hereof (but in no event later than the fifth business day after the
public announcement of the terms of this Agreement, Acquisition shall commence
(within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Offer. The Offer will be made pursuant to the
Offer Documents (as defined below) containing terms
1
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and conditions set forth in this Agreement. Acquisition shall accept for
payment, purchase and pay for all Shares which have been validly tendered and
not withdrawn pursuant to the Offer at the earliest time following expiration of
the Offer that all conditions to the Offer set forth in Article 6 shall have
been satisfied or waived by Acquisition. The obligation of Acquisition to accept
for payment, purchase and pay for Shares tendered pursuant to the Offer shall be
subject only to the condition that at least a majority of the issued and
outstanding Shares be validly tendered (the "Minimum Condition") and the other
conditions set forth in Article 6. Acquisition expressly reserves the right to
waive any such condition (other than the Minimum Condition) to increase the
price per Share payable in the Offer or to make any other changes in the terms
and conditions of the Offer (provided that, unless previously approved by the
Company in writing, no change may be made which decreases the Per Share Amount,
which reduces the number of Shares to be purchased in the Offer, which changes
the form of consideration to be paid in the Offer, which imposes conditions to
the Offer in addition to those set forth in Article 6 or which amends or changes
any term or condition of the Offer in a manner adverse to the holders of
Shares). The Per Share Amount shall be paid net to the seller in cash, less any
required withholding of taxes, upon the terms and subject to such conditions of
the Offer. The Company agrees that no Shares held by the Company or any of its
subsidiaries will be tendered in the Offer.
(b) Subject to the terms and conditions thereof, the Offer
shall expire at midnight, New York City time, on the date that is twenty (20)
business days after the date the Offer is commenced (the "Initial Expiration
Date"); provided, however, without the consent of the Board, Parent may cause
Acquisition to (i) from time to time extend the Offer, if at the Initial
Expiration Date of the Offer any of the conditions to the Offer necessary to
consummate the Offer have not been satisfied or waived (other than the Minimum
Condition, to which this clause does not apply), until such time as such
conditions are satisfied or waived; (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the
Offer; or (iii) if all of the conditions to the Offer are satisfied or waived
but the number of Shares validly tendered and not withdrawn is less than ninety
percent (90%) of the then outstanding number of Shares on a fully diluted basis,
for an aggregate period not to exceed twenty (20) business days (for all such
extensions), provided that Acquisition shall accept and promptly pay for all
securities tendered prior to the date of such extension and shall otherwise meet
the requirements of Rule 14d-11 under the Exchange Act in connection with each
such extension. In addition, Parent and Acquisition agree that Acquisition shall
from time to time extend the Offer, if requested by the Company, if at the
Initial Expiration Date (or any extended expiration date of the Offer, if
applicable), any of the conditions to the Offer other than (or in addition to)
the Minimum Condition shall not have been waived or satisfied, until (taking
into account all such extensions) September 30, 2000.
(c) As soon as practicable after the date of commencement of
the Offer, Acquisition shall file with the SEC a Tender Offer Statement on
Schedule TO with respect to the Offer, which shall include an offer to purchase
and form of transmittal letter (together with any amendments thereof or
supplements thereto, collectively the "Offer Documents"). The Offer Documents
will comply in all material respects with the provisions of applicable federal
securities laws. Parent, Acquisition and the Company
2
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each agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and Acquisition further agrees to
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given a reasonable opportunity to review and comment on
the Offer Documents prior to their being filed with the SEC. Parent and
Acquisition agree to provide to the Company and its counsel any comments or
other communications which Parent, Acquisition or their counsel receives from
the staff of the SEC with respect to the Offer Documents promptly after receipt
thereof.
SECTION 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer
and the Merger and represents and warrants that the Board, including all of the
independent directors of the Company, at a meeting duly called and held, has,
subject to the terms and conditions set forth herein, adopted resolutions, which
are not conditional and have not been amended or repealed, pursuant to which the
Board (i) determined that this Agreement and the transactions contemplated
hereby, including the Offer and the Merger, are fair to, and in the best
interests of, the stockholders of the Company, (ii) declared that the Merger is
advisable and approved this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, in all respects and such approval
constitutes prior approval of the Offer, this Agreement and the Merger for
purposes of Section 203(a)(1) of the Delaware General Corporation Law (the
"DGCL") and similar provisions of any other similar state statutes that might be
deemed applicable to the transactions contemplated hereby, (iii) recommended
that the stockholders of the Company accept the Offer, tender their Shares
thereunder to Acquisition and, if required by law, approve and adopt this
Agreement and the Merger; and in addition that the Company consents, subject to
Section 5.4, to the inclusion of such recommendation and approval in the Offer
Documents, and (iv) takes all actions to amend the Company Option Plans and the
Rights Agreements contemplated by this Agreement.
(b) The Company hereby agrees to file with the SEC as soon as
practicable after the date hereof a Solicitation/Recommendation Statement on
Schedule 14D-9 pertaining to the Offer (together with any amendments thereof or
supplements thereto, the "Schedule 14D-9") containing the recommendation
described in Section 1.2(a) and to promptly mail the Schedule 14D-9 to the
stockholders of the Company. The Company, Parent and Acquisition each agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Parent, Acquisition and
their counsel shall be given a reasonable opportunity to review and comment on
the Schedule 14D-9 prior to it being filed with the SEC. The Company agrees to
provide to Parent, Acquisition and their counsel any comments or other
communications which the Company or its counsel receives from the staff of the
SEC
3
<PAGE>
with respect to the Schedule 14D-9 promptly after receipt thereof.
Notwithstanding anything to the contrary in this Agreement, the Board may
withdraw, modify or amend its recommendation under the circumstances set forth
in Section 5.4.
(c) In connection with the Offer, the Company will promptly
furnish Parent and Acquisition with mailing labels, security position listings
and any available listing or computer files containing the names and addresses
of the record holders of the Shares as of a recent date and shall furnish
Acquisition with such additional information and assistance (including, without
limitation, updated lists of stockholders, mailing labels and lists of
securities positions) as Acquisition or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Parent, Acquisition and their affiliates, associates,
agents and advisors shall use the information contained in any such labels,
listings and files only in connection with the Offer and the Merger, and, if
this Agreement shall be terminated, will deliver to the Company all copies of
such information then in their possession.
SECTION 1.3. Boards of Directors and Committees; Section 14(f).
(a) Promptly after the purchase by Acquisition of Shares
pursuant to the Offer following the Initial Expiration Date or, if applicable,
the extended expiration date of the Offer (the "Tender Offer Purchase Time") and
from time to time thereafter, and subject to the last sentence of this Section
1.3(a), Acquisition shall be entitled to designate that number (but no more than
that number) of directors of the Company constituting a majority of the Board,
and the Company shall use its best efforts to, upon request by Acquisition,
promptly, at the Company's election, either increase the size of the Board
(subject to the provisions of Article Fifth of the Company's Certificate of
Incorporation) or secure the resignation of such number of directors as is
necessary to enable Acquisition's designees to be elected to the Board and to
cause Acquisition's designees to be so elected and to constitute at all times
after the Tender Offer Purchase Time a majority of the Board. At such times, and
subject to the last sentence of this Section 1.3(a), the Company will use its
best efforts to cause persons designated by Acquisition to constitute the same
percentage as is on the Board of (i) each committee of the Board (other than any
committee of the Board established to take action under this Agreement), (ii)
each board of directors of each subsidiary of the Company and (iii) each
committee of each such board. Notwithstanding the foregoing, until the Effective
Time (as defined in Section 2.3 hereof) (x) the Company shall retain at least
three directors who are directors of the Company on the date hereof (the
"Continuing Directors") and (y) Parent and Acquisition shall not, and shall
cause their affiliates not to, (A) initiate, propose, vote for, or solicit
others to vote for, any change in the number of directors of Prism Mortgage
Company, an Illinois corporation and a wholly-owned subsidiary of the Company
("Prism Mortgage"), as of the date hereof or (B) take any action that would be
reasonably likely to result in any change described in the foregoing clause (A).
(b) The Company's obligation to appoint designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all action required pursuant to such
Section and Rule
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in order to fulfill its obligations under this Section 1.3 and shall include in
the Schedule 14D-9 such information with respect to the Company and its officers
and directors as is required under such Section and Rule in order to fulfill its
obligations under this Section 1.3. Acquisition will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by such Section and
Rule.
(c) From and after the time, if any, that Acquisition's
designees constitute a majority of the Board until the Effective Time, any
amendment, modification or waiver of any term or condition of this Agreement,
any amendment or modification to the Certificate of Incorporation or By-Laws of
the Company, any termination of this Agreement by the Company, any extension of
time of performance of any of the obligations of Parent or Acquisition
hereunder, any waiver of any condition or any of the Company's rights hereunder
or other action by the Company in connection with the rights of the Company
hereunder may be effected only with the concurrence of a majority of the
Continuing Directors.
ARTICLE 2
THE MERGER
SECTION 2.1. The Merger. At the Effective Time (as defined below)
and upon the terms and subject to the conditions of this Agreement and in
accordance with the DGCL, Acquisition shall be merged with and into the Company
(the "Merger"). Following the Merger, the Company shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of Acquisition shall cease. Parent, as the sole stockholder of
Acquisition, hereby approves this Agreement, the Merger and the other
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to cause the Effective Time to occur as
soon as practicable after the Stockholders' Meeting (as defined in Section
5.2(a)) or the purchase by Acquisition of 90% or more of the issued and
outstanding Shares pursuant to the Offer.
SECTION 2.2. Closing of the Merger. The closing of the Merger will
take place at a time (the "Closing Time") and on a date to be specified by the
parties, which shall be no later than the second business day after satisfaction
or waiver (in accordance with this Agreement) of the latest to occur of the
conditions set forth in Article 7 (other than those conditions that, by their
nature, are to be satisfied at the Closing Time, but subject to the satisfaction
or waiver of those conditions) at the offices of Gibson, Dunn & Crutcher LLP,
1050 Connecticut Avenue, N.W., Washington, D.C. 20036, unless another time, date
or place is agreed to in writing by the parties hereto.
SECTION 2.3. Effective Time. Subject to the terms and conditions
set forth in this Agreement, a Certificate of Merger or Certificate of Ownership
and Merger, (the "Merger Certificate") shall be duly executed and acknowledged
by Acquisition and the Company and thereafter delivered at the Closing Time to
the Secretary of State of the State of Delaware for filing pursuant to the DGCL.
The Merger shall become effective at such time as a properly executed and
certified copy of the Merger Certificate is duly
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accepted for record by the Secretary of State of the State of Delaware for
filing pursuant to the DGCL, or such later time as Acquisition and the Company
may agree upon and set forth in the Merger Certificate (not exceeding 30 days
after the Merger Certificate is accepted for record; the time the Merger becomes
effective being referred to herein as the "Effective Time").
SECTION 2.4. Effects of the Merger. The Merger shall have the
effects set forth in the DGCL. Without limiting the generality of the foregoing
and subject thereto at the Effective Time, all the properties, rights,
privileges, powers and franchises of the Company and Acquisition shall vest in
the Surviving Corporation and all debts, liabilities and duties of the Company
and Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 2.5. Certificate of Incorporation and Bylaws. The
Certificate of Incorporation of Acquisition in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
amended in accordance with applicable law. The Bylaws of Acquisition in effect
at the Effective Time shall be the Bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 2.6. Directors. The directors of Acquisition at the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation until the next annual meeting of stockholders and
until each such director's successor is duly elected or appointed and qualified.
SECTION 2.7. Officers. The officers of the Company at the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation until such officer's successor is duly elected or
appointed and qualified.
SECTION 2.8. Conversion of Shares.
(a) At the Effective Time, each Share, together with any
associated Rights, issued and outstanding immediately prior to the Effective
Time (excluding (i) Shares held by any of the Company's subsidiaries and (ii)
Shares held by Parent, Acquisition or any other subsidiary of Parent) shall, by
virtue of the Merger and without any action on the part of Acquisition, the
Company or the holder thereof, be converted into and shall become the right to
receive the Per Share Amount in cash, without interest (the "Cash Merger
Consideration"). Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time, the Shares shall have been changed into a
different number of shares or a different class by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares, then the Cash Merger Consideration contemplated by the Merger shall
be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) At the Effective Time, each Share held by Parent,
Acquisition or any subsidiary of Parent, Acquisition or the Company immediately
prior to the Effective
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Time shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be canceled and retired and will
cease to exist and no payment shall be made with respect thereto.
(c) At the Effective Time, each share of common stock of
Acquisition issued and outstanding immediately prior to the Effective Time shall
be converted into and shall become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
SECTION 2.9. Payment of Cash Merger Consideration.
(a) As of the Effective Time, Acquisition shall deposit in
trust with such agent or agents as may be appointed by Parent and Acquisition
and reasonably acceptable to the Company (the "Payment Agent") for the benefit
of the holders of issued and outstanding Shares at the Effective Time (excluding
(i) Shares held by any of the Company's subsidiaries and (ii) Shares held by
Parent, Acquisition or any other subsidiary of Parent), an amount in cash equal
to the aggregate amount necessary to pay the Cash Merger Consideration (such
cash is hereinafter referred to as the "Merger Fund") payable pursuant to
Section 2.8 in exchange for such issued and outstanding Shares. The Payment
Agent shall, pursuant to irrevocable instructions, deliver the Cash Merger
Consideration out of the Merger Fund. The Merger Fund shall not be used for any
other purpose.
(b) As soon as reasonably practicable after the Effective Time,
Parent shall cause the Payment Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding Shares (the "Certificates") whose Shares were
converted into the right to receive the Cash Merger Consideration pursuant to
Section 2.8: (i) a letter of transmittal (which shall specify that delivery
shall be effected and risk of loss and title to the Certificates shall pass only
upon delivery of the Certificates to the Payment Agent and shall be in such form
and have such other provisions as Parent and the Company may reasonably specify)
and (ii) instructions on how to surrender the Certificates in exchange for the
Cash Merger Consideration. Upon surrender to the Payment Agent of a Certificate
for cancellation, together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor,
and Parent shall cause the Payment Agent to deliver, a check representing the
Cash Merger Consideration which such holder has the right to receive pursuant to
the provisions of this Article 2 and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Shares which
is not registered in the transfer records of the Company, payment of the Cash
Merger Consideration may be made to a transferee if the Certificate representing
such Shares is presented to the Payment Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.9, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Cash Merger Consideration as contemplated by this Section 2.9.
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(c) In the event that any Certificate shall have been lost,
stolen or destroyed, Parent shall cause the Payment Agent to issue in exchange
therefor, upon the making of an affidavit of that fact by the holder thereof,
such Cash Merger Consideration as may be required pursuant to this Agreement;
provided, however, that Acquisition or the Payment Agent may, in its discretion,
require the delivery of a suitable bond or indemnity.
(d) All Cash Merger Consideration paid upon the surrender for
exchange of Shares in accordance with the terms hereof shall be deemed to have
been paid in full satisfaction of all rights pertaining to such Shares; subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such Shares in accordance with the
terms of this Agreement, or prior to the date hereof and which remain unpaid at
the Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If after the Effective Time
Certificates are presented to the Surviving Corporation for any reason they
shall be canceled and exchanged as provided in this Article 2.
(e) Any portion of the Merger Fund which remains undistributed
to the stockholders of the Company for six months after the Effective Time shall
be delivered to Parent upon demand and any stockholders of the Company who have
not theretofore complied with this Article 2 shall thereafter look only to
Parent for payment of their claim for the Cash Merger Consideration.
(f) Neither Acquisition nor the Company shall be liable to any
holder of Shares for cash from the Merger Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
SECTION 2.10. Stock Options.
(a) At the Effective Time, each outstanding option to purchase
Shares (a "Company Stock Option" or collectively "Company Stock Options") issued
pursuant to the Company's 1999 Omnibus Stock Incentive Plan (the "1999 Option
Plan"), whether vested or unvested, the exercise price of which is greater than
the Cash Merger Consideration, shall be canceled and extinguished without
consideration and the 1999 Option Plan shall terminate as of the Effective Date.
(b) At the Effective Time, each outstanding Company Stock
Option issued pursuant to the 1999 Option Plan or the Company's 2000 Stock
Option Plan (the "2000 Option Plan" and, together with the 1999 Option Plan, the
"Company Option Plans") that is vested as of the Effective Time, the exercise
price of which is less than the Cash Merger Consideration shall be canceled and
extinguished and shall become the right to receive an amount, without interest,
in cash paid at the Effective Time equal to the excess, if any of the Cash
Merger Consideration over the exercise price per Share of such Company Stock
Option, less the amount of Taxes (as defined in Section 3.15(a)) required to be
withheld under applicable Federal, state or local laws and regulations
multiplied by the number of Shares subject to such Company Stock Option.
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(c) At the Effective Time, each outstanding Company Stock
Option issued pursuant to the Company Option Plans or any other stock option
plan, program, arrangement or agreement to which the Company or any of its
subsidiaries is a party that is not vested as of the Effective Time, the
exercise price of which is less than the Cash Merger Consideration shall be
canceled and extinguished in consideration for certain compensatory payments to
be paid to the holder of such Company Stock Option at the time the Company
Stock Option would otherwise have vested (provided that such holder is employed
with the Company at such time and has not breached any of such holder's
obligations under any applicable employment agreement with the Company or any
Subsidiary) equal to an amount, without interest, in cash equal to the excess,
if any of the Cash Merger Consideration over the exercise price per Share of
such Company Stock Options that would otherwise have vested at such time.
Notwithstanding the foregoing, the right to receive such payments shall vest in
accordance with the terms of the applicable option agreement.
(d) If and to the extent required by the terms of the Company
Option Plan, or any other stock option plan, program, arrangement or agreement
to which the Company or any of its subsidiaries is a party or the terms of any
Company Stock Option granted thereunder, the Company shall cooperate with Parent
and Acquisition in obtaining the consent of each holder of outstanding Company
Stock Options to the foregoing treatment of such Company Stock Options and to
take any other action necessary to effectuate the foregoing provisions.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule previously
delivered by the Company to Parent (the "Company Disclosure Schedule"), the
Company hereby represents and warrants to each of Parent and Acquisition as of
the date hereof as follows:
SECTION 3.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and each of its subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, except where the failure to
qualify or to be in good standing would not have a Material Adverse Effect (as
defined below) and has all requisite power and authority to own lease and
operate its properties and to carry on its businesses as now being conducted,
except where the failure to have such power and authority would not have a
Material Adverse Effect. The Company has heretofore made available to Parent
complete and correct copies of the Certificate of Incorporation and Bylaws (or
similar governing documents), as currently in effect, of the Company and its
subsidiaries. When used in connection with the Company or its subsidiaries, the
term "Material Adverse Effect" means any change or effect (i) that is materially
adverse to the business, properties, financial condition, or results of
operations of the Company and its subsidiaries, taken as whole, or (ii) that
would materially impair the ability of the Company to perform its obligations
hereunder. Notwithstanding the foregoing, none of
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the following shall be deemed, either alone or in combination, to constitute a
Material Adverse Effect: (i) changes or effects resulting from general changes
in economic, market, regulatory or political conditions or changes in conditions
or business practices generally applicable to the industries in which the
Company and its subsidiaries operate, including, but not limited to, changes and
effects resulting from a change in interest rates or an industry-wide decrease
in mortgage volume; (ii) changes in the market price or trading volume of the
Shares on the Nasdaq National Market; or (iii) changes or effects resulting from
the announcement or approval of the Offer and the Agreement or relating to the
identity of or facts pertaining to Parent or Acquisition.
(b) Each of the Company and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on the Company.
SECTION 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized stock of the Company consists of 100,000,000
shares of common stock, par value $.01 per share of the Company (the "Shares"),
of which, as of January 31, 2000, 14,670,560 Shares were issued and outstanding,
and 10,000,000 shares of preferred stock, par value $.01 per share, no shares of
which are outstanding. All of the outstanding Shares have been validly issued
and are fully paid and nonassessable, and free of preemptive rights granted by
the Company. As of January 31, 2000, approximately 2,040,652 Shares were
reserved for issuance upon the exercise of outstanding Company Stock Options
issued pursuant to the Company Option Plans and other stock option plans, or
agreements to which the Company or any of its subsidiaries is a party. Except as
set forth in Section 3.2(a) of the Company Disclosure Schedule, since January
31, 2000, no shares of the Company's stock have been issued other than pursuant
to Company Stock Options or other stock-based employee benefit plans of the
Company and no options to acquire Shares have been granted other than pursuant
to the Company Option Plans. Except as set forth above and in Sections 3.2(a) of
the Company Disclosure Schedule, and except for the Rights, the Prism Equity
Value Plan-I and the Prism Equity Value Plan-II, as of the date hereof, there
are issued, reserved for issuance, or outstanding (i) no shares of stock or
other voting securities of the Company, (ii) no securities of the Company or its
subsidiaries convertible into or exchangeable for shares of stock or voting
securities of the Company, (iii) no options or other rights to acquire from the
Company or its subsidiaries and, except as described in Section 3.2(a) of the
Company Disclosure Schedule, no obligations of the Company or its subsidiaries
to issue any stock, voting securities or securities convertible into or
exchangeable for stock or voting securities of the Company, (iv) no bonds,
debentures, notes or other indebtedness or obligations of the Company or any of
its subsidiaries entitling the holders thereof to have the right to vote (or
which are convertible into, or exercisable or exchangeable for, securities
entitling the holders thereof to have the right to vote) with the stockholders
of the Company or any of its subsidiaries on any matter, and (v) no equity
equivalent interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (collectively "Company Securities"). As of
the date
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hereof, there are no outstanding obligations of the Company or its subsidiaries
(absolute, contingent or otherwise) to repurchase, redeem or otherwise acquire
any Company Securities. There are no Shares outstanding subject to rights of
first refusal of the Company, nor are there any pre-emptive rights granted by
the Company with respect to any Shares. Other than this Agreement, there are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or,
except as set forth in Section 3.2(a) of the Company Disclosure Schedule,
registration of any shares of stock of the Company.
(b) Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, all of the outstanding stock of the Company's subsidiaries
is owned by the Company, directly or indirectly, free and clear of any Lien (as
defined below). There are no securities of the Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire from
the Company or its subsidiaries and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any stock or other ownership interests in,
or any other securities, of any subsidiary of, the Company. Except as set forth
in Section 3.2(b) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or its subsidiaries to repurchase, redeem
or otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company. For purposes of this Agreement,
"Lien" means, with respect to any asset (including without limitation any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset (including any restrictions on the right to
vote or sell the same except as may be provided as a matter of law).
(c) The Shares constitute the only class of equity securities
of the Company or its subsidiaries registered or required to be registered under
the Exchange Act.
SECTION 3.3. Authority Relative to this Agreement; Recommendation.
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby except, if required by law, the approval and adoption of
this Agreement and the Merger by the holders of the outstanding Shares. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and
Acquisition, constitutes a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by any applicable conservator, receivership,
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
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SECTION 3.4. SEC Reports; Financial Statements; Accounting
Procedures.
(a) The Company has filed all required forms, reports and
documents ("Company SEC Reports") with the SEC since January 1, 1999, each of
which has complied (as of its respective date) in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates such
forms, reports and documents were filed. None of such Company SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained when filed any untrue statement of
a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements of the Company
included in the Company SEC Reports fairly present in all material respects in
conformity with generally accepted accounting principles in the United States as
in effect from time to time and applied on a consistent basis ("GAAP") (except
as may be indicated in the notes thereto or, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC and
subject to normal year-end adjustments) the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended.
(b) The Company has heretofore made available or promptly will
make available to Acquisition or Parent a complete and correct copy of any
amendments or modifications which are required to be filed with the SEC but have
not yet been filed with the SEC to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Exchange Act.
(c) The Company and its subsidiaries maintain a system of
internal accounting controls, policies and procedures sufficient to ensure that
all transactions relating to their business are executed in conformity in all
material respects with the applicable rules, regulations, directives and
instructions of governmental and regulatory authorities, the Agencies (as
defined in Section 3.9) and Investors (as defined in Section 3.8) (the "Agency
and Investor Requirements"), and in a manner as to permit preparation of
financial statements in accordance the Agency and Investor Requirements and to
maintain accountability for the Company's assets.
SECTION 3.5. Information Supplied. None of the information
supplied by the Company in writing for inclusion or incorporation by reference
in the Offer Documents, Schedule 14D-9, any other tender offer materials,
Schedule 14A or 14C, or the proxy statement or information statement ("Proxy
Statement") relating to any meeting to be held in connection with the Merger
(all of the foregoing documents, collectively, the "Disclosure Statements")
will, at the date each and any of the Disclosure Statements is mailed to
stockholders of the Company and at the time of the meeting of stockholders of
the Company to be held, if necessary, in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances
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under which they are made, not misleading, except that no representation or
warranty is made by the Company with respect to information supplied in writing
by Parent or Acquisition for inclusion in the Proxy Statement or Schedule 14D-9.
The Proxy Statement, if any, and Schedule 14D-9 will comply as to form in all
material respects with all provisions of applicable law. None of the information
supplied by the Company in writing for inclusion in the Disclosure Statements or
provided by the Company in the Schedule 14D-9 will, at the respective times that
any Disclosure Statement and the Schedule 14D-9 or any amendments thereof or
supplements thereto are filed with the SEC and are first published or sent or
given to holders of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.6. Consents and Approvals; No Violations. Except as set
forth in Section 3.6 of the Company Disclosure Schedule and except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, (a) the Exchange Act, (b) state securities
laws ("Blue Sky Laws") or take-over laws, (c) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), or (d) state insurance or
mortgage brokerage laws or regulations and the filing and recordation and
acceptance for record of the Merger Certificate as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent or approval of,
any court or tribunal, or administrative governmental or regulatory body, agency
or authority (a "Governmental Entity") is necessary for the execution and
delivery by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation or Bylaws (or similar governing documents) of the Company or any
of its subsidiaries, (ii) except as set forth in Section 3.6 of the Company
Disclosure Schedule result in a violation or breach of or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or any
of their respective properties or assets may be bound or (iii) except as set
forth in Section 3.6 of the Company Disclosure Schedule or in this Section 3.6
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company or any of its subsidiaries or any of their respective
properties or assets except, in the case of (ii) or (iii), for violations,
breaches, defaults or rights of termination, amendment, cancellation or
acceleration or Liens which would not have a Material Adverse Effect.
SECTION 3.7. No Undisclosed Liabilities; Absence of Changes.
Except to the extent publicly disclosed in the Company's SEC Reports or as set
forth in Section 3.7 of the Company Disclosure Schedule, as of December 31,
1999, none of the Company or any of its subsidiaries had any liabilities or
obligations of any nature,
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whether or not accrued, contingent or otherwise, that would be required by GAAP
to be reflected on a consolidated balance sheet of the Company and its
subsidiaries (including the notes thereto) or which would have a Material
Adverse Effect and since such date, the Company has incurred no such liability
or obligation, which would have a Material Adverse Effect, other than in the
ordinary course of business consistent with past practice.
SECTION 3.8. Litigation. As of the date hereof, except as
disclosed in Section 3.8 of the Company Disclosure Schedule, there is no suit,
claim, action, proceeding or investigation pending or, to the Company's
Knowledge (as defined below), threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity that (a) involves any Agency or any owner, purchaser or
beneficiary (other than an Agency) of a Mortgage Loan or of any proceeds of, or
interest in or from, a Mortgage Loan ("Investor") or (b) individually or in the
aggregate, would have a Material Adverse Effect. Except as disclosed by the
Company in the Company SEC Reports, none of the Company or its subsidiaries nor
any property or asset of the Company or any of its subsidiaries is subject to
any outstanding order, writ, injunction or decree which would have a Material
Adverse Effect. For purposes of this Agreement, the term "Knowledge" with
respect to the Company means the actual knowledge of any of the officers and
other employees of the Company identified in Exhibit B hereto.
SECTION 3.9. Compliance with Laws.
(a) The Company and its subsidiaries have complied in all
material respects with all applicable material laws, rules, regulations,
ordinances and codes, whether federal, state, local or foreign and, including,
without limitation, (i) all laws and regulations relating to occupational health
and safety, equal employment opportunities, fair employment practices, and sex,
race, religious, age and other prohibited discrimination, all other labor laws,
including without limitation the Family and Medical Leave Act, and (ii) all
licensure, disclosure, usury and other consumer credit laws and regulations
governing residential mortgage lending and brokering, including, but not limited
to, all applicable rules, regulations, standards and guidelines promulgated by
the United States Department of Housing and Urban Development ("HUD"), Freddie
Mac ("Freddie Mac"), the Government National Mortgage Association ("GNMA"),
Fannie Mae ("Fannie Mae"), the Veterans Administration ("VA" and, together with
HUD, Freddie Mac, GNMA and Fannie Mae, each, an "Agency" and, collectively the
"Agencies") and the Board of Governors of the Federal Reserve System, the state
agencies and all applicable provisions of the Real Estate Settlement Procedures
Act of 1974, the Flood Insurance Protection Act, the Consumer Credit Protection
Act, the Truth-in-Lending Act, the Equal Credit Opportunity Act and the Fair
Credit Reporting Act, each as amended from time to time, and all regulations
promulgated thereunder (the foregoing statutes and laws described in clause
(ii), collectively, "Consumer Credit Law") and, except as set forth on Section
3.9 of the Company Disclosure Schedule, no written notice or correspondence
(whether regarding litigation, regulatory action or otherwise) has been received
by the Company from or on behalf of consumers or from any regulatory agency in
which such consumer or regulatory agency has alleged
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noncompliance with any Consumer Credit Law or other applicable law, except as
would not individually or in the aggregate, have a Material Adverse Effect.
(b) Each loan as to which applications were accepted and
processed by the Company or any subsidiary or which otherwise was originated,
underwritten, closed, funded or brokered by the Company of any subsidiary (each,
a "Mortgage Loan") conforms in to the Agency and Investor Requirements and each
Mortgage Loan is eligible for sale to, insurance by, or pooling to collateralize
securities issued or guaranteed by, the applicable Investor or insurer except,
in the case of any of the foregoing, as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company and its subsidiaries have
originated, underwritten, funded, serviced and sold (as applicable) each
Mortgage Loan in compliance with applicable federal, state and local legal and
regulatory requirements (including licensing statutes and regulations) and in
accordance with Agency and Investor Requirements and the related Mortgage Loan
documents except, in the case of any of the foregoing, as would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.10. Forms; Policies and Procedures. The Company has
provided Parent with a copy of the Company's internal practices and procedures
and the Company, its subsidiaries and their employees have complied and are in
compliance with such practices and procedures except, where the failure to be in
compliance would not have a Material Adverse Effect. All such practices and
procedures and all form disclosures, and notices, brokers agreements, notes,
mortgages, instruments and agreements used in the business of the Company and
its Subsidiaries comply in all material respects with (a) all applicable
Consumer Credit Law and (b) any standards imposed by the Agencies, to the extent
applicable, and (c) any other applicable law or regulation.
SECTION 3.11. Licenses and Permits. The Company or the applicable
subsidiary has obtained all material licenses, permits, qualifications,
franchises and other governmental authorizations and approvals, including,
without limitation, all state mortgage broker and mortgage banker licenses and,
as applicable, approvals by the Agencies required in order for it to conduct its
business as presently conducted. Each such license, permit, qualification,
franchise and other authorization is in full force and effect and, except as set
forth in Section 3.11 of the Company Disclosure Schedule, will remain in full
force and effect immediately after the Effective Time and shall not be violated,
affected or impaired by, or require any further action to remain effective as a
result of the Closing. No material violation exists in respect of any such
material license, permit, qualification, franchise, authorization or approval.
No proceeding is pending, or to the Company's Knowledge, threatened to revoke or
limit any such license, permit, qualification, franchise, authorization or
approval.
SECTION 3.12. Employee Benefit Plans; Labor Matters.
(a) Section 3.12(a) of the Company Disclosure Schedule sets
forth each plan that is subject to the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and each other material agreement, arrangement or
commitment that is an employment or consulting agreement (other than
non-executive employment
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agreements or loan officer agreements), executive or incentive compensation
plan, bonus plan, deferred compensation agreement, employee pension, profit
sharing, savings or retirement plan, employee stock option or stock purchase
plan, group life, health, or accident insurance or other employee benefit plan,
agreement, arrangement or commitment, including, without limitation, severance,
vacation, holiday or other bonus plans, currently maintained by the Company or
any of its subsidiaries (or any entity that is or was at the relevant time
treated as a single employer with the Company or any of its subsidiaries under
Section 414(b), (c), (m), or (o) of the Code ("ERISA Affiliate")) for the
benefit of any present or former employees, officers or directors of the
Company, any of its subsidiaries or ERISA Affiliates ("Company Personnel") or
with respect to which the Company or any of its subsidiaries or ERISA Affiliates
has liability or makes or has an obligation to make contributions (each such
plan, agreement, arrangement or commitment set forth in Section 3.12(a) of the
Company Disclosure Schedule being hereinafter referred to as a "Company Employee
Plan").
(b) The Company has made available to the Parent (i) copies of
all Company Employee Plans or in the case of an unwritten plan, a written
description thereof, (ii) copies of the most recent annual, financial and, if
applicable, actuarial reports and Internal Revenue Service determination letters
relating to such Company Employee Plans and (iii) copies of the most recent
summary plan descriptions relating to such Company Employee Plans and
distributed to Company Personnel.
(c) Except as disclosed in Section 3.12(c) of the Company
Disclosure Schedule, there are no Company Personnel who are entitled to any
medical, dental or life insurance benefits to be paid under any Company Employee
Plans after termination of employment other than as required by Section 601 of
ERISA, Section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), or applicable state law.
(d) Each Company Employee Plan that is an employee welfare
benefit plan under Section 3(1) of ERISA is either (i) funded through an
insurance company contract and is not a "welfare benefit fund" within the
meaning of Section 419 of the Code or (ii) unfunded.
(e) All contributions or payments due with respect to any
periods prior to the Closing Time under any Company Employee Plan have been or
will be timely made or appropriate charges have been made on the financial
statements. Except as disclosed in Section 3.12(e) of the Company Disclosure
Schedule, each Company Employee Plan by its terms and operation is in compliance
in all material respects with all applicable laws (including, but not limited
to, ERISA, the Code and the Age Discrimination in Employment Act of 1967, as
amended). The Company has obtained a favorable determination as to the
qualification under Section 401(a) (and 401(k) where applicable) of each Company
Employee Plan that is an employee pension benefit plan from the IRS. To the
Company's Knowledge, nothing has occurred since the date of each such
determination that would adversely affect such tax qualification.
(f) Except as set forth in Section 3.12(f) of the Company
Disclosure Schedule, there are no actions, suits or claims pending or, to the
Company's Knowledge, threatened (other than routine noncontested claims for
benefits), against any Company
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Employee Plan or, to the Company's Knowledge, any administrator or fiduciary of
any such Company Employee Plan. As to each Company Employee Plan for which an
annual report is required to be filed under ERISA or the Code, all such filings
(including Form 5500s and all schedules) have been made on a timely basis, in
accordance with all applicable requirements. No Company Employee Plan is a
defined benefit plan under Section 3(35) of ERISA.
(g) Except as disclosed in Section 3.12(g) of the Company
Disclosure Schedule neither the Company, any of its subsidiaries nor any ERISA
Affiliate maintains or has maintained, contributes to or has contributed to or
is or has been required to contribute to any plan under which more than one
employer makes contributions (within the meaning of Section 4064(a) of ERISA),
any plan that is a multiemployer plan within the meaning of Section 3(37) of
ERISA, or any plan subject to the minimum funding requirements of Section 412 of
the Code.
(h) Neither the Company nor any of its subsidiaries (nor, to
the Company's Knowledge, any other Person, including any fiduciary) has engaged
in any "prohibited transaction" (as defined in Section 4975 of the Code or
Section 406 of ERISA) or committed any breach of fiduciary duty, which would
subject any of the Company Employee Plans (or their trusts), the Company, any of
its subsidiaries or ERISA Affiliates, to any material tax or penalty or other
material liability imposed under the Code or ERISA.
(i) None of the assets of the Company Employee Plans is
invested in any property constituting employer real property or an employer
security within the meaning of Section 407(d) of ERISA.
(j) Except as disclosed in Section 3.12(k) of the Company
Disclosure Schedule or otherwise provided in this Agreement, the transactions
contemplated by this Agreement (either alone or together with any other
transaction(s) or event(s)) will not (i) entitle any Company Personnel to
severance pay under any Company Employee Plan, (ii) accelerate the time of
payment or vesting or materially increase the amount of benefits due under any
Company Employee Plan or compensation to any Company Personnel, (iii) result in
any payments (including parachute payments) under any Company Employee Plan
becoming due to any Company Personnel, or (iv) terminate or modify or give a
third party a right to terminate or modify the provisions or terms of any
Company Employee Plan. Section 3.12(j) of the Company Disclosure Schedule sets
forth, for each employee of the Company or any of its subsidiaries that will
receive any parachute payment within the meaning of Section 280G of the Code, a
preliminary calculation of the base amount for such employee and of the amount
of each such parachute payment, based upon information currently known by the
Company and assuming all circumstances that could give rise to such payment
occur.
(k) Except as set forth in Section 3.12(k) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any collective bargaining or other labor union contract applicable to any
Company Personnel. There is no pending or, to the Company's Knowledge,
threatened labor dispute, strike or work stoppage against the Company or any of
its subsidiaries. There is no labor union
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representing any of the Company's employees or, to the Company's Knowledge, any
organizational effort currently being made on behalf of any labor organization
to organize any such employees. Neither the Company nor any of its subsidiaries
nor their respective representatives or employees has committed any unfair labor
practices in connection with the operation of the respective businesses of the
Company or its subsidiaries, and there is no pending or, to the Company's
Knowledge, threatened charge or complaint against the Company or its
subsidiaries by the National Labor Relations Board or any comparable state
governmental agency. To the Company's Knowledge, the Company and its
subsidiaries are in compliance in all material respects with all applicable laws
and regulations respecting employment, employment practices, labor relations,
employment discrimination, safety and health, wages, hours and terms and
conditions of employment.
(l) All individuals who are performing or have performed
services for the Company or any affiliate thereof, whether as consultants,
contractors, agents or otherwise, and are or were classified by the Company or
any affiliate as "independent contractors" qualify for such classification under
Section 530 of the Revenue Act of 1978 or Section 1706 of the Tax Reform Act of
1986, as applicable. The Company has fully complied with and is not in default
or violation of any law, statute, rule, regulation or requirement applicable to
such individual. Except as set forth in Section 3.12(l) of the Company
Disclosure Schedule, there is no pending or, to the Company's Knowledge,
threatened claim against the Company by or on behalf of any such individual, or
investigation, audit or other proceeding relating to such an individual or
individuals, by any Governmental Entity. To the Company's Knowledge, there is no
labor union representing any such individuals or, to the Company's Knowledge,
any organizational effort currently being made on behalf of any labor
organization to organize any such individuals.
SECTION 3.13. Environmental Laws and Regulations.
(a) Except as publicly disclosed in the Company SEC Reports,
(i) the Company and its subsidiaries are in material compliance with all
applicable federal, state, local and foreign laws and regulations, orders,
decrees, judgments, permits and licenses relating to public and worker health
and safety and to the protection and clean-up of the natural environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) and activities or conditions relating thereto,
including, without limitation, those relating to the generation, handling,
disposal, transportation or release of hazardous materials (collectively
"Environmental Laws"), except for non-compliance that would not have a Material
Adverse Effect, which compliance includes but is not limited to, the possession
by the Company and its subsidiaries of all material permits and other
governmental authorizations required under applicable Environmental Laws and
compliance with the terms and conditions thereof and; (ii) none of the Company
or its subsidiaries has received written notice of or, to the Company's
Knowledge, is the subject of any Environmental Claim (defined below) that would
have a Material Adverse Effect or, to the Company's Knowledge, against any
Person whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
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(b) Except as disclosed in the Company SEC Reports, there is no
action, cause of action, claim, investigation, demand or written notice by any
Person alleging liability under or non-compliance by the Company with any
Environmental Law (an "Environmental Claim") that is pending or, to the
Company's Knowledge, threatened against the Company or its subsidiaries which
would have a Material Adverse Effect.
SECTION 3.14. Taxes.
(a) For purposes of this Agreement: (i) "Tax" or "Taxes" means
any taxes, charges, fees, levies, or other assessments imposed by any U.S. or
foreign governmental entity, whether national, state, county, local or other
political subdivision, including, without limitation, all net income, gross
income, sales and use, rent and occupancy, value added, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipt,
capital stock, business and occupation, disability, employment, payroll,
license, estimated, or withholding taxes or charges imposed by any governmental
entity, and includes any interest and penalties on or additions to any such
taxes (and includes taxes for which the Company and/or any of its subsidiaries,
as the case may be, may be liable in its own right, or as the transferee of the
assets of, or as successor to, any other corporation, association, partnership,
joint venture, or other entity, or under Treasury Regulation Section 1.1502-6 or
any similar provision of foreign, state or local law), provided, however, that
to the extent that the following representations relate to state and local sales
taxes or lodging taxes, such representations are limited to the Company's
Knowledge; and (ii) "Tax Return" means a report, return or other information
required to be supplied to a governmental entity with respect to Taxes
including, where permitted or required, group, combined or consolidated returns
for any group of entities that includes the Company or any of its subsidiaries.
(b) Except as set forth in Section 3.14(b) of the Company
Disclosure Schedule, the Company and each of its subsidiaries, and any
affiliated or combined group of which the Company or any of its subsidiaries is
or was a member for applicable Tax purposes, have (i) filed all federal income
and all other Tax Returns required to be filed by applicable law and all such
federal income and other Tax Returns (A) reflect the liability for Taxes of the
Company and each of its subsidiaries, and (B) were filed on a timely basis and
(ii) within the time and in the manner prescribed by law, paid (and until the
Closing Time will pay within the time and in the manner prescribed by law) all
Taxes that were or are due and payable as set forth in such Tax Returns.
(c) Each of the Company and, where applicable, the Company's
subsidiaries has established (and until the Closing Time will maintain) on its
books and records reserves adequate to pay all Taxes of the Company or such
respective subsidiary, as the case may be, in accordance with GAAP, which are
reflected in the most recent consolidated financial statements of the Company
and its subsidiaries contained in the Company SEC Documents, as applicable, to
the extent required by GAAP.
(d) Except as disclosed in Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof has
requested any extension of time within which to file any income, franchise or
other Tax Return, which Tax Return has not been filed as of the date hereof.
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(e) Except as disclosed in Section 3.14(d) of the Company
Disclosure Schedule, neither the Company nor any subsidiary thereof has executed
any outstanding waivers or comparable consents that will be in effect after the
Effective Time regarding the application of the statute of limitations with
respect to any income, franchise or other Taxes or Tax Returns.
(f) Except as disclosed in Section 3.14(f) of the Company
Disclosure Schedule, no deficiency for any Tax which, alone or in the aggregate
with any other deficiency or deficiencies, would exceed $100,000, has been
proposed, asserted, or assessed in writing against the Company and/or any
subsidiary thereof that has not been resolved and paid in full or otherwise
settled, no audits or other administrative proceedings are presently in progress
or pending or threatened in writing with regard to any Taxes or Tax Returns of
the Company and/or any subsidiary thereof, and no written claim is currently
being made by any authority in a jurisdiction where any of the Company or any
subsidiary thereof, as the case may be, does not file Tax Returns that it is or
may be subject to Tax in that jurisdiction.
(g) Except as disclosed on Section 3.14(g) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to any agreement relating to allocating or sharing of the payment of, or
liability for, Taxes.
(h) The Company does not constitute and for the past five years
has not constituted a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
SECTION 3.15. Properties. Neither the Company nor any of its
Subsidiaries owns any real property. Each of the Company and its subsidiaries
has valid title to all properties, assets and rights shown on its balance sheet
or its last Company SEC Report prior to the date hereof as being owned by it
and valid leasehold interests in all material properties and assets (whether
real, personal or mixed) leased by it (collectively, the "Company Assets").
With respect to any leased Company Assets, there are no security deposits or
portions thereof that have been applied in respect of a breach or default under
the applicable lease which has not been redeposited in full and neither the
Company nor any of its subsidiaries has mortgaged, deeded in trust or otherwise
transferred or encumbered such Lease or any interest therein except in the
ordinary course of business. There are no pending or, to the Company's
Knowledge, threatened condemnation proceedings against or affecting any
material Company Assets.
SECTION 3.16. Material Contracts and Commitments.
(a) Section 3.16 of the Company Disclosure Schedule contains a
true and complete list as of the date of this Agreement of all of the following
contracts, agreements and commitments, whether oral or written ("Contracts"), to
which the Company or any of its subsidiaries is a party or by which any of them
or any of their material Company Assets is bound, as each such contract or
commitment may have been amended, modified or supplemented:
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(i) any agreement (including all master commitments and
pool purchase contracts) between the Company or any of its subsidiaries
and any Agency or Investor pursuant to which the Company and its
subsidiaries sold more than $175 million in principal amount of Mortgage
Loans during fiscal year 1999, and all insurance or guaranty contracts
(including contracts with any private mortgage insurer or Pool (as
defined herein) insurance provider with respect to the Mortgage Loans;
(ii) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for rent
in excess of $100,000 during any twelve-month period;
(iii) any agreement for the lease of real property
providing for the payment of rent in excess of $250,000 during any
twelve-month period;
(iv) any agreement (or group of related agreements) or
indemnity under which the Company or any of its subsidiaries has created,
incurred, assumed or guaranteed any debt including without limitation any
indebtedness for borrowed money, warehouse lines of credit, or any
capitalized lease or purchase money obligation (except for intercompany
obligations);
(v) any agreement under which the Company or any of its
subsidiaries has granted a lien, pledge, security interest or other
encumbrance upon any of its material assets;
(vi) any agreement under which the Company or any of its
subsidiaries has an obligation to indemnify a director, officer or
employee;
(vii) any agreement for the employment of any individual
on a full-time, part-time, consulting or other basis other than oral
retainers of professionals terminable at will except for employment
agreements of employees with a salary of less than $100,000 who have
signed the Company's or any of its subsidiaries' standard form employment
agreement (excluding commissioned employees);
(viii) any agreement concerning confidentiality or
noncompetition given by the Company other than those agreements (A) with
employees on the Company's standard form employment, (B) related to
Company Stock Options, (C) entered into with any Person in connection
with the proposed sale of the Company and (D) that do not materially
restrict the manner in which the Company or any of its subsidiaries
conduct its business;
(ix) any other plan, contract or arrangement, whether
formal or informal, which involves direct or indirect compensation
(including bonus, stock option, severance, golden parachute, deferred
compensation, special retirement, consulting and similar agreements and
all agreements and arrangements regarding the Company's net branches) for
the benefit of one or more of the current or former directors, officers
or employees of the Company (other than Company Employee Plans described
in Section 3.12(a));
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(x) any guaranty or suretyship, performance bond or
contribution agreement;
(xi) any marketing, sales representative or dealership
agreement with respect to which the fees paid or payable by the Company
are or will be in excess of $100,000; any material agreement relating to
e-commerce or agreements related to the Company's "net branches"; and
(xii) any other material contract or commitment.
(b) The Company has heretofore made available to the Parent
true and complete copies of all of the Contracts required to be set forth in
Section 3.16 of the Company Disclosure Schedule. Each such Contract is a valid
and binding agreement of the Company or one of its subsidiaries in accordance
with its terms, and is in full force and effect (except as set forth in Section
3.16 of the Company Disclosure Schedule), except where the failure to be valid
and binding and in full force and effect would not individually or in the
aggregate have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is in default with respect to any such Contract, nor (to the
Company's Knowledge) does any condition exist that with notice or lapse of time
or both would constitute such a default thereunder or permit any other party
thereto to terminate such Contract, except as would not have a Material Adverse
Effect. To the Company's Knowledge, no other party to any such Contract is in
default in any respect with respect to any such Contract, which would have a
Material Adverse Effect. No party has given any written notice (i) of
termination or cancellation of any such Contract or (ii) that it intends to
assert a breach of any such Contract, whether as a result of the transactions
contemplated hereby or otherwise, which would have a Material Adverse Effect.
Each Contract identified in Section 3.16 of the Company Disclosure Schedule in
response to any item under this Section 3.16 shall be deemed incorporated by
reference to all other items in this Section 3.16.
SECTION 3.17. Intellectual Property.
(a) Certain Definitions. When used in this Section 3.17, the
following capitalized terms shall have the following meanings:
(i) the term "Intellectual Property Rights" means
intellectual property rights arising from or in respect of the following,
whether protected, created or arising under the laws ofthe United States
or any other jurisdiction:
(A) fictitious business names, trade names,
registered and unregistered trademarks and service marks and logos
(including any Internet domain names), and applications therefor
(collectively, "Marks");
(B) patents, patent rights and all applications
therefor, including any and all continuation, divisional,
continuation-in-part, or reissue patent applications or patents
issuing thereon (collectively, "Patents"); and
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(C) know-how, inventions, discoveries, concepts,
ideas, methods, processes, designs, formulae, technical data,
drawings, specifications, data bases and other proprietary and
confidential information, including customer lists, in each case
to the extent not included in the foregoing subparagraphs (A) or
(B) (collectively, "Trade Secrets");
(ii) the term "Intellectual Property Assets" means all
Intellectual Property Rights owned or licensed by the Company necessary
to the conduct of the Company's business, and all further uses of the
terms Marks, Patents, Copyrights, and Trade Secrets in this Section 3.17
shall mean Marks, Patents, Copyrights, and Trade Secrets that are
Intellectual Property Assets; and
(iii) the term "Software" means any and all (w) computer
programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (x)
databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (y) descriptions,
flow-charts and other work product used to design, plan, organize and
develop any of the foregoing, and (z) all documentation, including user
manuals and training materials, relating to any of the foregoing, in each
case developed or licensed by the Company necessary for the conduct of
its business as currently conducted, specifically excluding those items
prepared for customers in the operation of the Company's business for
which the customer contractually has vested title.
(b) Marks. Section 3.17(b) of the Company Disclosure Schedule
sets forth an accurate and complete list of all registered, pending applications
for registration of any Marks and material unregistered Marks, in each case
owned by the Company and used by the Company in its business as presently
conducted ("Company Marks"). Except as may be set forth in Section 3.17(b) of
the Company Disclosure Schedule and would not have an Material Adverse Effect:
(i) the Company owns all right, title and interest in
each of the Company Marks, free and clear of any and all liens and
encumbrances (subject to written licenses granted in the ordinary course
of business), and the Company has not received any written notice or
claim challenging the Company's exclusive and complete ownership of such
Company Marks;
(ii) the Company Marks are valid and enforceable and the
Company has not received any written notice or claim challenging the
validity or enforceability of any such Company Marks;
(iii) to the Company's Knowledge, the Company has not
taken any action (or failed to take any action), that would result in the
forfeiture, relinquishment, or unenforceability of any of the Company
Marks or any of the Company's rights therein;
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(iv) the Company has taken reasonable steps to protect
the Company's rights in and to the Company Marks;
(v) except with respect to licensing arrangements,
business relationships, advertisements or publicity in each case made in
writing in the ordinary course of business, the Company has not granted
to any Person any right, license or permission to use any of the Company
Marks;
(vi) to the Company's Knowledge, there is no trademark or
service mark or application therefor of any other Person that conflicts
with any of the Company Marks;
(vii) none of the Company Marks used by the Company
infringes or to the Company's Knowledge is alleged to infringe any trade
name, trademark, service mark or trade dress right of any other Person,
and there have been no written claims made with respect thereto; and
(viii) to the Company's Knowledge, there has been no prior
use of any Company Marks by any third party which would confer upon such
third party superior rights in such Company Marks.
(c) Owned Patents. The Company does not own any right, title or
interest in any Patents.
(d) Owned Copyrights. Except as may be set forth on Section
3.17(d) of the Company Disclosure Schedule and would not have an Material
Adverse Effect:
(i) the Company is the owner of all right, title and
interest in and to each of the copyrights used by the Company in its
business as presently conducted other than those as to which the rights
being exercised by the Company have been licensed from another Person
(collectively, the "Owned Copyrights"), free and clear of any and all
liens and encumbrances (subject to written licenses granted in the
ordinary course of business), and the Company has not received any
written notice or claim challenging the Company's complete and exclusive
ownership of all Owned Copyrights;
(ii) the Company has not received any written notice or
claim challenging or questioning the validity or enforceability of any of
the Owned Copyrights or indicating an intention on the part of any Person
to bring a claim that any Owned Copyright is invalid, is unenforceable or
has been misused and, to the Company's Knowledge, no Owned Copyright
otherwise has been challenged or threatened in any way;
(iii) to the Company's Knowledge, the Company has not
taken any action (or failed to take any action), that would result in the
unenforceability of any of the Owned Copyrights;
(iv) the Company has taken all reasonable steps to
protect the Company's rights in and to the Owned Copyrights;
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(v) the Company has not granted to any Person any right,
license or permission to exercise any rights under any of the Owned
Copyrights other than non-exclusive licenses of Software granted in the
ordinary course of business of distributors or customers;
(vi) to the Company's Knowledge, no other Person has
infringed or is infringing in any of the Owned Copyrights; and
(vii) none of the subject matter of any Owned Copyrights
nor, to the Company's Knowledge, any other work of authorship fixed in a
tangible medium that is used, copied, modified, displayed or distributed
by the Company, infringes, violates or conflicts with, or is to the
Company's Knowledge, alleged to infringe, violate or conflict with, any
Intellectual Property Right of any other Person.
(e) Trade Secrets. Section 3.17(e) of the Company Disclosure
Schedule sets forth an accurate and complete list of all memoranda of invention
or invention disclosures owned and received by the Company (collectively,
"Invention Disclosures"). The Company has taken reasonable precautions to
protect the secrecy, confidentiality and value of all material Invention
Disclosures and all of the Company's other material Trade Secrets ("Company
Trade Secrets"). Except as may be set forth in Section 3.17(e) of the Company
Disclosure Schedule and as would not have an Material Adverse Effect:
(i) the Company has the absolute and unrestricted right
to use all of the Company Trade Secrets and none of the Company Trade
Secrets is subject to any liens or encumbrances (subject to written
licenses granted in the ordinary course of business), and the Company has
not received any written notice or claim challenging the Company's
absolute and unrestricted right to use all of the Company Trade Secrets;
(ii) none of the Company Trade Secrets has been, or is to
the Company's Knowledge, alleged to have been, misappropriated from, any
other Person and to the Company's Knowledge none of the Company Trade
Secrets infringes, violates or conflicts with, or is to the Company's
Knowledge, alleged to infringe, violate or conflict with, any
Intellectual Property Right of any third party; and
(iii) except under appropriate confidentiality obligations
that, to the Company's Knowledge, have been fully observed and performed,
to the Company's Knowledge, there has been no disclosure by the Company
of Company Trade Secrets.
(f) Software. Section 3.17(f) of the Company Disclosure
Schedule sets forth a complete and accurate list of all of the material Software
(excluding licensed software that is contained in standard desktop applications
and is available through commercial distributors or in consumer retail stores).
Section 3.17(f) of the Company Disclosure Schedule specifically identifies all
material Software that is owned
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exclusively by the Company (the "Owned Software") and all material Software that
is used by the Company in the conduct of their business as currently conducted
that is not exclusively owned by the Company (excluding licensed software that
is contained in standard desktop applications and is available through
commercial distributors or in consumer retail stores) (the "Licensed Software").
Except as may be set forth in Section 3.17(f) of the Company Disclosure Schedule
and as would not have an Material Adverse Effect:
(i) the Company is the owner of all right, title and
interest in and to all Owned Software and Intellectual Property Rights
relating thereto, free and clear of any and all liens and encumbrances
(subject to licenses granted in the ordinary course of business), and the
Company has not received any written notice or claim challenging the
Company's complete and exclusive ownership of all Owned Software and all
such Intellectual Property Rights relating thereto;
(ii) the Company has not assigned, licensed, transferred
or encumbered any of its rights in or to any Owned Software, to any
Person, excluding any non-exclusive licenses granted to distributors or
customers in the ordinary course of business;
(iii) no source code of any Owned Software has been
licensed or otherwise made available to any Person other than the Company
(other than pursuant to standard source code escrow agreements or
independent contractors subject to confidentiality obligations to the
Company), the Company has treated such source code as confidential and
proprietary business information, and has taken all reasonable steps to
protect the same as trade secrets of the Company;
(iv) none of the Owned Software contains any Software
that embody proprietary Intellectual Property Rights of any Person other
than the Company;
(v) the Company has lawfully acquired the right to use
the Licensed Software, as it is used in the conduct of their business as
presently conducted.
(g) [reserved]
(h) Agreements in Respect of Licensed Technology. Section
3.17(h) of the Company Disclosure Schedule contains a complete and accurate
specific list of all material agreements and arrangements pertaining to the
Licensed Software (excluding licensed software that is contained in standard
desktop applications and available through commercial distributors or in
consumer retail stores) (collectively, "Licensed Software Agreements") and a
complete and accurate specific list of all material agreements and arrangements
pertaining to any other technology used or practiced by the Company as to which
a Person other than the Company owns the applicable Intellectual Property Rights
(collectively, "Other Licensed Technology Agreements" and, together with
Licensed Software Agreements, the "Licensed Technology Agreements"). Section
3.17(h) of the Company Disclosure Schedule sets forth a complete and accurate
list of all royalty
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obligations of the Company under any Licensed Technology Agreements. Except as
may be set forth in Section 3.17(h) of the Company Disclosure Schedule and as
would not have a Material Adverse Effect:
(i) all Licensed Technology Agreements are in full force
and effect, and the Company is not in material breach thereof, nor to the
Company's Knowledge is there any claim or information to the contrary;
(ii) all Licensed Technology Agreements will be
maintained by the Company to the extent within the Company's control in
full force and effect through the Closing;
(iii) there are no pending and, to the Company's
Knowledge, no threatened disputes or disagreements with respect to any
Licensed Technology Agreement;
(iv) [reserved]
(v) [reserved]
(vi) to the Company's Knowledge, the Licensed Technology
Agreements together expressly confer on the Company valid and enforceable
rights under or in respect of all of the Intellectual Property Rights
that are not owned exclusively by Company and that are necessary in the
Company's business as currently conducted (collectively, the "Licensed
Intellectual Property"); and
(vii) neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
will result in a breach of any of the material terms, conditions or
provisions of, or constitute a default under, or result in the material
impairment of any rights under, any Licensed Technology Agreement.
(i) Agreements Involving Distribution or Other Rights Granted
to Third Parties in Respect of Software. The Company does not have any
agreements and arrangements involving the grant by the Company to any Person of
any right to distribute, prepare derivative works based on, support or maintain
or otherwise commercially exploit any owned Software.
(j) Sufficiency of Owned and Licensed Intellectual Property.
Except as set forth in Section 3.17(j) of the Company Disclosure Schedule and as
would not have an Material Adverse Effect, the Company has all of the
Intellectual Property Rights necessary for the conduct of the Company's business
as presently conducted and all of the Intellectual Property Rights necessary to
operate such business after the Closing in substantially the same manner as such
business heretofore has been operated by the Company.
(k) [reserved]
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(l) Employee Confidentiality Agreements. Except as set forth in
Section 3.17(l) of the Company Disclosure Schedule, all current and former
employees, contractors and consultants of the Company have entered into
confidentiality, invention assignment and proprietary information agreements
with the Company where appropriate, except as would not have an Material Adverse
Effect. The carrying on of the Company's business as currently conducted by the
employees, contractors and consultants of the Company does not, to the Company's
Knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or to the Company's Knowledge, constitute a default under, any
contract, covenant or instrument under which any of such employees, contractors
or consultants or the Company is now obligated.
SECTION 3.18. [reserved]
SECTION 3.19 Stock Options. Section 3.19 of the Company Disclosure
Schedule sets forth the following information concerning each of the Company
Personnel that has been granted Company Stock Options, the date of each such
grant, the total number of Shares for which the Company Stock Options are
exercisable, the number of Shares for which unvested options are exercisable and
the exercise price of all vested and unvested Company Stock Options.
SECTION 3.20. Insurance. The Company and its subsidiaries have
obtained and maintained in full force and effect insurance with responsible and
reputable insurance companies or associations in such amounts, on such terms and
covering such risks, as is customarily carried by reasonably prudent persons
conducting business or owning or leasing assets similar to those conducted,
owned or leased by the Company and its subsidiaries, except where the failure to
obtain or maintain such insurance would not have a Material Adverse Effect.
SECTION 3.21. Pool Certifications. All pools consisting of
Mortgage Loans that have been aggregated pursuant to the requirements of the
applicable Investor and assigned to collateralize securities ("Pools") are
properly balanced reconciled, fully funded and certified by the applicable
Investor or Agency.
SECTION 3.22. Brokers. No broker, finder or investment banker
(other than Friedman, Billings, Ramsey & Co., Inc., the Company's financial
adviser, a true and correct copy of whose entire engagement agreement has been
provided to Acquisition or Parent) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company
as follows:
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SECTION 4.1. Organization.
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
except in such jurisdictions where the failure to be so duly qualified or
licensed and in good standing would not have a Parent Material Adverse Effect.
The term "Parent Material Adverse Effect" means any change or effect that would
materially impair the ability of Parent and/or Acquisition to consummate the
transactions contemplated hereby.
(b) Each of Parent and Acquisition is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Parent Material Adverse Effect.
SECTION 4.2. Authority Relative to this Agreement. Each of Parent
and Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and the Stockholders' Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stockholders' Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the boards of directors of Parent and Acquisition and by Parent as
the sole stockholder of Acquisition and no other corporate proceedings on the
part of Parent or Acquisition are necessary to authorize this Agreement and the
Stockholders' Agreement or to consummate the transactions contemplated hereby
and thereby. This Agreement and the Stockholders' Agreement each have been duly
and validly executed and delivered by each of Parent and Acquisition and each
constitutes a valid, legal and binding agreement of each of Parent and
Acquisition enforceable against each of Parent and Acquisition in accordance
with its terms, except as such enforceability may be limited by any applicable
conservator, receivership, bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
except as the availability of equitable remedies may be limited by the
application of general principles of equity (regardless of whether such
equitable principle are applied in a proceeding at law or in equity).
SECTION 4.3. Information Supplied. None of the information
supplied by Parent or Acquisition in writing for inclusion in the Disclosure
Statements will, at the respective times that the Proxy Statement (if necessary)
and the Schedule 14D-9 and any amendments of or supplements to any of the
foregoing are filed with the SEC and are first published or sent or given to
holders of Shares, and in the case of any required Proxy Statement, at the time
that it or any amendment thereof or supplement thereto is mailed to the
Company's stockholders, at the time of the Stockholders' Meeting or the written
consent of the stockholders, if either is required, or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading except that no representation or warranty is
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made by Parent or Acquisition with respect to information supplied by the
Company for inclusion in the 14D-1. The Offer Documents shall comply in all
material respects as to form with applicable federal securities laws.
SECTION 4.4. Financing; Share Ownership. Parent has and will have
sufficient funds available to purchase all of the Shares that Parent agrees,
subject to the terms and conditions hereof, to purchase hereunder and to pay all
related fees and expenses, and will make such funds available to Acquisition
when required for the performance of its obligations hereunder. As of the date
hereof, Parent and Acquisition do not beneficially own any Shares.
SECTION 4.5. Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Securities Act, the Bank Act,
as amended (the "Bank Act"), the Bank Holding Company Act of 1956, as amended
(the "Bank Holding Company Act"), state insurance and mortgage brokerage laws or
regulations, and the filing and acceptance for record or recordation of the
Merger Certificate as required by the DGCL, no filing with or notice to, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Acquisition of this
Agreement and the Stockholders' Agreement or the consummation by Parent or
Acquisition of the transactions contemplated hereby and thereby, except where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not have a Parent Material Adverse
Effect. Neither the execution, delivery and performance of this Agreement and
the Stockholders' Agreement by Parent or Acquisition nor the consummation by
Parent or Acquisition of the transactions contemplated hereby and thereby will
(i) conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar charter or organizational
documents) of Parent or Acquisition, (ii) result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or Acquisition or any of Parent's other subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to Parent or Acquisition or any of
Parent's other subsidiaries or any of their respective properties or assets
except, in the case of (ii) or (iii), for violations, breaches or defaults which
would not have a Parent Material Adverse Effect.
SECTION 4.6. Brokers and Finders. Each of Parent and Acquisition
represents, as to itself and its affiliates, that no agent, broker, investment
banker, financial advisor or other firm or person is or will be entitled to any
brokers' or finders' fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
SECTION 4.7. Nature and Interim Operations of Acquisition.
Acquisition is a wholly owned, indirect subsidiary of the Parent and was formed
on March 9, 2000 solely for the purpose of engaging in the transactions
contemplated
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hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
ARTICLE 5
COVENANTS
SECTION 5.1. Interim Operations. From the date of this Agreement
until the Tender Offer Purchase Time, except as set forth in Section 5.1 of the
Company Disclosure Schedule or as expressly contemplated by any other provision
of this Agreement, unless the Parent has consented in writing thereto, the
Company shall, and shall cause each of its subsidiaries to:
(a) conduct its business and operations only in the ordinary
course of business consistent with past practice;
(b) use reasonable efforts to preserve intact the business,
organization, goodwill, rights, licenses, permits and franchises of the Company
and its subsidiaries and maintain their existing relationships with customers,
suppliers and other Persons having business dealings with them;
(c) use reasonable efforts to keep in full force and effect
adequate insurance coverage and maintain and keep its material Company Assets in
good repair, working order and condition, normal wear and tear excepted;
(d) not amend or modify its respective Certificate of
Incorporation, Bylaws, partnership agreement or other charter or organizational
documents;
(e) other than pursuant to the stock purchase right identified
as Item 1 in Section 3.2(a) of the Disclosure Schedule and other than up to
20,000 Company Stock Options that may be issued under the 2000 Stock Option Plan
in connection with the Company's fair share plan, not authorize for issuance,
issue, sell, grant, deliver, pledge or encumber or agree or commit to issue,
sell, grant, deliver, pledge or encumber any shares of any class or series of
capital stock of the Company or any of its subsidiaries or any other equity or
voting security or equity or voting interest in the Company or any of its
subsidiaries, any securities convertible into or exercisable or exchangeable for
any such shares, securities or interests, or any options, warrants, calls,
commitments, subscriptions or rights to purchase or acquire any such shares,
securities or interests (other than issuances of Shares upon exercise of Company
Stock Options granted prior to the date of this Agreement to directors,
officers, employees and consultants of the Company in accordance with the
Company Stock Plan as currently in effect);
(f) not (i) split, combine or reclassify any shares of its
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its stock or (ii) in
solely the case of the Company, declare, set aside or pay any dividends on, or
make other distributions in respect of, any of the Company's stock, repurchase,
redeem or otherwise acquire, or agree or commit to repurchase, redeem or
otherwise acquire, any shares of stock or other equity or debt securities or
equity interests of the Company or any of its subsidiaries;
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(g) except as contemplated by Section 2.10, not amend or
otherwise modify the terms of any Company Stock Options or the Company Option
Plans, the effect of which shall be to make such terms more favorable to the
holders thereof or Persons eligible for participation therein;
(h) other than normal salary increases in the ordinary
course of business consistent with past practice, not (i) materially increase
the compensation payable or to become payable to any directors, officers or
employees of the Company or any of its subsidiaries except arrangements in
connection with employee transfers and agreements with new employees having a
salary of greater than $75,000, (ii) grant any severance or termination pay to,
or enter into any employment or severance agreement with any director or officer
or employee (other than in the ordinary course of business) of the Company or
any of its subsidiaries, or (iii) establish, adopt, enter into or amend in any
material respect or take action to accelerate any material rights or material
benefits under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director or officer or
employee (other than in the ordinary course of business) of the Company or any
of its subsidiaries;
(i) not acquire or agree to acquire (including, without
limitation, by merger, consolidation, or acquisition of stock, equity securities
or interests, or assets) any corporation, partnership, joint venture,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets of any other Person outside the ordinary
course of business consistent with past practice or any interest in any real
properties (other than in the ordinary course of business);
(j) not incur, assume or guarantee any indebtedness for
borrowed money (including draw-downs on letters or lines of credit) or issue any
notes, bonds, debentures, debt instruments, evidences of indebtedness or other
debt securities of the Company or any of its subsidiaries or any options,
warrants or rights to purchase or acquire any of the same, except for (i)
renewals of existing bonds and letters of credit in the ordinary course of
business not to exceed $1,000,000 in the aggregate; (ii) incurring indebtedness
for borrowed money in the ordinary course of business consistent with past
practice in an aggregate amount not to exceed $100,000 or (iii) advances in the
ordinary course pursuant to (A) working capital lines of credit in an amount not
to exceed $15,000,000 in the aggregate and (B) warehouse lines of credit set
forth in Section 3.16(a)(v) of the Company Disclosure Schedule, or any renewal
or replacement thereof;
(k) not sell, lease, license, encumber or otherwise dispose of,
or agree to sell, lease, license, encumber or otherwise dispose of, any material
properties or assets of the Company or any of its subsidiaries, other than in
the ordinary course of business;
(l) not authorize or make any capital expenditures (including
by lease) in excess of $500,000 in the aggregate other than the ordinary course
of business for the Company and all of its subsidiaries;
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(m) not make any material change in any of its accounting or
financial reporting (including tax accounting and reporting) methods, principles
or practices, including with respect to the method of accounting for loans held
for sale or premiums for risk management instruments, or recognizing loan
origination income, net premium income, or gains or losses on risk management
instruments, except as may be required by a change in law or in GAAP;
(n) not make any material tax election or settle or compromise
any material United States or foreign tax liability;
(o) except in the ordinary course of business consistent with
past practice, not amend, modify or terminate any material Contract or waive,
release or assign any material rights or claims thereunder;
(p) other than in the ordinary course of business, not enter
into contracts that reasonably would involve financial obligations by the
Company exceeding $100,000;
(q) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries;
(r) fail to report any facts, circumstance or events that has
resulted in any insurance claims that, individually or in the aggregate, would
have a Material Adverse Effect; and
(s) except as to subsections (a), (b) and (c) of Section 5.1,
not agree or commit in writing or otherwise to do any of the foregoing.
SECTION 5.2. Stockholders' Meeting; Action by Consent.
(a) The Company, acting through the Board, shall, if required
for the Merger under the DGCL:
(i) duly call, give notice of, convene and hold a
meeting of its stockholders (the "Stockholders' Meeting"), to be held as
soon as practicable after the Tender Offer Purchase Time for the purpose
of considering and taking action upon this Agreement using a record date,
to the extent possible, that is a day on which the Shares are listed on
the Nasdaq National Market;
(ii) except as otherwise permitted under Section 5.4,
include in the Proxy Statement (A) the recommendation of the Board that
stockholders of the Company vote in favor of the approval and adoption of
this Agreement, the Merger and the other transactions contemplated hereby
(including the Plan and Agreement of Merger attached hereto as Exhibit
C), and (B) a statement that the Board believes that the consideration to
be received by the stockholders of the Company pursuant to the Merger is
fair to such stockholders; and
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(iii) except as otherwise permitted under Section 5.4, use
reasonable efforts (A) to obtain and furnish the information required to
be included by it in the Proxy Statement, if any, and, after consultation
with Parent and Acquisition, cause the Proxy Statement to be mailed to
its stockholders at the earliest practicable time following the Tender
Offer Purchase Time, and (B) to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby.
At such meeting, Parent and Acquisition will, and will cause their
affiliates to, vote all Shares owned by them in favor of approval and
adoption of this Agreement, the Merger and the transactions contemplated
hereby.
(b) Notwithstanding subsection (a), if Parent, Acquisition and
any other subsidiary of Parent collectively acquire at least 90% of the issued
and outstanding Shares, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
purchase of the Shares pursuant to the Offer without a Stockholders' Meeting in
accordance with Section 253 of the DGCL.
SECTION 5.3. Termination of Registration of Shares. The Company,
acting through its Board, at the earliest practicable time following the Tender
Offer Purchase Time (but in no event prior to the record date for the
Stockholders' Meeting, if necessary, called for the purpose of approving the
Merger), if the number of holders of record of the Shares at such time is
smaller than 300, take all steps necessary or appropriate to terminate
registration of the Shares under the Exchange Act, including without limitation
the filing of Exchange Act Form 15 with the SEC and of a notice to the Nasdaq
National Market to delist the Shares.
SECTION 5.4. Other Potential Acquirers.
(a) The Company and its subsidiaries shall and shall direct
and use their reasonable best efforts to cause, its affiliates and their
respective officers, directors, employees, representatives and agents to
immediately cease any discussions or negotiations with any parties with respect
to any Third Party Acquisition (as defined below). The Company and its
subsidiaries shall and shall direct and use their reasonable best efforts to
cause their respective officers, directors, employees, representatives or
agents not to, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with or provide any non-public information
to any Person or group (other than Parent and Acquisition or any designees of
Parent and Acquisition) concerning any Third Party Acquisition; provided,
however, that nothing herein shall prevent the Board from taking and disclosing
to the Company's stockholders a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer; and
provided further, that notwithstanding the foregoing, if, prior to the Tender
Offer Purchase Time, the Company receives a "Potential Proposal" (defined as an
unsolicited Superior Proposal (defined below) or an unsolicited proposal, offer
or indication that the Company in good faith believes may lead to a Superior
Proposal), then, following written notice to Parent and Acquisition, the
Company may, pursuant to a non-disclosure agreement with terms regarding the
protection of confidential information at least as restrictive as such terms in
the Confidentiality Agreement, provide the Person making the Potential Proposal
with the same non-public information that the Company supplied to
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Parent and consider and negotiate a Potential Proposal. The Company shall
promptly, and in any event before furnishing non-public information to any such
Person, notify the Parent in the event it receives any proposal or inquiry
concerning a Third Party Acquisition, including the material terms and
conditions thereof and the identity of the party submitting such proposal.
(b) Except as set forth in this Section 5.4(b), the Board shall
not withdraw its recommendation of the transactions contemplated hereby or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if prior
to the Tender Offer Purchase Time the Board by a majority vote determines in its
good faith judgment, after consultation with its legal counsel, that failure to
do so would be inconsistent with their fiduciary duties under applicable law,
the Board may withdraw its recommendation of the transactions contemplated
hereby or approve or recommend a Superior Proposal; provided, however, that the
Company shall not be entitled to enter into any agreement with respect to a
Superior Proposal unless and until this Agreement is terminated by its terms
pursuant to Section 8.1. For the purposes of this Agreement, "Third Party
Acquisition" means the occurrence of any of the following events: (i) the
acquisition of the Company by merger or otherwise by any Person (which includes
a "person" as such term is defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Acquisition or any affiliate thereof (a "Third Party") or by
an officer or director of the Company; (ii) the acquisition by a Third Party of
more than 20% of the total assets of the Company and its subsidiaries taken as a
whole; (iii) the acquisition by a Third Party of Shares which, together with all
other Shares owned by such Third Party and its affiliates, equal 20% or more of
the issued and outstanding Shares; (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (v) the
repurchase by the Company or any of its subsidiaries of more than 20% of the
issued and outstanding Shares; or (vi) the acquisition by the Company or any
subsidiary by merger, purchase of stock or assets, joint venture or otherwise of
a direct or indirect ownership interest or investment in any business whose
annual revenues, net income or assets attributable to such ownership interest or
investment is equal or greater than 20% of the annual revenues net income or
assets of the Company. For purposes of this Agreement a "Superior Proposal"
means any bona fide proposal to acquire directly or indirectly for consideration
consisting of cash and/or securities all of the Shares then issued and
outstanding or all or substantially all the assets of the Company and otherwise
on terms which the Company Board by a majority vote determines in its good faith
judgment (consistent with the advice of a financial adviser of nationally
recognized reputation) to be more favorable to the Company's stockholders than
the Merger and the Offer. At and after the Tender Offer Purchase Time, the
Company shall not under any circumstances withdraw its recommendation of the
transactions contemplated hereby or approve or recommend, or cause the Company
to enter into any agreement with respect to, any Third Party Acquisition.
SECTION 5.5 Access to Information. From the date of this Agreement
until the Closing Time, upon reasonable prior notice, the Company shall (and
shall cause each of its subsidiaries to) (a) give the Parent and its
representatives full access, during normal business hours and at other
reasonable times without disruption to the Company's normal business affairs, to
the books, records, contracts, commitments, properties, offices
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and other facilities of it and its subsidiaries, (b) arrange for Parent and its
representatives reasonable access, during normal business hours, to the
officers, employees and agents of it and its subsidiaries, and (c) furnish
promptly to the Parent and its representatives such financial and operating data
and other information concerning the business, operations, properties,
contracts, records and personnel of the Company and its subsidiaries as the
Parent may from time to time reasonably request. Parent agrees that it will not,
and will cause its representatives not to, use any information or access
obtained pursuant to this Section 5.5 for any purpose not reasonably related to
the consummation of the transactions contemplated by this Agreement. All
information obtained by the Parent pursuant to this Section 5.5 shall be kept
confidential in accordance with the confidentiality provisions of the Letter
Agreement between Parent and the Company dated as of January 31, 2000 (the
"Confidentiality Agreement").
SECTION 5.6. Further Actions.
(a) Each of the parties hereto shall use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations, and consult and fully cooperate with and provide
reasonable assistance to each other party hereto and their respective
representatives in order, to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable hereafter, including,
without limitation, (i) using commercially reasonable efforts to make all
filings, applications, notifications, reports, submissions and registrations
with, and to obtain all consents, approvals, authorizations or permits of,
Governmental Entities or other Persons as are necessary for the consummation of
the Merger and the other transactions contemplated hereby (including, without
limitation, pursuant to the HSR Act, the Bank Act, the Bank Holding Company Act,
state insurance or mortgage broker laws, the Home Owners' Loan Act, the
Securities Act, the Exchange Act, Blue Sky Laws, Delaware law and other
applicable laws and regulations in effect in the United States or any other
jurisdiction), and (ii) taking such actions and doing such things as any other
party hereto may reasonably request in order to cause any of the conditions to
such other party's obligation to consummate the Merger as specified in Article 7
of this Agreement to be fully satisfied. Prior to making any application to or
filing with any Governmental Entity or other Person in connection with this
Agreement, the Company, on the one hand, and the Parent, on the other hand,
shall provide the other with drafts thereof and afford the other a reasonable
opportunity to comment on such drafts.
(b) Without limiting the generality of the foregoing, each of
the Parent and the Company agrees to cooperate and use reasonable efforts to
vigorously contest and resist any action, suit, proceeding or claim, and to have
vacated, lifted, reversed or overturned any injunction, order, judgment or
decree (whether temporary, preliminary or permanent), that delays, prevents or
otherwise restricts the consummation of the Merger or any other transaction
contemplated by this Agreement, and to take any and all actions (but not
including the disposition of material assets, divestiture of businesses, or the
withdrawal from doing business in particular jurisdictions, if material) as may
be required by Governmental Entities as a condition to the granting of any such
necessary approvals or as may be required to avoid, vacate, lift, reverse or
overturn any injunction, order, judgment, decree or regulatory action (provided,
however, that in no event shall any party
36
<PAGE>
hereto take, or be required to take, any action that could reasonably be
expected to have a Material Adverse Effect or that, individually or in the
aggregate, could reasonably be expected to have a Parent Material Adverse
Effect).
(c) The Company shall take all necessary action prior to the
Effective Time to cause the dilution provisions of the Rights Agreement to be
inapplicable to the transactions contemplated by this Agreement, without any
payment to holders of Rights.
(d) The Board shall administer the Company's Employee Stock
Purchase Plan such that no action thereunder would be permitted to be taken by
the President or any other officer of the Company without the approval of the
Board.
SECTION 5.7. Public Announcements. Parent, Acquisition and the
Company, as the case may be, will consult with one another and mutually agree
upon the content and timing of any press releases or public statements with
respect to the transactions contemplated by this Agreement, including, without
limitation, the Offer and the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation and agreement
except to the extent that such disclosure may be required by applicable law or
by obligations pursuant to any listing agreement with the Toronto Stock
Exchange, the New York Stock Exchange or the Nasdaq National Market as
determined by Parent, Acquisition or the Company, as the case may be.
SECTION 5.8. Employee Benefit Matters.
(a) Parent agrees that, effective as of the Effective Time and
for a one year period following the Effective Time, Parent shall provide, or
cause Acquisition and its subsidiaries and successors to provide, those persons
who, immediately prior to the Effective Time, were employees of the Company and
its subsidiaries and who continue in such employment ("Continuing Employees"),
with benefits and compensation no less favorable in the aggregate to benefits
and compensation that are provided to the Continuing Employees as of the date of
this Agreement.
(b) Except with respect to accruals under any defined benefit
pension plan, at such time as a Continuing Employee is provided benefits under
the benefit plans or arrangements of Parent or the Surviving Corporation, or any
subsidiary of Parent or the Surviving Corporation, Parent will, or will cause
the Surviving Corporation and its subsidiaries to, give such Continuing Employee
full credit for purposes of eligibility and vesting under such employee benefit
plans or arrangements maintained by Parent, Acquisition or any subsidiary of
Parent or Acquisition for such Continuing Employees' service with the Company or
any subsidiary of the Company to the same extent recognized by the Company at
such time. Parent will, or will cause the Surviving Corporation and its
subsidiaries to, (i) waive all limitations as to preexisting conditions (except
to the extent that such limitations were not waived under the Company's
then-existing welfare plans), exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Continuing Employees
under any welfare plan that such employees may be eligible to participate in
after the Effective Time, and (ii) provide each Continuing Employee with credit
for any co-payments and deductibles paid prior to the Effective Time in
satisfying any applicable deductible or out-of-pocket
37
<PAGE>
requirements under any welfare plans that such employees are eligible to
participate in after the Effective Time to the same extent as if those
deductibles or co-payments had been paid under the welfare plans for which such
employees are eligible after the Effective Time.
(c) Parent and Acquisition (i) to cause Acquisition after
consummation of the Merger contemplated by this Agreement to assume, honor, and
pay all amounts provided under, all Company Employee Plans in accordance with
their terms, and (ii) to honor and to cause Acquisition to honor, all rights,
privileges and modifications to or with respect to any such Company Employee
Plans that become effective as a result of any of the transactions contemplated
by this Agreement.
SECTION 5.9. Expenses. Whether or not the Merger is consummated,
subject to Section 8.3 hereof, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby (including, without
limitation, fees and disbursements of representatives) shall be borne by the
party which incurs such cost or expense.
SECTION 5.10. Notification of Certain Matters. The Company shall
give prompt notice to Parent and Acquisition, and Parent and Acquisition shall
give prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied in all material respects prior to the Tender Offer Purchase
Time and (b) any material failure of the Company, Parent or Acquisition, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.10 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 5.11. Guarantee of Performance. Parent hereby guarantees
the performance by Acquisition and, after the Effective Time, the Surviving
Corporation of its obligations under this Agreement, including but not limited
to the Surviving Corporation's obligations under Section 5.13.
SECTION 5.12. Effect of Parent's Knowledge. If Parent or any
director, officer, employee, counsel, accountant, advisor or other
representative has obtained, prior to the execution of this Agreement, actual
knowledge of any information relevant to accuracy of the representation and
warranties of the Company under this Agreement, then for purposes of determining
whether the condition set forth in Section 6.1(a)(iv) has been satisfied, such
information shall be deemed to have been disclosed by the Company in the Company
Disclosure Schedule.
SECTION 5.13. Indemnification; Directors' and Officers' Insurance.
Subject to the occurrence of the Effective Time, the Surviving Corporation
shall cause its Certificate of Incorporation and Bylaws to contain the
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indemnification provisions set forth in the Certificate of Incorporation and
Bylaws of the Company on the date of this Agreement, which provisions
thereafter shall not be amended, repealed or otherwise modified after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors,
officers or employees of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement). Parent shall cause the Surviving
Corporation to comply with the terms of and maintain in existence the
indemnification agreements in effect on the date of this Agreement. In the
event the Surviving Corporation or any of its successors or assigns (a)
consolidates with or merges into any other Person and the Surviving Corporation
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (b) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 5.13. The
Surviving Corporation shall obtain and maintain in effect for not less than
five years after the Effective Time, the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company and the Company's subsidiaries with respect to matters occurring at
or prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), provided, that Parent may, with no lapse in
coverage, substitute therefore policies of substantially the same coverage
containing terms and conditions which are no less advantageous, in any material
respect, to the Company's present or former directors, officers, employees,
agents or other individuals otherwise covered by such insurance policies prior
to the Effective Time (the "Indemnified Parties"). This Section 5.13 is
intended to benefit the Indemnified Parties and shall be binding on all
successors and assigns of Parent, Acquisition, the Company and the Surviving
Corporation.
ARTICLE 6
CONDITIONS TO THE OFFER
SECTION 6.1. Conditions to the Offer.
(a) Notwithstanding any other provisions of the Offer,
Acquisition shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC including Rule 14e-l(c) under the
Exchange Act (relating to Acquisition's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for, and may delay the acceptance for payment of or, subject to the
restrictions referred to above, the payment for, any tendered Shares, if (w)
any waiting periods applicable to the Offer under the HSR Act shall not have
been terminated or shall not have expired and any required approvals or notices
under the Bank Act, the Bank Holding Company Act and required approvals from
state Governmental Entities responsible for regulating, in the aggregate,
ninety percent (90%) of the Company's and its subsidiary's average mortgage
origination volume for the period 1998 and 1999 shall not have been obtained,
and, in the case of any approval, authorization or consent, shall not be in full
force and effect and all conditions applicable thereto shall not have been
satisfied; (x) any of the consents or approvals of any Person other than a
Governmental Entity, in connection with the execution, delivery and performance
of this Agreement shall not have been obtained; except where the failure to
have obtained any such consent or approval would not have a Material Adverse
Effect; (y) the Minimum Condition shall not have been satisfied or (z) at any
time on or after the date of this Agreement and before the time of acceptance
of such Shares for payment pursuant to the Offer, any of the following events
shall occur:
(i) [reserved];
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(ii) from the date of this Agreement until the Tender
Offer Purchase Time, any Governmental Entity or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or
other order which is in effect at the Tender Offer Purchase Time and
which (A) makes the acceptance for payment of, or the payment for, some
or all of the Shares illegal or otherwise prohibits consummation of the
Offer, the Merger or any of the other transactions contemplated hereby,
or (B) prohibits Acquisition from operating or deriving benefits from the
majority of the value of the operations of the Company and its
subsidiaries taken as a whole to operate the Company; provided, however,
that the parties shall use reasonable efforts (subject to the proviso in
Section 5.6(b)) to cause any such decree, judgment or other order to be
vacated or lifted prior to September 30, 2000;
(iii) [reserved];
(iv) the representations and warranties of the Company
set forth in this Agreement shall not be true and correct on the date of
this Agreement or the Company shall have breached or failed in any
respect to perform or comply with any material obligation, agreement or
covenant required by this Agreement to be performed or complied with by
it at or prior to such time except, where the failure of representations
and warranties (without regard to materiality qualifications therein
contained) to be true and correct, or the performance or compliance with
such obligations, agreements or covenants, would not, individually or in
the aggregate, have a Material Adverse Effect;
(v) this Agreement shall have been terminated in
accordance with its terms;
(vi) there shall have occurred an acceptance by the
Company of a Superior Proposal;
(vii) [reserved];
(viii) the Board shall have withdrawn or modified in a
manner adverse to Parent its approval or recommendation of the Offer,
shall have recommended to the Company's stockholders a Third Party
Acquisition or shall have adopted any resolution to effect any of the
foregoing;
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(ix) [reserved];
(x) [reserved];
(xi) [reserved];
(xii) from the date of this Agreement until the Tender
Offer Purchase Time, there shall have occurred the commencement of a war
having a Material Adverse Effect on the Company;
which, in the reasonable judgment of Parent and Acquisition, in any such case,
and regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payments.
(b) The conditions set forth in Section 6.1(a) (other than the
Minimum Condition) are for the sole benefit of Acquisition and may be asserted
by Acquisition regardless of any circumstances giving rise to any condition and
may be waived (other than the Minimum Condition) by Acquisition, in whole or in
part, at any time and from time to time, in the sole discretion of Acquisition.
The failure by Parent or Acquisition (or any affiliate of Acquisition) at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
right and each right will be deemed an ongoing right which may be asserted at
any time and from time to time.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger are
subject to the satisfaction at or prior to the Closing Time of the following
conditions:
(a) this Agreement, the Merger and the other transactions
contemplated hereby shall have been approved by all necessary corporate action
of the Company, including, if necessary, adoption by vote of the stockholders of
the Company provided that Parent and Acquisition shall have complied with their
obligations in respect of the voting of Shares set forth in Section 5.2(a)(iii);
(b) no Governmental Entity or court of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order which is in
effect and which makes the payment of the Cash Merger Consideration illegal or
otherwise prohibits the Merger; and
(c) [reserved]
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(d) Acquisition shall have purchased Shares pursuant to the
Offer in accordance with the terms of this Agreement and the Offer; provided,
that neither Parent nor Acquisition may invoke this condition if Acquisition
shall have failed to purchase, in violation of the terms of this Agreement or
the Offer, Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing Time whether before or
after approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent or the Company if (i) any Governmental Entity or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect and which makes payment of the Per
Share Amount or the Cash Merger Consideration illegal or otherwise prohibits
the Offer or the Merger or (ii) Acquisition shall not have purchased Shares
pursuant to the Offer or the Merger shall not have occurred on or prior to
September 30, 2000, provided, that the right to terminate this Agreement
pursuant to this Section 8.1(b) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement results in such
failure to purchase;
(c) by Parent and Acquisition prior to the Tender Offer
Purchase Time if there shall have been a breach of any covenant or agreement on
the part of the Company resulting in a Material Adverse Effect or a Parent
Material Adverse Effect which shall not have been cured prior to the earlier of
(A) 10 days following notice of such breach and (B) two business days prior to
the date on which the Offer expires as such date may be extended;
(d) by the Company prior to the Tender Offer Purchase Time if
(i) the Company shall have received a Superior Proposal, shall have furnished
Parent a reasonable written notice advising Parent that the Board has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the Person making such Superior Proposal and Parent
shall not, within three business days of Parent's receipt of the Notice of
Superior Proposal, have made an offer which the Company Board, by a majority
vote, determines in its good faith judgment (consistent with the advice of a
financial advisor of nationally recognized reputation) to be as favorable to the
Company's stockholders as such Superior Proposal, provided, however, that such
termination under this clause (i) shall not be effective until payment of the
fee required by Section 8.3(b); (ii) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition which materially
adversely affects (or materially delays) the
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consummation of the Offer or (iii) there shall have been a material breach of
any covenant or agreement on the part of Parent or Acquisition and which
materially adversely affects (or materially delays) the consummation of the
Offer which shall not have been cured prior to the earlier of (A) 10 days
following notice of such breach and (B) two business days prior to the date on
which the Offer expires.
SECTION 8.2. Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void and have no effect without any liability
on the part of any party hereto or its affiliates, directors, officers or
stockholders other than the provisions of this Section 8.2 and the last sentence
of Sections 5.5 and Sections 8.3, and 9.1 through 9.12 hereof. Nothing contained
in this Section 8.2 shall relieve any party from liability for any willful
breach of this Agreement.
SECTION 8.3. Fees and Expenses.
(a) In the event this Agreement is terminated pursuant to
certain provisions, as set forth in Section 8.3(b) below, subject to the
provisions of Section 8.3(c), the Company shall pay to Acquisition the amount of
$3,500,000 (the "Breakup Fee") immediately upon such a termination.
(b) Subject to the provisions of Section 8.3(c), the Breakup
Fee shall be payable
(i) if the Offer is terminated pursuant to Section
6.1(a)(viii) and within one year after such termination either (x)the
Company enters into an agreement to merge with another company (other
than a merger pursuant to which the stockholders of the Company will
acquire more than fifty percent (50%) of the voting securities of such
surviving corporation) or enters into an agreement pursuant to which more
than 50% of the issued and outstanding Shares are acquired by another
person or pursuant to which new voting securities are issued to another
person or to the stockholders of another company which will aggregate
more than fifty percent (50%) of the outstanding voting securities of the
Company after such issuance or (y) another person acquires more than
fifty percent (50%) of the issued and outstanding Shares, in which case
the Company shall promptly, but in no event later than two days after the
date of any of the events in (x) or (y), pay Parent the Breakup Fee; or
(ii) the Company shall have terminated this Agreement
pursuant to Section 8.1(d)(i).
(c) Notwithstanding the provisions of subsections (a) and (b)
above, Acquisition may, at its sole option, but subject to Section 8.3(d), waive
payment of the Breakup Fee in order to exercise its options to purchase certain
Shares pursuant to Section 3 of the Stockholders' Agreement (the "Options"). In
the event of such exercise, the Breakup Fee shall no longer be payable.
(d) Notwithstanding anything to the contrary contained herein,
in the event that the Company gives Parent the notice specified in Section
8.1(d) (the "Superior Proposal Notice") and Acquisition or its designee
exercises its Options under Section 3 of the Stockholders' Agreement within the
applicable three-day period, then at Acquisition's or such designee's election
(made in writing within such three-day exercise period) (i) the Agreement shall
not be terminated
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and Parent shall purchase or cause to be purchased the Shares not subject to
the Option ("Remaining Shares") at a per Share price in cash equal to the per
Share value of the consideration payable pursuant to the applicable Superior
Proposal, or (ii) the Agreement shall be terminated and Parent shall sell or
cause Acquisition or its designee to sell the Shares acquired pursuant to the
exercise of the Option or shall assign its right to acquire such Shares
pursuant to the Stockholders' Agreement on the terms and conditions and to the
person specified in the Superior Proposal pursuant to the related agreement;
provided that neither Parent nor Acquisition shall have the right to make the
election specified above in the event that either Parent or Acquisition accepts
the Breakup Fee. The acquisition of the Remaining Shares shall be made pursuant
to a merger conducted in accordance with Article 2 and Section 5.2 as if the
exercise of the Option constituted the closing of the Offer after satisfaction
of the applicable conditions. The Parent and Acquisition shall take all actions
necessary to effect such acquisition, including without limitation, causing
their Shares to be voted in favor of such merger.
SECTION 8.4. Amendment. This Agreement may be amended by action
taken by the Board subject to Section 1.3(c), and by the parties hereto at any
time before or after approval, if necessary, of the Merger by the stockholders
of the Company but, after any such approval, no amendment shall be made which
requires the approval of such stockholders under applicable law without such
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of the parties hereto.
SECTION 8.5. Extension; Waiver. At any time prior to the Closing
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set forth in an instrument, in writing, signed on
behalf of such party. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Entire Agreement; Assignment. This Agreement, the
Confidentiality Agreement and the Stockholders' Agreement together (a)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings both written and oral among the parties or any of them with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise.
SECTION 9.2. Survival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the earlier
of (i) termination of this Agreement or (ii) the Tender Offer Purchase Time, in
the case of the representations and warranties of Parent or Acquisition or the
purchase of Shares by Acquisition pursuant to the Offer, in the case of the
representations and warranties of the Company. This Section 9.2 shall not limit
any covenant or agreement of the parties
44
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hereto which by its terms contemplates performance after the Tender Offer
Purchase Time.
SECTION 9.3. Validity. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
SECTION 9.4. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to each other party as follows:
<TABLE>
<S> <C>
if to Parent or Acquisition: ROYAL BANK OF CANADA
200 Bay Street,
14th Floor, North Tower
Toronto, Ontario
M5J2J5 Canada
Telecopier: 416-974-9344
Attention: Robert K. Horton
Senior Vice President, Strategic Initiatives
with copies to: RBC Head Office Law Department
1 Place Ville Marie
4th Floor, East Wing
Montreal, Quebec
H3C3A0 Canada
Telecopier (514) 874-0241
Attention: Sarah J. Azzarello
Vice President and Associate General Counsel
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Telecopier: (212) 351-4035
Attention: Lawrence J. Hohlt, Esq.
if to the Company to: PRISM FINANCIAL CORPORATION
440 N. Orleans
Chicago, IL 60610
Telecopier (312) 494-0184
Attention: Mark A. Filler
President
</TABLE>
45
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<TABLE>
<S> <C>
with a copy to: Skadden, Arps, Slate, Meagher & Flom
(Illinois)
333 West Wacker Drive, Suite 2000
Chicago, IL 60606
Telecopier: (312) 407-0411
Attention: Rodd M. Schreiber, Esq.
</TABLE>
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 9.5. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to the principles of conflicts of law thereof.
SECTION 9.6. Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 9.7. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and its successors and
permitted assigns and nothing in this Agreement express or implied is intended
to or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement; provided, however, that
the provisions of Section 5.12 shall inure to the benefit of and be enforceable
by the Indemnified Parties.
SECTION 9.8. Certain Definitions. For the purposes of this
Agreement the term:
(a) "affiliate" means a Person that, directly or indirectly,
through one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned Person;
(b) "business day" means any day other than a day on which the
New York Stock Exchange is closed;
(c) "stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity; and
(e) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other Person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other Person, as the case may be, (either alone or through or together
with any other subsidiary) (i) owns, directly or indirectly, 25% or more of the
capital stock the holders of which are generally
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entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity, (ii) has the right to appoint a
majority of the board of directors or other governing body of such corporation
or other legal entity or (iii) otherwise controls.
SECTION 9.9. Personal Liability. This Agreement shall not create
or be deemed to create or permit any personal liability or obligation on the
part of any direct or indirect stockholder of the Company or Parent or any
officer, director, employee, agent or representative of any party hereto.
SECTION 9.10. Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that if Parent
receives the Breakup Fee pursuant to Section 8.3 it shall not also be entitled
to specific performance to compel the consummation of the Merger.
SECTION 9.11. Waiver of Conditions. The conditions to each of the
parties' obligations to consummate the Merger are for the benefit of such party
and may be waived by such party in whole or in part to the extent permitted by
applicable law.
SECTION 9.12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Merger
Agreement to be duly executed on its behalf as of the day and year first above
written.
ROYAL BANK OF CANADA
By: /s/ ROBERT K. HORTON
------------------------------------------
Name: Robert K. Horton
----------------------------------------
Title: Senior Vice President
---------------------------------------
By: /s/ JAMES T. RAGER
------------------------------------------
Name: James T. Rager
----------------------------------------
Title: Vice Chairman
---------------------------------------
PRISM FINANCIAL CORPORATION
By: /s/ MARK A. FILLER
------------------------------------------
Name: Mark A. Filler
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
RAINBOW ACQUISITION SUBSIDIARY, INC.
By: /s/ ROBERT K. HORTON
------------------------------------------
Name: Robert K. Horton
----------------------------------------
Title: Senior Vice President, Strategic
---------------------------------------
Initiatives
48
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EXHIBIT A
FORM OF STOCKHOLDERS' AGREEMENT
[SEE EXHIBIT 2]
49
<PAGE>
EXHIBIT B
KNOWLEDGE GROUP
MARK FILLER
DAVID FISHER
LARRY KATZ
ERIC GURRY
TERRY MARKUS
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EXHIBIT C
PLAN AND AGREEMENT OF MERGER
51
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PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER, dated as of ______________ , 2000
("Agreement"), is entered into by and between Prism Financial Corporation
("Prism") and Prism Acquisition Subsidiary, Inc. ("Acquisition"), each a
Delaware corporation. Prism and Acquisition are hereinafter sometimes
collectively referred to as the "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, each of Prism and Acquisition is a corporation duly organized
and existing under the laws of the State of Delaware;
WHEREAS, on the date of this Agreement, Prism has authority to issue
110,000,000 shares of capital stock, consisting of 100,000,000 shares of common
stock, par value $.01 per share (the "Shares"), of which, as of January 31,
2000, 14,670,560 Shares were issued and outstanding, and of these ______________
are owned by Acquisition; and 10,000,000 shares of preferred stock, par value
$.01 per share, no shares of which are outstanding;
WHEREAS, on the date of this Agreement, Acquisition has authority to
issue 1000 shares of common stock, par value $.01 per share ("Acquisition Common
Stock"), of which 100 shares are issued and outstanding and owned by RBC
Holdings (Delaware) Inc., a Delaware corporation ("Parent");
WHEREAS, the respective Boards of Directors of Prism and Acquisition have
determined that it is advisable and in the best interests of each of such
corporations that Acquisition be merged with and into Prism upon the terms and
subject to the conditions set forth in the Merger Agreement dated as of March
10, 2000 among Royal Bank of Canada, a Canadian commercial bank and the indirect
parent of Acquisition, Prism and Acquisition (the "Merger Agreement") and this
Agreement for the purpose of completing the acquisition of Prism by Parent;
WHEREAS, the Board of Directors of Acquisition has, by resolutions duly
adopted, approved, certified, executed and acknowledged this Agreement;
WHEREAS, Parent has approved this Agreement as the sole stockholder of
Acquisition; and
WHEREAS, the Board of Directors of Prism has approved this Agreement, and
directed that this Agreement be submitted to a vote of its stockholders, if such
a vote is necessary under Delaware law. Capitalized terms used and not defined
herein shall have the meanings ascribed to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Prism and Acquisition hereby agree as follows:
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1. Merger. Acquisition shall be merged with and into Prism (the
"Merger"), and Prism shall be the surviving corporation (hereinafter sometimes
referred to as the "Surviving Corporation"). The Merger shall become effective
at such time as a properly executed and certified copy of the Merger Certificate
is duly accepted for record by the Secretary of State of the State of Delaware
for filing pursuant to the Delaware General Corporation Law, or such later time
as Acquisition and Prism may agree upon and set forth in the Merger Certificate
(not exceeding 30 days after the Merger Certificate is accepted for record; the
time the Merger becomes effective being referred to herein as the "Effective
Time").
2. Governing Documents. The Certificate of Incorporation of Acquisition
in effect at the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with applicable law. The
Bylaws of Acquisition in effect at the Effective Time shall be the Bylaws of the
Surviving Corporation until amended in accordance with applicable law.
3. Succession. At the Effective Time, the separate corporate existence of
Acquisition shall cease, and Prism shall possess all the assets, rights,
privileges, powers and franchises, of a public and private nature and be subject
to all the restrictions, disabilities and duties of each of the Constituent
Corporations, and all and singular, the assets, rights, privileges, powers and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts due to each of the Constituent Corporations on
whatever account, shall be transferred to, vested in and devolved on the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest shall be thereafter as effectually
the property of the Surviving Corporation as they were of the respective
Constituent Corporations, and the title to any real estate vested by deed or
otherwise, in either of such Constituent Corporations shall not revert or be in
any way impaired by reason of the Merger; but all rights of creditors and all
liens upon any property of Acquisition shall be preserved unimpaired. To the
extent permitted by law, any claim existing or action or proceeding pending by
or against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place. All debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it.
4. Directors and Officers. The directors and officers of Acquisition at
the Effective Time shall be the initial directors and officers, holding the same
titles and positions, of the Surviving Corporation, and after the Effective Time
shall serve in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
5. Further Assurances. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, there shall be executed
and delivered on behalf of Acquisition such deeds and other instruments, and
there shall be taken or caused to be taken by it all such further and other
action, as shall be appropriate, advisable or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Acquisition, and otherwise to
carry out the purposes of this Agreement, and the officers and directors of the
Surviving Corporation are fully authorized in the name and on
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behalf of Acquisition or otherwise, to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
6. Conversion of Shares. At the Effective Time, each Share (together with
any associated rights to purchase preferred stock issued pursuant to the Rights
Agreement dated as of January 27, 2000 between the Company and LaSalle Bank
National Association) issued and outstanding immediately prior to the Effective
Time (excluding (i) Shares held by any of Prism's subsidiaries and (ii) Shares
held by Parent, Acquisition or any other subsidiary of Parent) shall, by virtue
of the Merger and without any action on the part of Acquisition, Prism or the
holder thereof, be converted into and shall become the right to receive [$7.50]
in cash, without interest (the "Cash Merger Consideration"), provided, however,
that each such Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or Prism immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of Acquisition, Prism or the
holder thereof, be canceled and retired and will cease to exist and no payment
shall be made with respect thereto. At the Effective Time, each share of
Acquisition Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and shall become one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
7. Conditions to Merger. The Merger shall have received the approval, if
such is required by law, of the holders of Shares pursuant to the Delaware
General Corporation Law and to the other conditions set forth in Article 7 of
the Merger Agreement.
8. Stock Certificates. At and after the Effective Time, all of the
outstanding certificates which, immediately prior to the Effective Time,
represented Shares shall, respectively, without further action by any party, be
deemed for all purposes to evidence the right to receive the Cash Merger
Consideration as herein provided. The registered owner on the books and records
of the Surviving Corporation or its transfer agents of any such outstanding
stock certificate shall not have exercised nor be entitled to exercise any
voting or other rights with respect to, or to receive any dividends or other
distributions upon, the shares of Acquisition Common Stock or any other
securities whatsoever.
9. Options. At the Effective Time, each outstanding option to purchase
Shares issued pursuant to Prism's 1999 Omnibus Stock Incentive Plan (the "1999
Option Plan"), Prism's 2000 Stock Option Plan or any other stock option plan,
program, arrangement or agreement to which Prism is a party shall be treated as
set forth in the Merger Agreement. The 1999 Option Plan shall terminate as of
the Effective Time.
10. Amendment. Subject to applicable law, this Agreement may be amended,
modified or supplemented by written agreement of the parties hereto at any time
prior to the Effective Time with respect to any of the terms contained herein.
11. Abandonment. At any time prior to the Effective Time, this Agreement
may be terminated and the Merger may be abandoned by the Board of Directors of
Prism, notwithstanding approval of this Agreement by the stockholder of
Acquisition or, if such was required, by the stockholders of Prism, or both, (a)
if the conditions to consummation of the Merger set forth in Article 7 of the
Merger Agreement are not satisfied or waived or (b) by mutual agreement of the
Boards of Directors of the parties.
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11. Amendment. At any time prior to the Effective Time, this Agreement
may be amended by the Boards of Directors of the parties hereto to the extent
permitted by applicable law, notwithstanding approval of this Agreement by the
stockholder of Acquisition or, if such was required, by the stockholders of
Prism, or both.
12. Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in two or more counterparts, each of which
shall be deemed to be an original and the same agreement.
IN WITNESS WHEREOF, Prism and Acquisition have caused this Agreement to
be signed by their respective duly authorized officers as of the date first
above written.
PRISM FINANCIAL CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PRISM ACQUISITION SUBSIDIARY, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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CERTIFICATE OF THE SECRETARY
OF
PRISM FINANCIAL CORPORATION
I, the Secretary of Prism Financial Corporation, hereby certify that the
Plan and Agreement of Merger to which this certificate is attached, after having
been first duly signed on behalf of the corporation by the President and
Secretary under the corporate seal of the corporation, was duly approved and
adopted.
WITNESS my hand and seal of Prism Financial Corporation this ____ day of
________ 2000.
---------------------------
Secretary
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CERTIFICATE OF THE SECRETARY
OF
PRISM ACQUISITION SUBSIDIARY, INC.
I, the Secretary of Prism Acquisition Subsidiary, Inc., hereby certify
that the Plan and Agreement of Merger to which this certificate is attached,
after having been first duly signed on behalf of the corporation by the
President and Secretary under the corporate seal of the corporation, was duly
approved and adopted by written consent of the sole stockholder of the
corporation, dated ________, 2000.
WITNESS my hand and seal of Prism Acquisition Subsidiary, Inc. this
____ day of ________ 2000.
---------------------------
Secretary
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EXHIBIT 2
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as of March 10,
2000, by and among Royal Bank of Canada, a Canadian commercial bank ("Parent"),
Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Acquisition"), and the Stockholders listed on Schedule I
hereto (each, a "Stockholder," and collectively, the "Stockholders") of Prism
Financial Corporation, a Delaware corporation (the "Company"). Capitalized terms
used and not defined herein have the meanings given them in the Merger
Agreement, dated as of the date hereof, by and among Parent, Acquisition and the
Company (as amended from time to time, the "Merger Agreement").
WHEREAS, concurrently herewith, Parent, Acquisition and the Company
are entering into the Merger Agreement, a copy of which in the form to be
executed has been delivered to each Stockholder, pursuant to which, among other
things, Acquisition will make a cash tender offer (the "Offer") for all of the
issued and outstanding shares of common stock, par value $.01, of the Company
(each, a "Share," and one or more, the "Shares"), and Acquisition will
subsequently be merged with and into the Company (the "Merger"), in each case
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, each Stockholder Beneficially Owns (as defined in Section
2(a)) the number of Shares set forth opposite such Stockholder's name in column
3 of Schedule I hereto; and
WHEREAS, in order to induce Parent and Acquisition to enter into the
Merger Agreement and to perform their obligations thereunder and as a condition
thereof, the Stockholders are entering into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
premises, representations, warranties, covenants and agreements contained
herein, the parties hereby agree as follows:
SECTION 1. TENDER OF SHARES.
Each Stockholder hereby agrees to tender the Shares owned by such
Stockholder, or cause such Shares to be tendered, into the Offer promptly after
Parent causes Acquisition to commence the Offer, but in no event later than five
(5) Business Days after the date on which Stockholder receives the Offer
Documents for tendering such Shares. Each Stockholder further agrees that such
Stockholder shall not withdraw any Shares so tendered unless and until after the
Termination Date occurs. With respect to the Shares tendered pursuant to this
Section 1, each Stockholder will receive the same price per Share (but in any
event not less than $7.50 per Share) received by the other stockholders of the
Company pursuant to the Offer. For purposes of this Agreement, the "Termination
Date" shall be the first to occur of (a) the date that Acquisition terminates
the Offer in accordance with the terms of the Merger Agreement, (b) the date the
Offer expires in accordance with the terms of the Merger Agreement, or (c) the
date the Merger Agreement is terminated pursuant to Article 8 of the Merger
Agreement, in each case without such Shares being purchased by Acquisition
pursuant to the Offer.
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SECTION 2. AGREEMENT TO VOTE; IRREVOCABLE PROXY.
(a) Each Stockholder hereby agrees that during the period commencing
on the date of this Agreement and continuing until the first to occur of the
Effective Time (as defined in the Merger Agreement) or the Termination Date, at
any meeting of the holders of the Shares, however called, or in connection with
any written consent of the holders of Shares, such Stockholder shall vote (or
cause to be voted) the Shares held of record or Beneficially Owned by such
Stockholder, whether owned on the date hereof or hereafter acquired, (i) in
favor of approval of the Merger Agreement, all transactions contemplated
thereby, and any actions required in furtherance thereof and hereof (including
election of such directors of the Company as Parent is entitled to designate
pursuant to Section 1.3(a) of the Merger Agreement); (ii) against any action or
agreement that is intended, or could reasonably be expected, to impede,
interfere with, or prevent the Offer or the Merger or result in a breach in any
respect of any covenant, representation or warranty or any other obligation or
agreement of the Company or any of its subsidiaries under the Merger Agreement
or this Agreement; and (iii) except as specifically requested in writing in
advance by Parent, against any of the following actions (other than the Merger
and the transactions contemplated by the Merger Agreement and this Agreement)
that are submitted to a vote of the holders of the Shares: (A) any extraordinary
corporate transaction, such as a merger, consolidation or other business
combination involving the Company or any of its subsidiaries or affiliates; (B)
any sale, lease, transfer or disposition by the Company or any of its
subsidiaries of any assets outside the ordinary course of business or any assets
which in the aggregate are material to the Company and its subsidiaries taken as
a whole, or a reorganization, recapitalization, dissolution or liquidation of
the Company or any of its subsidiaries or affiliates; (C)(1) any change in the
present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or Bylaws; (2) any other material change in the
corporate structure or business of the Company or any of its subsidiaries; or
(3) any other action or agreement that is intended, or could reasonably be
expected, to impede, interfere with or prevent the Offer, the Merger or the
transactions contemplated by this Agreement or the Merger Agreement. None of the
Stockholders shall enter into any agreement or understanding with any Person,
the effect of which would be inconsistent with or violative of the provisions
and agreements contained in Section 1 or 2 hereof.
As used in this Agreement, the term "Beneficially Own" or
"Beneficial Ownership" with respect to any securities means having "beneficial
ownership" of such securities as determined pursuant to Rule 13d-3 under the
Exchange Act, including pursuant to any agreement, arrangement or understanding,
whether or not in writing, except that the term shall not include Shares which a
Stockholder has the right to acquire under any of the Company Stock Options
unless such Shares have been acquired upon exercise of such Company Stock
Options. Without duplicative counting of the same securities by the same holder,
securities Beneficially Owned by a Stockholder shall include securities
Beneficially Owned by all other Persons with whom a Stockholder would constitute
a "group" within the meaning of Section 13(d)(3) of the Exchange Act.
(b) Effective on the date that all waiting periods under the HSR Act
applicable to the acquisition of the Shares pursuant to the Offer or to Section
3 of this Agreement have been terminated or shall have expired and all
applicable approvals or notices under the Bank Act and the Bank Holding Company
Act and any other notices to or approvals, authorizations or consents
<PAGE>
of any other Governmental Entity (including any Agency) and to or of any
Investor required in respect thereto shall have been filed or obtained and until
the Termination Date, and in order to secure its obligations hereunder, each
Stockholder hereby grants to, and appoints James T. Rager and Robert K. Horton,
in their respective capacities as officers of Parent, and any individual who
shall hereafter succeed to any such office of Parent, and any other designee of
Parent, and each of them individually, with full power of substitution and
resubstitution, such Stockholder's true and lawful irrevocable proxy to vote
such Stockholder's Shares, or grant a consent or approval in respect of such
Stockholder's Shares, on such matters and as indicated in Section 2(a) above.
Each Stockholder (i) agrees to take such further action and execute such other
instruments as may be necessary to effectuate the intent of this proxy, (ii)
hereby represents that any proxy heretofore given in respect of the
Stockholder's Shares is not irrevocable, and (iii) hereby revokes any proxy
previously granted by such Stockholder with respect to its Shares. Each
Stockholder understands and acknowledges that Parent and Acquisition are
entering into the Merger Agreement in reliance on such Stockholder's execution
and delivery of this irrevocable proxy. Each Stockholder hereby affirms that
this irrevocable proxy is given in connection with the execution of this
Agreement and the Merger Agreement, and further affirms that this irrevocable
proxy is coupled with an interest in this Agreement for the term stated herein
and may under no circumstances be revoked prior to the Termination Date. Each
Stockholder hereby ratifies and confirms all that this irrevocable proxy may
lawfully do or cause to be done by virtue hereof. This proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 212(e)
of the DGCL. This proxy shall terminate automatically on the Termination Date.
SECTION 3. GRANT OF OPTION.
(a) Subject to the terms of this Section 3, each Stockholder hereby
grants to Acquisition (or its designee), effective on the date hereof, an
irrevocable option (each, an "Option") to purchase all Shares held of record or
Beneficially Owned by such Stockholder at a purchase price per Share equal to
the Per Share Amount.
(b) Acquisition may exercise the Options, in whole, at any time and
from time to time, following the occurrence of a Purchase Event (as defined
below); provided that the Options shall expire and be of no further force and
effect upon the earliest to occur (the "Expiration Date") of (i) the Tender
Offer Purchase Time or (ii) at the close of business on the third business day
after the receipt by Parent of a Superior Proposal Notice pursuant to Section
8.1(d)(i) of the Merger Agreement or (iii) the ninetieth (90th) day after the
exercise of the Options, if the Option Closing shall not have occurred.
Notwithstanding anything herein to the contrary Acquisition, at its option, may
elect, pursuant to this Section 3(b) and Section 8.3(d) of the Merger Agreement,
either to exercise the Options or to accept payment of the Breakup Fee provided
for in Section 8.3 of the Merger Agreement, but shall not be entitled to
exercise the Options and retain the Breakup Fee. In the event Acquisition
determines to exercise the Options, Acquisition shall notify the Company of its
waiver of receipt of the Breakup Fee pursuant to the Merger Agreement.
(c) As used herein, a "Purchase Event" shall mean the receipt by
Parent of a Superior Proposal Notice pursuant to Section 8.1(d)(i) of the
Merger Agreement.
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(d) To exercise the Options, Acquisition shall, prior to the
Expiration Date, give written notice to the Stockholder who granted such Option
specifying the time for the closing (the "Option Closing") of such purchase. The
Option Closing shall be held at the office of Gibson, Dunn & Crutcher LLP, at
1050 Connecticut Avenue, N.W., Washington, DC 20036 on the date that is no later
than three business days after the date on which each of the conditions set
forth in Section 3(e) below has been satisfied or waived by Acquisition.
(e) The occurrence of the Option Closing shall be subject to the
satisfaction of each of the following conditions:
(i) to the extent necessary, all waiting periods under
the HSR Act applicable to the purchase of the Shares pursuant to
Section 3 of this Agreement have been terminated or shall have
expired and all required approvals or notices under the Bank Act and
the Bank Holding Company Act and any other notices to or approvals,
authorizations or consents of any other Governmental Entity
(including any Agency) and to or of any Investor required in respect
thereto shall have been filed or obtained; and
(ii) no preliminary or permanent injunction or other
order, decree or ruling issued by any court of governmental or
regulatory authority, domestic or foreign, of competent jurisdiction
prohibiting the exercise of an Option or the delivery of Shares
shall be in effect.
(f) At the Option Closing, (i) Acquisition (or its designee) shall
pay, by wire transfer, an amount equal to the product of (A) the Per Share
Amount and (B) the number of Shares owned by such Stockholder; and (ii) each
Stockholder whose Shares are being purchased shall deliver or shall cause to be
delivered to Acquisition a certificate or certificates evidencing such
Stockholder's Shares, and such Stockholder agrees that such Shares shall be
transferred free and clear of all liens. All such certificates representing
Shares shall be duly endorsed in blank, or with appropriate stock powers, duly
executed in blank, attached thereto, in proper form for transfer, with the
signature of such Stockholder thereon guaranteed, and with all applicable taxes
paid or provided for.
SECTION 4. AFTER-ACQUIRED SHARES.
Notwithstanding anything herein to the contrary, any Shares acquired
by such Stockholder after the date hereof, whether by exercise of Company Stock
Options, by purchase, by exchange or by inheritance or bequeath or otherwise,
shall be subject to all of the representations, warranties, covenants and
agreements of such Stockholder contained herein. In the event of a share
dividend or distribution, or any change in the Shares by reason of any share
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall be deemed to refer to and include the Shares as
well as all such share dividends and distributions and any shares into which or
for which any or all of the Shares may be changed or exchanged.
<PAGE>
SECTION 5. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES.
Each Stockholder, severally and not jointly, hereby represents,
warrants and covenants to Parent and Acquisition as of the date hereof and as of
the Tender Offer Purchase Time as follows:
(a) On the date hereof, such Stockholder is the record and
Beneficial Owner of the number of Shares set forth opposite such Stockholder's
name in column 3 of Schedule I hereto. On the date hereof, the Shares set forth
opposite such Stockholder's name in column 3 of Schedule I hereto constitute all
of the Shares owned of record or Beneficially Owned by such Stockholder. Such
Stockholder owns such Shares free and clear of all liens, claims, charges,
security interests, mortgages or other encumbrances, and such Shares are not
subject to any rights of first refusal, put rights, other rights to purchase or
encumber such Shares, or to any restrictions other than this Agreement as to the
encumbrance, disposition or voting of such Shares. Such Stockholder has
controlling voting power and sole power to issue instructions with respect to
the matters set forth in Section 2 hereof, sole power of disposition, sole power
of conversion, sole power to demand dissenters' rights and sole power to agree
to all of the matters set forth in this Agreement, in each case with respect to
all of the Shares set forth opposite such Stockholder's name in column 3 of
Schedule I hereto, without limitations, qualifications or restrictions on such
rights, except those arising under marital property laws or general fiduciary
principles applicable to such Stockholder.
(b) Such Stockholder has the legal capacity, power and authority to
enter into and perform all of such Stockholder's obligations under this
Agreement. The execution, delivery and performance of this Agreement by such
Stockholder will not violate any other agreement to which such Stockholder is a
party including, without limitation, any voting agreement, stockholder agreement
or voting trust. This Agreement has been duly and validly executed and delivered
by such Stockholder and, assuming the due authorization, execution and delivery
by Parent and Acquisition, constitutes a valid, legal and binding agreement of
such Stockholder, enforceable against such Stockholder in accordance with its
terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally or by marital property
laws applicable to such Stockholder, and except as the availability of equitable
remedies may be limited by the application of general principles of equity
(regardless of whether such equitable principles are applied in a proceeding at
law or in equity). There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which such Stockholder is trustee
who is not a party to this Agreement and whose consent is required for the
execution and delivery of this Agreement or the consummation by any Stockholder
of the transactions contemplated hereby.
(c) (i) No filing with or notice to, and no permit, authorization,
consent or approval of, any Governmental Entity is necessary on the part of such
Stockholder for the execution of this Agreement by such Stockholder or the
consummation by such Stockholder of the transactions contemplated hereby; and
(ii) none of the execution, delivery or performance of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby nor compliance by such Stockholder with any of the
provisions hereof will (A) result in a violation or breach of, or constitute
(with or without notice or lapse of time or
<PAGE>
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration or Lien) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement, understanding or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or any of such Stockholder's
properties or assets may be bound; or (B) conflict with or violate any order,
writ, injunction, decree, law, statute, rule or regulation applicable to the
Stockholder or any of such Stockholder's properties or assets.
(d) No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by the Merger Agreement based upon arrangements made
by or on behalf of such Stockholder.
(e) Such Stockholder shall not, in its capacity as a Stockholder,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with or provide any non-public information to any
Person or group (other than Parent and Acquisition or any designees or Parent
and Acquisition) concerning any Third Party Acquisition. In addition, such
Stockholder will not, in its capacity as a Stockholder, and will instruct his
agents and affiliates not to, directly or indirectly, make or authorize any
public statement, recommendation or solicitation in support of any Acquisition
Proposal made by any Person or group (other than Parent or Acquisition).
(f) Such Stockholder shall not, directly or indirectly: (i) tender
its Shares in any tender offer or exchange offer for the Shares other than the
Offer; (ii) except as contemplated by this Agreement or the Merger Agreement,
otherwise offer for sale, sell, transfer, tender, pledge, encumber, assign or
otherwise dispose of, or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
its Shares; (iii) except as contemplated by this Agreement, grant any proxies or
powers of attorney, deposit any of its Shares into a voting trust or enter into
a voting agreement with respect to any Shares; or (iv) take any action that
would make any representation or warranty of such Stockholder contained herein
untrue or incorrect or have the effect of preventing or impairing such
Stockholder from performing its obligations under this Agreement.
(g) Such Stockholder hereby acknowledges that such Stockholder has
received a true and correct copy of the Merger Agreement, that such Stockholder
has read and understands the provisions thereof (including, but not limited to,
the representations and warranties of the Company set forth in Article 3 of the
Merger Agreement (the "Company's Representations and Warranties"). Such
Stockholder acknowledges that it shall be responsible for indemnifying,
reimbursing and holding harmless the Parent Indemnitees (as defined in Section
10(a) below) for breaches of the Company's Representations and Warranties to the
extent provided in Section 10 notwithstanding the expiration of the Company's
Representations and Warranties pursuant to the Merger Agreement.
(h) Such Stockholder understands and acknowledges that Parent and
Acquisition are relying upon the foregoing representations, warranties and
covenants by such Stockholder, and on such Stockholder's execution and delivery
of this Agreement in entering into the Merger Agreement.
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SECTION 6. CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION.
Such Stockholder acknowledges and agrees that the obligations of
Parent and Acquisition to consummate the Offer and the Merger are subject to the
satisfaction of the following conditions: (i) each of the conditions set forth
in the Merger Agreement and (ii) compliance by such Stockholder with the
provisions of Section 1 of this Agreement.
SECTION 7. FURTHER ASSURANCES.
From time to time, at Parent's request and without further
consideration, each Stockholder agrees to execute and deliver such additional
documents and take all such further lawful action as may be necessary or
desirable to consummate and make effective, and to cause the Company to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement.
SECTION 8. STOP TRANSFER; FORM OF LEGEND.
Each Stockholder agrees and covenants to Parent that such
Stockholder shall not (a) transfer or encumber or agree to transfer or encumber
any of such Stockholder's Shares prior to the Effective Time or (b) request that
the Company register the transfer (book-entry or otherwise) of any certificate
or uncertificated interest representing any of such Stockholder's Shares, in
either case without the consent of the Parent. If reasonably requested by
Parent, any certificates representing the Stockholders' Shares shall contain the
following legend:
"The securities represented by this certificate are
subject to certain restrictions on transfer and other
terms of a Stockholders' Agreement, dated as of March
10, 2000, among Royal Bank of Canada, Rainbow
Acquisition Subsidiary, Inc., and the parties listed on
the signature pages thereto, a copy of which is on file
in the principal office of Royal Bank of Canada."
SECTION 9. ESCROW ACCOUNT.
At the Tender Offer Purchase Time, Acquisition shall deposit, out of
funds otherwise owing to each Stockholder in respect of the Per Share Amount
immediately upon payment thereof, an amount equal to the product of (a) Seven
Million Five Hundred Thousand Dollars ($7,500,000) multiplied by (b) the
Indemnification Percentage set forth opposite such Stockholder's name in column
4 of Schedule I (with respect to each Stockholder, such Stockholder's
"Indemnification Percentage") in immediately available funds by a wire transfer
to an interest-bearing account (the "Escrow Account") designated by the escrow
agent (the "Escrow Agent") pursuant to an Escrow Agreement, substantially in the
form attached hereto as Exhibit A, to be executed by Parent, each Stockholder
and such Escrow Agent (the "Escrow Agreement"), to be held pursuant to the terms
and conditions hereof and thereof. Each of the parties agrees that (i) the
amounts so deposited in the Escrow Account constitute contingent purchase price
the fair market value of which cannot reasonably be ascertained until the
termination of the Escrow Agreement and (ii) for income tax purposes each
Stockholder's amount realized from the sale of its Shares shall not include
amounts deposited in the Escrow Account but shall include amounts (other than
earnings on amounts held in the Escrow Account)
<PAGE>
paid from the Escrow Account to such Stockholder (which amounts shall be
treated as realized by the Stockholder in his tax year in which such payment is
received). No party shall take a position that is inconsistent with the previous
sentence in any Tax Return, audit or other proceeding.
SECTION 10. INDEMNIFICATION.
(a) After the Tender Offer Purchase Time, subject to the limitations
set forth in this Section 10, the Parent and its affiliates (collectively, the
"Parent Indemnitees") shall each be indemnified and reimbursed and held harmless
to the extent set forth in this Section 10 by each of the Stockholders severally
in respect of any and all damages, losses, costs, expenses, liabilities,
judgments, awards, fines, sanctions, penalties, claims, charges and amounts paid
in settlement, including, without limitation, the reasonable costs, fees and
expenses of attorneys, accountants and other agents and representatives, in each
case net of any proceeds of insurance policies received by such Parent
Indemnitee in connection therewith ("Damages") incurred by any Parent Indemnitee
as a result of any inaccuracy or misrepresentation in or breach of any
representation, warranty, covenant or agreement of such Stockholder in this
Agreement.
(b) After the Tender Offer Purchase Time, subject to the limitations
set forth in this Section 10, each Parent Indemnitee shall be indemnified and
reimbursed and held harmless to the extent set forth in this Section 10 by the
Stockholders in respect of any and all Damages incurred by any Parent Indemnitee
as a result of (i) any inaccuracy or misrepresentation in or breach of any of
the Company's Representations and Warranties, or (ii) whether or not resulting
from any inaccuracy or misrepresentation in or breach of any of the Company's
Representations and Warranties, (A) any fines, orders, judgments or penalties
imposed on the Company or any of its subsidiaries as a result of any violation
of any law or regulation by the Company or any of its subsidiaries prior to the
Effective Time other than any of the foregoing related to the matters set forth
on Schedule II, (B) the matters set forth in Schedule II or (C) to the extent
that an additional payment is due under the agreement listed on Schedule III to
this Agreement solely as a result of the transactions contemplated by the Merger
Agreement.
(c) Any indemnification of the Parent Indemnitees shall be limited
to and effected solely by disbursement from the Escrow Account in accordance
with the terms and subject to the conditions contained in the Escrow Agreement.
Payments of indemnification from such Escrow Account shall be deemed to be made
first from the principal or corpus of the Escrow Account and thereafter from the
accumulated earnings, if any, on funds held in the Escrow Account. For the
avoidance of doubt, the sole recourse of any Parent Indemnitee for any breach of
any representation or warranty by any Stockholder hereunder or pursuant to
paragraph (b) above shall be limited to the actual funds deposited by such
Stockholder in the Escrow Account and any interest thereon.
(d) With respect to Damages incurred by Parent Indemnitees pursuant
to (a) Section 10(a) above, Parent shall only be entitled to make a claim
against the funds deposited in the Escrow Account (and accumulated earnings
thereon) by the Stockholder responsible for the breach or (b) Section 10(b)
above, Parent shall be entitled to make a claim against all funds deposited in
the Escrow Account (including accumulated earnings thereon) by all Stockholders
and the obligation to indemnify, reimburse and hold harmless the Parent
Indemnitees with
<PAGE>
respect to such Damages shall be allocated among the Stockholders on the
basis of their Stockholders' Indemnification Percentage.
(e) If any Parent Indemnitee shall believe that such Parent
Indemnitee is entitled to indemnification pursuant to this Section 10 in respect
of any Damages, such Parent Indemnitee shall give to the Escrow Agent and to
each relevant Stockholder or to all Stockholders, as the case may be, written
notice thereof in such form and manner specified in the Escrow Agreement. The
failure of such Parent Indemnitee to give notice of any claim for
indemnification promptly shall not adversely affect such Parent Indemnitee's
right to indemnity hereunder except to the extent the relevant Stockholder or
the Stockholders are prejudiced by such failure. All such claims for
indemnification must be made not later than midnight on the date that is one
year after the Tender Offer Purchase Time.
(f) For purposes of determining the breach of any of the Company's
Representations or Warranties and the amount of Damages for which
indemnification shall be available hereunder, (i) references to "Material
Adverse Effect" and "material" (and other forms of materiality qualifiers) in
the Company's Representations and Warranties shall not be applicable and (ii)
each of the Company's Representations and Warranties shall be deemed to have
been made as of the date of this Agreement and as of the Tender Offer Purchase
Time, except to the extent any of the Company's Representations and Warranties
is expressly made as of a specific date, in which case it shall be deemed to
have been made as of the date specified.
(g) Notwithstanding any other provision of this Section 10, (i) no
Parent Indemnitee shall be entitled to make a claim under Section 10(a) or
clause (i) of Section 10(b) against any Stockholder in respect of Damages unless
the aggregate amount of all Damages incurred by the Parent Indemnitees for which
the Stockholders would but for this Section 10(g), be liable exceeds, on a
cumulative basis $500,000, in which case the Stockholders shall be liable for
all such Damages that exceed such amount and such Parent Indemnitee may assert
its right to indemnification hereunder to the full extent of such excess,
subject to Section 10(d); and (ii) no Parent Indemnitee shall be entitled to
make a claim under Section 10(b)(ii)(B) against any Stockholder in respect of
Damages unless the aggregate amount of all Damages incurred by the Parent
Indemnitees for which the Stockholders would but for this Section 10(g), be
liable exceeds, on a cumulative basis $500,000, in which case the Stockholders
shall be liable for all such Damages that exceed such amount, provided that, for
purposes of calculating Damages under this clause (ii), only 60% of actual
Damages shall be included as Damages subject to Section 10(d).
(h) Parent Indemnitees shall, in good faith, defend against any
claim, suit or proceeding that could result in a claim for Damages under this
Section 10 and shall use reasonable efforts to minimize the extent of such
Damages. No Parent Indemnitee shall settle any claim, suit or proceeding without
the consent of each indemnifying Stockholder, which consent shall not be
unreasonably be held; provided that the Parent Indemnitee need not obtain the
consent of any Stockholder who denies any indemnification obligation with
respect to such claim, suit or proceeding.
(i) If Parent or any director, officer, employee, counsel,
accountant, advisor or other representative of Parent has obtained, prior to the
date of this Agreement, actual knowledge of
<PAGE>
any information relevant to the accuracy of the representations and
warranties of any Stockholder or the Company's Representations and Warranties,
then for purposes of this Section 10, such information shall be deemed to have
been contained in the applicable representation and warranty such Stockholder as
of the date of this Agreement and to have been disclosed by the Company in the
Company Disclosure Schedule.
SECTION 11. TERMINATION; SURVIVAL.
The representations, warranties, covenants and agreements contained
herein with respect to the Shares shall terminate on and shall not survive the
Termination Date. Notwithstanding the foregoing, if the Tender Offer Purchase
Time shall have occurred, the representations and warranties of the
Stockholders, the Company's Representations and Warranties (solely for purposes
of Section 10 hereof) and the provisions of Sections 9, 10 and 13 of this
Agreement shall be deemed to survive for a period of one year after the Tender
Offer Purchase Time.
SECTION 12. STOCKHOLDER CAPACITY.
No Person executing this Agreement who is or becomes during the term
hereof a director or executive officer of the Company makes any agreement or
understanding herein in his or her capacity as such director or executive
officer. Each Stockholder signs solely in its capacity as the record and/or
Beneficial Owner of its Shares.
SECTION 13. DISPUTE RESOLUTION.
(a) Any dispute or difference between any one or more Stockholders,
on the one hand, and Parent or Acquisition, on the other hand, arising out of
this Agreement or the transactions contemplated hereby or by the Merger
Agreement, including, without limitation, any dispute between a Parent
Indemnitee and any one or more Stockholders under Section 10 but excluding any
suit for specific performance as provided in Section 14(l), which the parties
are unable to resolve themselves shall be submitted to and resolved by
arbitration as provided herein. Any disputing party may request the American
Arbitration Association (the "AAA") to designate one arbitrator, who shall be
qualified as an arbitrator under the standards of the AAA, who shall be a
retired or former judge of any appellate or trial court of the State of
Illinois, any United States appellate court or the United States District Court
for any Illinois District, who is, in any such case, not affiliated with any
party in interest to such arbitration, and who has substantial professional
experience with regard to legal matters.
(b) The arbitrator shall consider the dispute at issue in Chicago,
Illinois at a mutually agreed upon time within 60 calendar days (or such longer
period as may be acceptable to the parties to the arbitration or as directed by
the arbitrator) after the designation of the arbitrator. The arbitration
proceeding shall be held in accordance with the rules for commercial arbitration
of the AAA in effect on the date of the initial request by the disputing party
that gave rise to the dispute to be arbitrated (as such rules are modified by
the terms of this Agreement or may be further modified by mutual agreement of
the disputing parties) and shall include an opportunity for the parties to
conduct discovery in advance of the proceeding. Notwithstanding the foregoing,
the disputing parties shall agree that they will attempt, and they intend that
they and the arbitrator should use its best efforts in that attempt, to conclude
the arbitration proceeding
<PAGE>
and have a final decision from the arbitrator within 120 calendar days
after the designation of the arbitrator; provided, however, that the arbitrator
shall be entitled to extend such 120 calendar day period for a total of two 120
calendar day periods. The arbitrator shall deliver a written award with respect
to the dispute to each of the parties to the arbitration, who shall promptly act
in accordance therewith. Each party to such arbitration agrees that any award of
the arbitrator shall be final, conclusive and binding and that it will not
contest any action by any other party thereto in accordance with the award of
the arbitrator. It is specifically understood and agreed that any party may
enforce any award rendered pursuant to the arbitration provisions of this
Section 13 by bringing suit in any court of competent jurisdiction.
SECTION 14. MISCELLANEOUS.
(a) This Agreement and the Merger Agreement constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof. This Agreement
may not be assigned by any Stockholder except in connection with a transfer of
its Shares. Parent or Acquisition may assign, in its sole discretion, its rights
and obligations hereunder to any direct or indirect wholly owned subsidiary of
Parent.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
(c) The failure of any party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.
(d) This Agreement may not be amended, changed, supplemented, waived
or otherwise modified or terminated, with respect to any Stockholder, except
upon the execution and delivery of a written agreement executed by Parent,
Acquisition and such Stockholder; provided that Schedule I hereto may be
supplemented by Parent by adding the name and other relevant information
concerning any Stockholder of the Company who agrees to be bound by the terms of
this Agreement (by executing a counterpart signature page hereof) without the
agreement of any other party hereto, and thereafter such added Stockholder shall
be treated as a "Stockholder" for all purposes of this Agreement.
(g) If any provision of this Agreement or the application thereof to
any Person or circumstance is held invalid or unenforceable, the remainder of
this Agreement and the application of such provision to other Persons or
circumstances shall not be affected thereby and to such end the provisions of
this Agreement are agreed to be severable.
(h) All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by
<PAGE>
delivery in Person, by facsimile or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties as
follows:
if to any Stockholder: At the address set forth
opposite such Stockholder's
name in column 2 of
Schedule I hereto.
if to Parent or Acquisition: 200 Bay Street
14th Floor, North Tower
Toronto, Ontario, Canada
Telecopier: 416-974-9344
Attention: Robert K. Horton
with a copies to: RBC Head Office Law Department
1 Place Ville Marie
4th Floor, East Wing
Montreal, Quebec
M5J2J5 Canada
Telecopier: (514) 874-0241
Attention: Sarah J. Azzarello
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Telecopier: 212-351-4035
Attention: Lawrence J. Hohlt,
Esq.
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(i) This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware without regard to the principles of
conflicts of laws thereof.
(j) The descriptive headings used herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
(k) Each Stockholder agrees that this Agreement and the obligations
hereunder shall attach to such Stockholder's Shares and shall be binding upon
any Person to which record or Beneficial Ownership of such Shares shall pass,
whether by operation of law or otherwise, including, without limitation, such
Stockholder's heirs, guardians, administrators or successors. Notwithstanding
any transfer of Shares, the transferor shall remain liable for the performance
of all obligations of the transferor under this Agreement. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto and its
successors and permitted assigns and nothing in this Agreement express or
implied is intended to or shall confer upon any other Person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
(l) Each of the Stockholders hereby acknowledges and agrees that its
failure to perform its agreements and covenants hereunder will cause irreparable
injury to Parent
<PAGE>
and Acquisition for which damages, even if available, will not be an adequate
remedy. Accordingly, each Stockholder hereby consents to the issuance of
injunctive relief by any court of competent jurisdiction to compel performance
of such Stockholder's obligations and to the granting by any court of the remedy
of specific performance of its obligations hereunder.
(m) This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
IN WITNESS WHEREOF, Parent and Acquisition have caused this
Stockholders' Agreement to be duly executed, and each Stockholder has duly
executed this Agreement, as of the day and year first above written.
ROYAL BANK OF CANADA
By: /s/ ROBERT K. HORTON
-------------------------------
Name: Robert K. Horton
Title: Senior Vice President
RAINBOW ACQUISITION
SUBSIDIARY, INC.
By: /s/ ROBERT K. HORTON
-------------------------------
Name: Robert K. Horton
Title: Senior Vice President
STOCKHOLDERS
/s/ MARK A. FILLER
-------------------------------------
Mark A. Filler, individually and as
controlling general partner of Filler
Growth and Retention Fund I L.P.
/s/ TERRY A. MARKUS
-------------------------------------
Terry A. Markus, individually and as
controlling general partner of Markus
Growth and Retention Fund I L.P.
ESTATE OF BRUCE C. ABRAMS
By: /s/ NANCY C. ABRAMS
--------------------------
Nancy C. Abrams, Executor
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE I
column 1 column 2 column 3 column 4
NUMBER OF SHARES INDEMNIFICATION
STOCKHOLDER ADDRESS OWNED PERCENTAGE
_____________________ ________________________ ________________________ ________________________
<S> <C> <C> <C>
Mark A. Filler, 226 Prospect 1,966,671 20%
individually and Highland Park,
as controlling general Illinois 60035
partner of Filler
Growth and Retention
Fund I L.P.
Terry A. Markus, 3448 Dauphine Avenue 1,673,150 18%
individually and as Northbrook, Illinois 60062
controlling general
partner of Markus
Growth and Retention
Fund I L.P.
Estate of Bruce C. c/o Louis S. Harrison 5,503,745 62%
Abrams Lord, Bissell & Brook
115 South LaSalle
Chicago, Illinois 60603
</TABLE>
[Schedules II and III intentionally ommitted. Such schedules will be supplied
supplementally to the Securities and Exchange Commission upon its request.]
<PAGE>
EXHIBIT A
FORM OF ESCROW AGREEMENT
A-1
FORM OF
ESCROW AGREEMENT
This ESCROW AGREEMENT (the "Agreement") is entered into this ___ day of
___________ 2000 by and among the individuals named on SCHEDULE A hereto
(each a "Stockholder," and collectively, the "Stockholders"), Royal Bank of
Canada, a Canadian commercial bank ("RBC"), and
__________________________________________ (the "Escrow Agent").
RECITALS
WHEREAS, pursuant to a Merger Agreement dated as of March 10, 2000 (the
"Merger Agreement"), among RBC, Rainbow Acquisition Subsidiary, Inc., a Delaware
corporation and a wholly owned, indirect subsidiary of RBC ("Acquisition"), and
Prism Financial Corporation, a Delaware corporation (the "Company"), Acquisition
will merge with and into the Company, with the Company as the surviving
corporation; and
WHEREAS, as a condition of and inducement to Parent's and Acquisition's
entering into the Merger Agreement and incurring the obligations set forth
therein, the Stockholders have entered into a stockholders' agreement dated as
of March 10, 2000 (the "Stockholders' Agreement"), pursuant to which, among
other things, the Stockholders will indemnify, reimburse and hold harmless RBC
and its affiliates (the "RBC Indemnitees") against Damages (as defined in the
Stockholders' Agreement) incurred by such RBC Indemnitees under the
circumstances, and subject to the limitations, set forth in the Stockholders'
Agreement and this Agreement (the "Indemnity Obligations").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants, terms and conditions set forth in this Agreement, the parties hereto
agree as follows:
1. Appointment of the Escrow Agent; Deposit of Escrow Amount. The
Stockholders and RBC hereby constitute and appoint the Escrow Agent as, and the
Escrow Agent hereby agrees to assume and perform the duties of, the escrow agent
under and pursuant to this Agreement. The Escrow Agent acknowledges receipt of
an executed copy of the Stockholders' Agreement and the amount set forth
opposite each Stockholder's name under the "Initial Escrow Deposit" column of
Schedule A hereto (with respect to each Stockholder, such Stockholder's "Initial
Escrow Deposit") from or on behalf of the Stockholders as provided in Section 9
of the Stockholders' Agreement. The aggregate amount of the Initial Escrow
Deposits of all Stockholders is equal to Seven Million Five Hundred Thousand
Dollars ($7,500,000) (the "Escrow Amount").
2. The Escrow Fund. The Escrow Amount and all earnings thereon (the
Escrow Amount and all such earnings being referred to herein together as the
"Escrow Fund") shall be held by the Escrow Agent as a trust fund in a separate
account maintained for the purpose, on the terms and subject to the conditions
of this Agreement. Except as otherwise provided in Section 10 hereof, amounts
held in the Escrow Fund shall not be available to, and shall not be
1
<PAGE>
used by, the Escrow Agent to set off any obligations of either RBC or the
Stockholders owing to the Escrow Agent in any capacity.
3. Investment of the Escrow Fund; Taxes.
(a) Investment of the Escrow Fund. The Escrow Agent shall invest
and reinvest all cash funds held from time to time in the Escrow Fund in
any one or more of the following kinds of investments: (i) bonds or other
obligations of, or guaranteed by, the government of the United States of America
having maturities of not greater than thirty (30) days (and, in any event, not
maturing after the Release Date); (ii) commercial paper rated, at the time of
the Escrow Agent's investment therein or contractual commitment providing for
such investment, at least P-1 by Moody's Investors Service, Inc. and A-1 by
Standard & Poor's Corporation and having maturities of not greater than thirty
(30) days (and, in any event, not maturing after the Release Date); (iii)
corporate obligations rated, at the time of the Escrow Agent's investment
therein or contractual commitment providing for such investment, among the two
highest ratings by any nationally recognized statistical ratings organization
and having maturities of not greater than 180 days; (iv) demand or time deposits
in, certificates of deposit of, or bankers' acceptances issued by, a depository
institution or trust company incorporated under the laws of the United States of
America or any State thereof if, in any such case, the depository institution
or, trust company has combined capital and surplus of not less than One Hundred
Million Dollars ($100 million) (any such institution being herein called a
"Permitted Bank"), having maturities of not greater than thirty (30) days (and,
in any event, not maturing after the Release Date); or (v) a Money Market
Account at the Escrow Agent, fully insured up to the maximum extent permitted by
law by the Federal Deposit Insurance Corporation.
(b) Taxes; Back-up Withholding. Each of the Stockholders and RBC
acknowledges that the payment of any interest earned on funds invested in
the Escrow Fund will be subject to back-up withholding unless a properly
completed Internal Revenue Service Form W-8 or W-9 certification is submitted to
the Escrow Agent. All taxes in respect of earnings on the Escrow Fund shall be
the obligation of and shall be paid when due by, the Stockholders, who shall
indemnify and hold RBC and the Escrow Agent harmless from and against all such
taxes.
4. Claims Against the Escrow Fund.
(a) Concurrently with the delivery of a written notification to the
relevant Stockholder of a claim for indemnity under Section 10(a) of the
Stockholders' Agreement (or, in the case of a claim for indemnity under Section
10(b) of the Stockholders' Agreement, to each of the Stockholders), RBC will
deliver to the relevant Stockholder or to each of the Stockholders, as the case
may be, and the Escrow Agent a certificate in substantially the form of ANNEX I
attached hereto (a "Certificate of Instruction"). The Escrow Agent shall give
written notice to the relevant Stockholder or to each of the Stockholders, as
the case may be, of its receipt of a Certificate of Instruction not later than
the second (2nd) business day next following receipt thereof, together with a
copy of such Certificate of Instruction.
(b) If the Escrow Agent (i) shall not, within thirty (30) calendar
days following receipt by the relevant Stockholders of a Certificate of
Instruction (the "Objection Period"), have received a certificate in
substantially the form of ANNEX II attached hereto (an "Objection Certificate")
signed by the relevant Stockholder with respect to a claim for indemnification
under Section 10(a) of the Stockholders' Agreement or any of the Stockholders
2
<PAGE>
with respect to a claim for indemnification under Section 10(b) of the
Stockholders' Agreement, as the case may be, disputing the relevant
Stockholder's or the Stockholders', as the case may be, obligation to pay the
amount of the Damages referred to in such Certificate of Instruction, or (ii)
shall have received such an Objection Certificate within the Objection Period
and shall thereafter have received either (x) a certificate substantially in the
form of ANNEX III attached hereto (a "Resolution Certificate") signed by RBC and
the relevant Stockholder or each of the Stockholders, as the case may be,
stating that RBC and the relevant Stockholder or Stockholders, as the case may
be, have agreed that the amount of the Damages referred to in such Resolution
Certificate is payable to one or more of the RBC Indemnitees or (y) a copy of
the final award rendered by the arbitrator pursuant to Section 13 of the
Stockholders' Agreement accompanied by a certificate substantially in the form
of ANNEX IV attached hereto (an "Arbitration Certificate") signed by RBC stating
that the amount of the Damages referred to in such Arbitration Certificate is
payable to one or more of the RBC Indemnitees by the relevant Stockholder or the
Stockholders, as the case may be, then the Escrow Agent shall, subject to
Section 5, on the tenth (10th) business day next following (A) the expiration of
the Objection Period or (B) the Escrow Agent's receipt of a Resolution
Certificate or an Arbitration Certificate, as the case may be, (or as soon
thereafter as the appropriate amount of funds in the Escrow Account may be
withdrawn from investments made pursuant to Section 3(a) without penalty) pay
over to RBC from the Escrow Fund, by wire transfer of immediately available
funds to a bank account of RBC's designation, the amount set forth in the
Certificate of Instruction or, if the related Resolution Certificate or
Arbitration Certificate specifies that a lesser amount than the amount set forth
in the Certificate of Instruction is payable, such lesser amount.
(c) Any certificate or notice to be delivered to the Escrow
Agent pursuant to paragraph (b) by RBC or any of the Stockholders shall
be concurrently delivered to the relevant Stockholder or to each of the other
Stockholders, as the case may be, or RBC, respectively. The Escrow Agent shall
give written notice to RBC and each Stockholder of its receipt of an Objection
Certificate not later than the second (2nd) business day next following receipt
thereof, together with a copy of such Objection Certificate. The Escrow Agent
shall give written notice to the relevant Stockholder or to each of the
Stockholders, as the case may be, of its receipt of an Arbitration Certificate
not later than the second (2nd) business day next following receipt thereof,
together with a copy of such Arbitration Certificate.
(d) Upon RBC's determination that it has no claim or has
released its claim with respect to any Damages referred to in a
Certificate of Instruction (or a specified portion thereof), RBC will promptly
deliver to the relevant Stockholder or to each of the Stockholders, as the case
may be, and to the Escrow Agent a certificate substantially in the form of ANNEX
V attached hereto (an "RBC Cancellation Certificate") canceling such Certificate
of Instruction (or such specified portion thereof, as the case may be), and such
Certificate of Instruction (or portion thereof) shall thereupon be deemed
canceled. The Escrow Agent shall give written notice to the relevant Stockholder
or to each of the Stockholders, as the case may be, of its receipt of an RBC
Cancellation Certificate not later than the second (2nd) business day next
following receipt thereof, together with a copy of such RBC Cancellation
Certificate.
(e) Upon receipt of a copy of the final award rendered by the
arbitrator pursuant to Section 13 of the Stockholders' Agreement stating
that none of the Damages referred to in a Certificate of Instruction as to which
the relevant Stockholder or the Stockholders, as the case may be, delivered an
Objection Certificate within the Objection Period is payable to any
3
<PAGE>
RBC Indemnitee by the relevant Stockholder or the Stockholders, as the
case may be, will promptly deliver to RBC and the Escrow Agent a copy of such
order (accompanied by a certificate substantially in the form of ANNEX VI
attached hereto (a "Stockholder Cancellation Certificate")) signed by, the
relevant Stockholder or each of the Stockholders, as the case may be, canceling
such Certificate of Instruction, and such Certificate of Instruction shall
thereupon be deemed canceled. The Escrow Agent shall give written notice to RBC
of its receipt of a Stockholder Cancellation Certificate not later than the
second (2nd) business day next following receipt thereof, together with a copy
of such Stockholder Cancellation Certificate.
(f) Upon the payment by the Escrow Agent of the amount referred
to in a Certificate of Instruction, Resolution Certificate or Arbitration
Certificate (or a lesser amount pursuant to Section 5(e)), such Certificate of
Instruction, Resolution Certificate or Arbitration Certificate, as the case may
be, shall be deemed canceled. Upon the receipt by the Escrow Agent of a
Resolution Certificate, an Arbitration Certificate, an RBC Cancellation
Certificate or a Stockholder Cancellation Certificate, the related Certificate
of Instruction shall be deemed canceled.
5. Allocation of Damages to and among Stockholders.
(a) The Escrow Agent shall establish and maintain separate books
of account with respect to each Stockholder's Initial Escrow Deposit, all
earnings thereon, all payments in respect of Damages allocated to such
Stockholder pursuant to Section 10(a) of the Stockholders' Agreement and all
payments in respect of Damages allocated to such Stockholder pursuant to Section
10(b) of the Stockholders' Agreement in proportion to such Stockholder's
Indemnification Percentage, all as if the portion of the Escrow Fund
attributable to such Stockholder were held in a separate account. At the request
of any Stockholder, the Escrow Agent shall promptly provide such Stockholder
with a statement showing all deposits, earning and disbursements of funds
attributable to such Stockholder and the balance of the funds held in the Escrow
Account attributable to such Stockholder.
(b) Any Damages paid by the Escrow Agent pursuant to any
Certificate of Instruction, Resolution Certificate or Arbitration
Certificate shall be allocated entirely to a Stockholder or allocated among all
Stockholders in accordance with their respective Indemnification Percentages as
indicated in the Certificate of Instruction, Resolution Certificate or
Arbitration Certificate as the case may be. In making any allocation in
accordance with a Certificate of Instruction, Resolution Certificate or
Arbitration Certificate, the amount allocated to any Stockholder shall be equal
to (i) in the case of Damages allocated entirely to such Stockholder pursuant to
Section 10(a) of the Stockholders' Agreement, the lesser of (x) the amount of
the Damages set forth in the Certificate of Instruction, Resolution Certificate
or Arbitration Certificate, as the case may be, and (y) the balance of the funds
held in the Escrow Account attributable to such Stockholder as determined by the
books of account maintained by the Escrow Agent pursuant to clause (a); and (ii)
in the case of Damages allocated among the Stockholders in accordance with their
respective Indemnification Percentages pursuant to Section 10(b) of the
Stockholders' Agreement, the lesser of (x) the amount of the Damages set forth
in the Certificate of Instruction, Resolution Certificate or Arbitration
Certificate, as the case may be, multiplied by such Stockholder's
Indemnification Percentage and (y) the balance of the funds held in the Escrow
Account attributable to such Stockholder as determined by the books of account
maintained by the Escrow Agent pursuant to clause (a).
4
<PAGE>
(c) In the event that the Escrow Agent determines, based on the
books of account maintained by the Escrow Agent pursuant to clause (a),
that the balance of the funds held in the Escrow Account attributable to any
Stockholder equals zero, the Escrow Agent shall promptly deliver to RBC and to
such Stockholder a notice substantially in the form of ANNEX VII attached hereto
(the "Zero Balance Notice") signed by the Escrow Agent stating that the balance
of the funds held in the Escrow Account attributable to any Stockholder equals
zero. From and after the receipt by RBC of a Zero Balance Notice with respect to
any Stockholder, neither RBC nor any other RBC Indemnitee shall assert any claim
for indemnification or Damages against such Stockholder and, notwithstanding any
other provision of this Agreement or of the Stockholders' Agreement, the
Indemnification Obligation of such Stockholder shall terminate.
6. Release of Escrow Fund. The Escrow Agent shall pay over to each of the
Stockholders from the Escrow Fund, by wire transfer of immediately available
funds to a bank account designated by each of the Stockholders, the amount of
any funds remaining in the Escrow Fund upon the earlier to occur of:
(a) the termination of the Indemnification Obligation pursuant
to Section 10(e) of the Stockholders' Agreement (the "Release Date"); or
(b) the receipt by the Escrow Agent of a certificate
substantially in the form of ANNEX VIII attached hereto (a "Release
Certificate") signed by RBC and each of the Stockholders stating that no
further claims shall be made against the Escrow Fund in respect of the Indemnity
Obligation.
7. Termination. This Agreement shall terminate upon distribution of
all of the Escrow Fund pursuant to Section 5 or 6.
8. Duties and Obligations of the Escrow Agent. The duties and obligations
of the Escrow Agent shall be limited to and determined solely by the provisions
of this Agreement and the certificates delivered in accordance herewith and the
Escrow Agent is not charged with knowledge of or any duties or responsibilities
in respect of any other agreement or document. In furtherance and not in
limitation of the foregoing:
(a) No Liability with Respect to Investments. The Escrow Agent
shall not be liable for any loss of earning sustained as a result of
investments made hereunder in accordance with the terms hereof;
(b) Reliance on Certificates. The Escrow Agent shall be fully
protected in relying in good faith upon any written certification,
notice, direction, request, waiver, consent, receipt or other document that the
Escrow Agent reasonably believes to be genuine and duly authorized, executed and
noticed as provided herein;
(c) Limited Liability for Certain Actions. The Escrow Agent
shall not be liable for any error of judgment or calculation (including
any calculations made pursuant to Section 5 of this Agreement), or for any act
done or omitted by it, or for any mistake in fact or law, or for anything that
it may do or refrain from doing in connection herewith; provided, however, that
notwithstanding any other provision in this Agreement, the Escrow Agent shall be
liable for its willful misconduct or gross negligence or breach of this
Agreement;
5
<PAGE>
(d) Reliance on Advice of Counsel. The Escrow Agent may seek the
advice of legal counsel selected with reasonable care in the event of any
dispute or question as to the construction of any of the provisions of this
Agreement or its duties hereunder, and it shall incur no liability and shall be
fully protected in respect of any action taken, omitted or suffered by it in
good faith in accordance with the opinion of such counsel;
(e) Refraining from Action. In the event that the Escrow Agent
shall in any instance, after seeking the advice of legal counsel pursuant
to the immediately preceding clause, in good faith be uncertain as to its duties
or rights hereunder, it shall be entitled to refrain from taking any action in
that instance and its sole obligation, in addition to those of its duties
hereunder as to which there is no such uncertainty, shall be to keep safely all
property held in the Escrow Fund until it shall be directed otherwise in writing
by each of the parties hereto or by the final award rendered by the arbitrator
pursuant to Section 13 of the Stockholders' Agreement; provided, however, in the
event that the Escrow Agent has not received such written direction or order
within 180 calendar days after requesting the same, it shall have the right to
interplead RBC and the Stockholders in any court of competent jurisdiction and
request that such court determine its rights and duties hereunder; and
(f) Acting though Agents. The Escrow Agent may execute any of
its powers or responsibilities hereunder and exercise any rights
hereunder either directly or by or through agents or attorneys selected with
reasonable care. Nothing in this Agreement shall be deemed to impose upon the
Escrow Agent any duty to qualify to do business or to act as fiduciary or
otherwise in any jurisdiction other than the Escrow Agent's primary place of
business and the Escrow Agent shall not be responsible for and shall not be
under a duty to examine into or pass upon the validity, binding effect,
execution or sufficiency of this Agreement or of any amendment or supplement
hereto.
9. Cooperation. RBC and the Stockholders shall provide to the Escrow
Agent all certificates, instruments and other documents within their respective
powers that are necessary for the Escrow Agent to perform its duties and
responsibilities hereunder.
10. Fees and Expenses; Indemnity. RBC shall pay all of the fees (as set
forth on the Fee Schedule attached hereto as SCHEDULE B) of the Escrow Agent for
its services hereunder as and when billed by the Escrow Agent, and each shall
reimburse and indemnify the Escrow Agent for, and hold it harmless against, any
loss, damages, cost or expense, including but not limited to reasonable
attorneys' fees, reasonably incurred by the Escrow Agent in connection with the
Escrow Agent's performance of its duties and obligations under this Agreement,
as well as the reasonable costs and expenses of defending against any claim or
liability relating to this Agreement; provided that notwithstanding the
foregoing, RBC shall not be required to indemnify the Escrow Agent for any such
loss, liability, cost or expense arising as a result of the Escrow Agent's
willful misconduct or gross negligence or breach of this Agreement. Any such
fees, expenses or indemnification obligations of RBC shall be paid directly to
the Escrow Agent by RBC and shall not be paid out of the Escrow Fund; provided,
however, that the Escrow Agent shall be entitled to withhold from any amount
payable to RBC pursuant to Section 5 the amount of any such fees, expenses or
indemnity payments due and unpaid by RBC.
11. Resignation and Removal of the Escrow Agent.
6
<PAGE>
(a) Resignation or Removal. The resignation of the Escrow Agent
shall be effective as such 30 days following the giving of written notice
thereof to the Stockholders and RBC. In addition, the Escrow Agent may be
removed and replaced on a date designated in a written instrument signed by a
majority-in-interest of the Stockholders (or their authorized representative or
attorney-in-fact) and RBC and delivered to the Escrow Agent. Notwithstanding the
foregoing, no such resignation or removal shall be effective until a successor
escrow agent has acknowledged its appointment as such as provided in paragraph
(c) below. In either event, upon the effective date of such resignation or
removal, the Escrow Agent shall deliver the property comprising the Escrow Fund
to such successor escrow agent, together with such records maintained by the
Escrow Agent in connection with its duties hereunder and other information with
respect to the Escrow Fund as such successor may reasonably request.
(b) Appointment of Successor Escrow Agent. If a successor
escrow agent shall not have acknowledged its appointment as such as
provided in paragraph (c) below, in the case of a resignation, prior to the
expiration of thirty (30) days following the date of a notice of resignation or,
in the case of a removal, on the date designated for the Escrow Agent's removal,
as the case may be, because the Stockholders and RBC are unable to agree on a
successor escrow agent, or for any other reason, the Escrow Agent may select a
successor escrow agent and any such resulting appointment shall be binding upon
all of the parties to this Agreement, provided that any such successor selected
by the Escrow Agent shall be a Permitted Bank (as defined in Section 3(a))
qualified to do business in the State of Illinois.
(c) Acknowledgment by Successor Escrow Agent; Release of Escrow
Agent. Upon written acknowledgment by a successor escrow agent appointed
in accordance with the foregoing provisions of this Section 11 of its Agreement
to serve as escrow agent hereunder and the receipt of the property then
comprising the Escrow Fund, the Escrow Agent shall be fully released and
relieved of all duties, responsibilities and obligations under this Agreement,
subject to the proviso contained in Section 8(c), and such successor escrow
agent shall for all purposes hereof be the Escrow Agent.
(d) Automatic Succession. Notwithstanding any other provision
of this Section 11, any Permitted Bank into which the Escrow Agent is
merged or with which it is consolidated, or any Permitted Bank to which the
Escrow Agent transfers a substantial portion of its escrow business shall be the
successor escrow agent without the execution or filing of any paper or any
further act on the part of any party hereto.
12. Specific Performance. Each of the Stockholders hereby acknowledges
that its failure to perform its agreements and covenants hereunder will cause
irreparable injury to RBC and the RBC Indemnitees for which damages, even if
available, will not be an adequate remedy. Accordingly, each Stockholder hereby
consents to the issuance of injunctive relief by a court of competent
jurisdiction to compel performance of such Stockholder's obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder.
13. General Provisions.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by registered or certified mail (postage prepaid, return receipt
requested) to each other party as follows:
7
<PAGE>
(i) if to RBC, to:
200 Bay Street
14th Floor, North Tower
Toronto, Ontario
M5J2J5 Canada
Telecopier: (416) 974-9344
Attention: Robert K. Horton
with a copies to:
RBC Head Office Law Department
1 Place Ville Marie
4th Floor, East Wing
Montreal, Quebec
M5J2J5 Canada
Telecopier: (514) 874-0241
Attention: Sarah J. Azzarello
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Telecopier: (213) 229-7520
Attention: Lawrence J. Hohlt, Esq.
(ii) if to the Stockholders or any Stockholder:
to the address set forth opposite such
Stockholder's name on Schedule A [with a
copy to any party designated thereon].
(iii) if to the Escrow Agent, to:
___________________________
___________________________
___________________________
___________________________
Telecopier: ________________
Attention: _________________
or to such other address as the Person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(b) Waiver of Breach. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to insist upon
compliance by any other party hereto with its obligations hereunder, and any
custom or practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
(a) Entire Agreement. This Agreement and the Stockholders'
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties
8
<PAGE>
with respect to the subject matter hereof. Any modification of this Agreement
shall be effective only if it is in writing and signed by the parties to this
Agreement. This Agreement may not be assigned by any Stockholder. This Agreement
is personal to the Escrow Agent and, except as otherwise provided in Section 11,
shall not be assignable by the Escrow Agent without the written consent of a
majority-in-interest of the Stockholders and RBC.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts thereof.
(g) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which shall constitute one and the same agreement.
(c) Amendments. This agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, with respect to
any Stockholder, except upon the execution and delivery of a written agreement
executed by RBC, Acquisition and such Stockholder; provided that Schedule A
hereto may be supplemented by RBC after notice to the Escrow Agent and each of
the Stockholders by adding the name and other relevant information concerning
any Stockholder of the Company who becomes a party to the Stockholders'
Agreement (by executing a counterpart signature page hereof) without the
agreement of any other party hereto, and thereafter such added Stockholder shall
be treated as a "Stockholder" for all purposes of this Agreement.
(d) Validity. If any provision of this Agreement or the
application thereof to any Person or circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby and to
such end the provisions of this Agreement are agreed to be severable.
(f) Descriptive Headings. The descriptive heading used herein
are inserted for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, each of RBC and the Escrow Agent has caused this
Escrow Agreement to be duly executed, and each Stockholder has duly executed
this Agreement as of the day and year first above written.
ROYAL BANK OF CANADA
By:
________________________________
Name:
Title:
By:
_________________________________
Name:
Title:
ESCROW AGENT
___________________________
By:
________________________
Name:
Title:
RAINBOW ACQUISITION SUBSIDIARY,
INC.
By:
_________________________________
Name:
Title:
STOCKHOLDERS
_______________________________________________
Mark A. Filler, individually and as controlling
general partner of Filler Growth and Retention
Fund I L.P.
________________________________________________
Terry A. Markus, individually and as controlling
general partner of Markus Growth and Retention
Fund I L.P.
ESTATE OF BRUCE C. ABRAMS
By:
____________________________________________
Nancy C. Abrams, Executor
10
<PAGE>
Dated: ____________, 200_
11
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Initial Indemnification
Stockholder Address Escrow Deposit Percentage
___________ _______ ______________ _______________
<S> <C> <C> <C>
Mark A. Filler
Terry A. Markus
Nancy C. Abrams, as
Executor of the Estate
of Bruce C. Adams
</TABLE>
1
<PAGE>
SCHEDULE B
Escrow Depository Services
Fee Schedule for Holding (Depository) Escrows
I. ACCEPTANCE FEE: ESCROW
II. ANNUAL ADMINISTRATION FEE:
III. INVESTMENT PROCESSING FEES:
IV. ACTIVITY FEES:
V. OUT-OF-POCKET EXPENSES:
VI. EXTRAORDINARY SERVICES AND EXPENSES:
1
<PAGE>
EXHIBIT 3
ROYAL BANK OF CANADA
Royal Bank Plaza
MUTUAL CONFIDENTIALITY AGREEMENT 200 Bay Street
Toronto, Ontario
M5J 2J5 Canada
(416) 974-9878
CONFIDENTIAL
as of January 31, 2000
Prism Financial Corporation
440 North Orleans
Chicago, Illinois 60610
Attention: Mark Filler
President & CEO
Dear Sirs:
Re: Confidentiality and Non-Disclosure Covenants
In connection with a possible transaction (the "Transaction") between Royal
Bank of Canada or any of its affiliates and Prism Financial Corporation
(hereinafter individually referred to as the "Party", the "Disclosing Party" or
the "Recipient Party", as the case may be, and collectively referred to as the
"Parties") the Parties are providing to each other certain information that is
non-public, confidential and/or proprietary in nature concerning their
respective business, operations and assets. In consideration of the Parties
providing such information to each other, each Party agrees, for a period of
two years from the date of this agreement, to treat any confidential
information concerning the other Party, whether prepared by or on behalf of
such Party or otherwise identified as confidential information at the time of
disclosure, in accordance with the provisions of this agreement and to take or
abstain from taking certain other actions hereinafter set forth.
1. The term "Confidential Information" includes all information of the
Disclosing Party provided under this agreement provided, however, that
it does not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by the
Recipient Party, (ii) was within the Recipient Party's possession on a
non-confidential basis prior to its being provided to the Recipient
Party by or on behalf of the Disclosing Party, (iii) is or becomes
available to the Recipient party on a non-confidential basis from a
source other than the Disclosing Party or its Representatives (as
defined below) which source, to the best of the Recipient Party's
knowledge, is not prohibited from disclosing such information by a
legal, contractual or fiduciary obligation, or (iv) is independently
developed by the Recipient Party without the use of the Disclosing
Party's information.
2. The Recipient Party agrees that it shall use the Confidential
Information provided by the Disclosing Party solely for the purpose of
evaluating the Transaction, that such Confidential Information will be
kept confidential by the Recipient Party and that the Recipient Party
will not disclose any of such Confidential Information provided,
however, that (i) the Recipient Party may disclose any of such
Confidential Information to which the Disclosing Party gives its prior
written consent, and (ii) the Recipient Party may disclose any of such
Confidential Information to its directors, officers, employees, agents
or advisors (including, without limitation, attorneys, accountants,
consultants, bankers and financial advisors) as well as those of its
affiliates (hereinafter collectively referred to as the
"Representatives") who need to know such Confidential Information for
the purpose of evaluating the Transaction and who shall be informed of
the confidential nature of such Confidential Information.
3. Each item of the Confidential Information shall remain the exclusive
property of the Disclosing Party. The Recipient Party and its
Representatives shall not use, directly or indirectly, any portion of
such Confidential Information, or any summaries or other information
derived therefrom, or any reproductions thereof, except for the purpose
of evaluating the Transaction.
4. Without the prior written consent of the other Party, neither Party
will disclose to any person that discussions or negotiations are taking
place concerning the Transactions or any of the terms, conditions or
other facts with respect thereto, including the status thereof
("Transaction Information"). The term "person" as used in this
agreement shall be broadly interpreted to include the media and any
corporation, partnership, group, individual or other entity.
5. In the event that the Recipient Party or its Representatives become
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process by court order
of a court of competent jurisdiction, or in order to comply with
applicable requirements of any stock exchange, government department or
agency or other regulatory authority, or by requirements of any
securities law or regulations or other legal requirements) to disclose
any of the Confidential Information provided by the Disclosing Party or
any of the Transaction Information, the Recipient Party shall provide
the Disclosing Party with prompt written notice of such requirements so
that the Disclosing Party may seek a protective order or other
appropriate remedy or waive compliance with the terms of this
agreement, which waiver may not be unreasonably withheld. In the event
that such protective order or other remedy is not obtained or that the
Disclosing Party waives compliance with the provisions hereof, the
Recipient Party agrees to provide only that portion of the Confidential
Information provided by the Disclosing Party and Transaction
Information which is legally required and to exercise its reasonable
efforts to obtain assurances that confidential treatment will be
afforded to such Confidential Information and Transaction Information.
6. The Confidential Information provided by the Disclosing Party shall not
be copied, reproduced or summarized in any form, or stored in a
retrieval system or database, by the Recipient Party or its
Representatives without the prior written consent of the Disclosing
Party, except for such copies, reproductions, summaries and storage as
are strictly required for the purpose of evaluating the Transaction, it
being agreed, however, that such copies, reproductions, summaries and
storage shall be accorded the same confidential treatment as the
originals thereof. Upon the Disclosing Party's written request, all
original or copies of the Confidential Information provided by such
Disclosing Party, including that portion of the Confidential
Information that consists of notes, analyses, compilations, studies,
interpretations or other documents prepared by the Recipient Party and
its Representatives, will be promptly destroyed by the Recipient Party
and its Representatives. The destruction shall be certified in writing
to the Disclosing Party by an authorized officer of the Recipient Party
supervising such destruction.
7. The Recipient Party understands that the Disclosing Party has
endeavored to include in the Confidential Information those materials
which it believes to be reliable and relevant for the purpose of
evaluating the Transaction, but the Recipient Party acknowledges that
neither the Disclosing Party nor its Representatives make any
representation or warranty, either express or implied as to the
accuracy or completeness of such Confidential Information.
8. The Recipient Party agrees that in the event of a breach or threatened
breach of this agreement by the Recipient Party or its Representatives,
where irreparable damages would occur to the Disclosing Party with the
amount of potential damages being impossible to ascertain, the
Disclosing Party may, in addition to pursuing any remedies provided by
law, obtain an injunction against the Recipient Party or its
Representatives restraining any such breach or threatened breach of
this agreement or an order of specific performance of this agreement.
9. The Parties agree that unless and until definitive agreement regarding
the Transaction has been executed by the Parties, neither Party will be
under any legal obligation of any kind whatsoever with respect to the
Transaction by virtue of this agreement except for the matters
specifically agreed to in this agreement.
10. Any notices required by this agreement shall be given in hand, sent by
first class mail or forwarded electronically to the applicable address
set forth below. Each Party may from time to time specify as its
address for purposes of this agreement any other address upon giving
ten (10) days written notice thereof to the other Party.
In the case of
Royal Bank of Canada
Royal Bank Plaza
200 Bay Street
14th Floor, North Tower
Toronto, Ontario
M5J 2J5 Canada
Facsimile: (416) 974-9344
Attention: Robert K. Horton
In the case of
Prism Financial Corporation
440 North Orleans
Chicago, Illinois 60610
Facsimile: 312 494-0273
Attention: Mark Filler
11. This agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors and assigns.
12. No amendment to the terms and conditions of this agreement shall be
valid and binding unless made in writing and signed by the Parties. The
Parties agree that if any of the provisions of this agreement become
unenforceable, the remainder of this agreement shall nevertheless
remain binding to the fullest extent possible taking into consideration
the purposes and spirit hereof.
13. This agreement embodies the entire understanding and agreement between
the Parties with respect to the Confidential Information and supersedes
all prior understanding and agreement relating thereto.
14. This agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to principles of
conflicts of law.
Please confirm your agreement to the foregoing by signing and returning one copy
of this letter to the undersigned.
Royal Bank of Canada
Per: /s/ Robert K. Horton
-------------------------------------
Name: Robert K. Horton
Title: Senior Vice President, Strategic Initiatives
Accepted and agreed as of the date first written above.
Prism Financial Corporation
Per: /s/ Mark A. Filler
-------------------------------------
Name: Mark A. Filler
Title: President
<PAGE>
EXHIBIT 4
March 22, 2000
Dear Fellow Stockholders:
We are pleased to inform you that on March 10, 2000, Prism Financial
Corporation ("Prism") entered into a Merger Agreement (the "Merger Agreement")
with Royal Bank of Canada, a Canadian commercial bank ("Parent"), and Prism
Acquisition Subsidiary, Inc. (f/k/a Rainbow Acquisition Subsidiary, Inc.), a
Delaware corporation and a wholly owned, indirect subsidiary of Parent
("Purchaser"), pursuant to which Purchaser has today commenced a tender offer
(the "Offer") to purchase all of the outstanding shares of Prism common stock,
par value $.01 per share (the "Shares"), together with the associated rights
to purchase preferred stock pursuant to the Rights Agreement, dated as of
January 27, 2000, between Prism and LaSalle Bank National Association, as
Rights Agent, for $7.50 per Share in cash. Under the Merger Agreement and
subject to the terms thereof, following the Offer, Purchaser will be merged
with and into Prism (the "Merger") and all Shares not purchased in the Offer
(other than Shares held by Parent, Purchaser or Prism, or Shares held by
dissenting stockholders) will be converted into the right to receive $7.50 per
Share in cash.
Your Board of Directors has (i) determined that the Offer and the Merger
are fair to and in the best interests of Prism's stockholders and (ii)
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger. The Prism Board of Directors recommends
that Prism's stockholders accept the Offer and tender their Shares pursuant to
the Offer.
In arriving at its recommendation, the Prism Board gave careful
consideration to a number of factors described in the attached Schedule 14D-9
which has been filed today with the Securities and Exchange Commission,
including, among other things, the opinion, dated March 10, 2000, of Friedman,
Billings, Ramsey & Co., Inc., Prism's financial advisor, to the effect that,
as of such date, the consideration to be received by holders of Shares
pursuant to the Merger Agreement was fair to such stockholders from a
financial point of view.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated March 22, 2000, of Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions
of the Offer and the Merger and provide instructions as to how to tender your
Shares. We urge you to read the enclosed materials carefully.
Sincerely,
/s/ Richard L. Wellek
Richard L. Wellek
Chairman of the Board
<PAGE>
Exhibit 5
FOR IMMEDIATE RELEASE
ROYAL BANK OF CANADA AND PRISM FINANCIAL CORPORATION
ANNOUNCED AGREEMENT FOR ACQUISITION OF PRISM FINANCIAL
CORPORATION
CHICAGO--March 14, 2000 - Royal Bank of Canada (NYSE, TSE: RY) and Prism
Financial Corporation (NASDAQ:PRFN) announced on Friday, March 10, that
they had entered into a definitive agreement for Royal Bank to acquire
Prism.
Royal Bank's cash offer to purchase all outstanding shares of Prism for
US$7.50 per share is valued at approximately US$115 million.
The terms of the agreement provide for Royal Bank to commence a cash tender
offer in the near future for all outstanding shares of Prism. The three
major stockholders, representing more than 60% of outstanding shares, and
key members of management, have agreed to tender their shares. The
transaction is subject to regulatory approvals.
All stockholders should read the tender offer statement concerning the
tender offer that will be filed by Royal Bank, and the
solicitation/recommendation statement that will be filed by Prism, with the
Securities and Exchange Commission (SEC) and mailed to stockholders. These
statements will contain important information that stockholders should
consider before making any decision regarding tendering their shares.
Stockholders will be able to obtain these statements, as well as other
filings containing information about Prism, without charge, at the SEC's
Internet site (www.sec.gov http://www.sec.gov). Filings containing
information about Royal Bank, without charge, at the Internet site of the
System for Electronic Document Analysis and Retrieval, developed by the
Canadian Securities Administrators (www.sedar.com http://www.sedar.com).
Copies of the tender offer and the solicitation/recommendation statements
and other SEC filings can also be obtained, without charge, from Royal
Bank's Corporate Secretary. In addition, copies of the
solicitation/recommendation may also be obtained without charge from
Prism's Corporate Secretary.
ABOUT ROYAL BANK OF CANADA
Royal Bank of Canada (RY) is a diversified global financial services group
and a leading provider of personal and commercial banking, investment and
trust services, insurance, corporate and investment banking, on-line
banking and transaction-based services including custody. The group's main
business units include Royal Bank, RBC Dominion Securities, Royal
Investment Services, RBC Insurance, Global Integrated Solutions, Security
First Network Bank and Bull & Bear Securities. The group has 50,000
employees who serve 10 million personal, business and public sector
customers in 30 countries. For more information, visit Royal Bank's Web
site at www.royalbank.com.
ABOUT PRISM FINANCIAL CORPORATION
Prism Financial Corporation is a leading national retail mortgage banking
company that originated approximately $8 billion in loans in 1999. Based in
Chicago, Prism is licensed nationally, with more than 1,100 loan officers
in 27 states. Prism operates through more than 150 retail branches as well
as through partnerships with major Internet companies. Prism Financial's
common stock trades on NASDAQ under the ticker symbol PRFN.
CONTACT:
Royal Bank Media Relations Prism Financial Corporation:
Jeff Keay, 416/974-5506 Lisa Morrell, Media Relations
or (312) 410-8662
Royal Bank Investor Relations David Fisher, Chief Financial Officer
Nabanita Merchant, 416/955-7803 (312) 410-8488
FOR IMMEDIATE RELEASE
ROYAL BANK OF CANADA MAKES OFFER
TO ACQUIRE PRISM FINANCIAL CORPORATION
A LEADING U.S. RETAIL MORTGAGE BANKING COMPANY
TO BECOME INDEPENDENT OPERATING UNIT OF ROYAL BANK
CHICAGO, MARCH 10, 2000 - Prism Financial Corporation (NASDAQ:PRFN) today
announced that it has agreed to be acquired by Royal Bank of Canada (NYSE,
TSE: RY). Royal Bank's cash offer to purchase all outstanding shares of
Prism for US$7.50 per share is valued at approximately US$115 million.
The terms of the agreement provide for Royal Bank to commence a
cash tender offer in the near future for all outstanding shares of Prism.
The three major stockholders, representing more than 60% of outstanding
shares, and key members of management, have agreed to tender their shares.
The transaction is subject to regulatory approvals.
Founded in 1992, Chicago-based Prism Financial Corporation is the
largest independent mortgage broker in the United States. The company
operates as both a mortgage banker -- underwriting, closing and funding
loans -- and as a mortgage broker -- selling the loan products of over 100
different lenders. Prism is one of the fastest growing mortgage originators
in the U.S. with total mortgage originations of nearly US$8 billion in
1999, up 53% from 1998. It is licensed nationally and has 2,000 employees
located in 27 states. Prism Financial Corporation operates through 159
retail branches and is a leader in e-commerce affinity marketing.
"The planned transaction will provide us with new business
opportunities through Royal Bank's extensive product portfolio, capital
resources and marketing expertise," said Mark Filler, President and CEO of
Prism Financial Corporation. "Our customers and employees will benefit from
our ability to offer additional innovative products and services and to
enhance our investment in technology and in ongoing retail growth."
"Royal Bank and Prism Financial Corporation are leading providers
of residential mortgages in their domestic markets," said John Cleghorn,
Chairman and Chief Executive Officer, Royal Bank of Canada. "This
acquisition will give us a distribution network in the U.S.
and continue to strengthen our online presence."
Prism Financial Corporation will operate as a stand-alone business
unit under existing management, and will continue to offer its strong value
proposition to clients. Prism's customers will also benefit from access to
Royal Bank's suite of services in the United States through Atlanta-based
Security First Network Bank, the world's first and #1 rated Internet bank,
and Bull & Bear Securities, a discount brokerage operation based in New
York.
Royal Bank intends to expand Prism's business by building on the
company's expertise in the mortgage origination business, its experience in
acquisitions, its talented employees and its established relationships with
leading Internet web sites and financial services companies.
"This deal fits nicely with our strategy of leveraging our
Canadian competencies on a niche basis in the United States to create
strong North American lines of business," added Mr. Cleghorn. "We want to
be among the leading North American banks in selected high-growth markets
and in selected business lines. Prism, with its mortgage expertise and
reputation, is a building block in implementing this strategy. We have
every confidence in the track record of Prism's management team to continue
its impressive growth."
"Royal Bank and Prism share a vision of ambitious growth in the
United States," Mr. Filler said. "We will contribute to Royal Bank's
expansion plans by aggressively pursuing our three-pronged strategy of
internal growth, selective acquisitions and Internet alliances. Through the
synergies between our two companies, we expect to be an even stronger
competitor. Our ability to leverage Royal Bank's lower cost of capital and
array of products will help fuel our growth, particularly in today's
challenging mortgage environment."
ABOUT ROYAL BANK OF CANADA
Royal Bank of Canada (RY) is a diversified global financial
services group and a leading provider of personal and commercial banking,
investment and trust services, insurance, corporate and investment banking,
on-line banking and transaction-based services including custody. The
group's main business units include Royal Bank, RBC Dominion Securities,
Royal Investment Services, RBC Insurance, Global Integrated Solutions,
Security First Network Bank and Bull & Bear Securities. The group has
50,000 employees who serve 10 million personal, business and public sector
customers in 30 countries. For more information, visit Royal Bank's Web
site at www.royalbank.com.
ABOUT PRISM FINANCIAL CORPORATION
Prism Financial Corporation is a leading national retail mortgage
banking company that originated approximately $8 billion in loans in 1999.
Based in Chicago, Prism is licensed nationally, with more than 1,100 loan
officers in 27 states. Prism operates through more than 150 retail branches
as well as through partnerships with major Internet companies. Prism
Financial's common stock trades on NASDAQ under the ticker symbol PRFN.
SAFE HARBOR PROVISION
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements. This business release
may contain forward-looking statements that reflect PRISM AND ROYAL BANK'S
current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and
uncertainties, including those identified below, which could cause future
results to differ materially from historical results or those anticipated.
The words "believe," "expect," "anticipate," "intend," "estimate," "goals,"
"would," "could," "should" and other expressions which indicate future
events and trends identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates, and if no date is provided, then such
statements speak only as of today. Neither Prism, nor Royal Bank,
undertakes any obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. The following factors, as well as those disclosed in each of
Prism and Royal Bank's prospectus filed with the Securities and Exchange
Commission, could cause future results and business plans to differ
materially from historical results and current plans: (1) the level of
demand for mortgage credit and ancillary services, which is affected by
such external factors as the level of interest rates; (2) the direction of
interest rates; (3) the relationship between mortgage interest rates and
the cost of funds; (4) federal and state regulation of mortgage banking,
Prism's ancillary service operations, and affordable housing and historic
tax credits; and (5) competition within the mortgage banking, affordable
housing and historic tax credits, and various ancillary service industries.
- 30 -
FOR FURTHER INFORMATION:
Prism Financial Corporation, contact: Lisa Morrell, Media Relations
(312) 410-8662
David Fisher, CFO (312) 410-8488
Royal Bank Media Relations, contact Jeff Keay, (416) 974-5506
Royal Bank Investor Relations, contact: Nabanita Merchant, (416) 955-7803
<PAGE>
EXHIBIT 6
[FBR LOGO]
March 10, 2000
Board of Directors
Prism Financial Corporation
Prism Center
440 North Orleans
Chicago, IL 60610
Board of Directors:
You have requested that Friedman, Billings, Ramsey & Co., Inc. ("FBR")
provide you with its opinion as to the fairness, from a financial point of
view, to the holders of common stock ("Stockholders") of Prism Financial
Corporation ("Prism" or the "Company") of the Consideration (as hereinafter
defined) to be received by them pursuant to the Agreement and Plan of Merger by
and between Prism and Royal Bank of Canada ("Royal Bank"), dated March 10, 2000
(the "Merger Agreement"), pursuant to which a newly-formed acquisition
subsidiary of Royal Bank will be merged with and into Prism (the "Merger"),
following Royal Bank's tender for all of the outstanding common stock of Prism.
The Merger Agreement provides, among other things, that Stockholders of Prism
will receive cash consideration equal to a fixed price of $7.50 per Prism share
(the "Consideration"). As a condition of and inducement to Royal Bank to enter
into the Merger Agreement, certain Stockholders of Prism are entering into a
Stockholder's Agreement, dated March 10, 2000 (the "Stockholder's Agreement"),
pursuant to which such Stockholders have agreed to tender approximately 62% of
the outstanding common stock of Prism to Royal Bank for the Consideration.
Additionally, all outstanding options of Prism common stock scheduled to vest
prior to the close of the Merger or upon a change of control of the Company
will become fully vested and such option holders will receive cash
consideration equal to the amount of the difference between the strike price of
such options and the Consideration (the "Premium"), if any, at the closing of
the Merger. The holders of options that do not become vested prior to the close
of the Merger or a change of control scenario will receive cash consideration
equal to the amount of the Premium, if applicable, in accordance with the
previously established vesting schedule for such options. The Merger Agreement
will be considered at a meeting of the Stockholders of Prism, if required. The
terms of the Merger are more fully set forth in the Merger Agreement.
In delivering this opinion, FBR has completed the following tasks:
1. reviewed the Royal Bank Annual Report to Stockholders for the fiscal
years ended December 31, 1998 and 1999 and the Royal Bank Report to
Stockholders for the fiscal quarters ended July 31, 1999, April 30, 1999
and January 31, 1999.
2. reviewed the Prism Registration Statement on Form S-1 filed with the
Securities and Exchange Commission ("SEC") on March 23, 1999 and its
related amendments; reviewed the Prism Quarterly Reports on Form 10-Q filed
with the SEC for the quarters ended June 30, 1999 and September 30, 1999;
3. reviewed and discussed the unaudited financial statements of Prism
for the year ended December 31, 1999 with the management of Prism;
4. discussed the financial condition, results of operations, earnings
projections, business and prospects of Prism with the management of Prism;
<PAGE>
Board of Directors
Prism Financial Corporation
March 10, 2000
Page 2
5. compared the results of operations and financial condition of Prism
with those of certain publicly-traded financial services organizations (or
their holding companies) that FBR deemed to be reasonably comparable to
Prism, as the case may be;
6. reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions that FBR deemed to be reasonably
comparable to the Merger;
7. reviewed the financial terms, to the extent publicly available, of
certain acquisition transactions entered into by Royal Bank;
8. reviewed a copy of the Merger Agreement and Stockholders Agreement;
and
9. performed such other financial analyses and reviewed and analyzed
such other information as FBR deemed appropriate, including an assessment
of general economic, market and monetary conditions.
In rendering this opinion, FBR did not assume responsibility for
independently verifying, and did not independently verify, any financial or
other information concerning Prism or Royal Bank furnished to it by Prism or
Royal Bank, or the publicly available financial and other information
regarding Prism, Royal Bank and other financial services organizations (or
their holding companies) included in our analysis. FBR has assumed that all
such information is accurate and complete and has no reason to believe
otherwise. FBR has further relied on the assurances of management of Prism and
Royal Bank that they are not aware of any facts that would make such financial
or other information relating to such entities inaccurate or misleading. With
respect to financial forecasts for Prism provided to FBR by its management,
FBR has assumed, for purposes of this opinion, that the forecasts have been
reasonably prepared on bases reflecting the best available estimates and
judgments of such management at the time of preparation as to the future
financial performance of Prism. FBR has assumed that there has been no
undisclosed material change in Prism's assets, financial condition, result of
operations, business or prospects since December 31, 1999. FBR did not
undertake an independent appraisal of the assets or liabilities of Prism nor
was FBR furnished with any such appraisals. FBR is not an expert in the
evaluation of allowances for loan losses, was not requested to and did not
review such allowances, and was not requested to and did not review any
individual credit files of Prism. FBR's conclusions and opinion are
necessarily based upon economic, market and other conditions and the
information made available to FBR as of the date of this opinion. FBR
expresses no opinion on matters of a legal, regulatory, tax or accounting
nature related to the Merger.
FBR, as part of its institutional brokerage, research and investment
banking practice, is regularly engaged in the valuation of securities and the
evaluation of transactions in connection with mergers and acquisitions of
specialty finance companies, commercial banks, savings institutions and
financial services holding companies, initial and secondary offerings and
mutual-to-stock conversions of savings institutions, as well as business
valuations for other corporate purposes for financial services organizations
and real estate related companies. FBR has experience in, and knowledge of,
the valuation of specialty finance companies in Illinois and the rest of the
United States.
FBR has acted as a financial advisor to Prism in connection with the Merger
and will receive a fee for services rendered which is contingent upon the
consummation of the Merger. In the ordinary course of FBR's business, it may
effect transactions in the securities of Prism or Royal Bank for its own
account and/or for the accounts of its customers and, accordingly, may at any
time hold long or short positions in such securities. From time to time,
principals and/or employees of FBR may also have positions in such securities.
Based upon and subject to the foregoing, as well as any such other matters
as we consider relevant, it is FBR's opinion, as of the date hereof, that the
Consideration is fair, from a financial point of view, to the Stockholders of
Prism.
<PAGE>
Board of Directors
Prism Financial Corporation
March 10, 2000
Page 3
This letter is solely for the information of the Board of Directors and
Stockholders of Prism and may not be relied upon by any other person or used
for any other purpose, reproduced, disseminated, quoted from or referred to
without FBR's prior written consent; provided, however, this letter may be
referred to and reproduced in its entirety in proxy materials or a
Solicitation/Recommendation Statement sent to the Stockholders in connection
with Royal Bank's tender for Prism common stock or the solicitation of
approval for the Merger.
Very truly yours,
/s/ Friedman, Billings, Ramsey &
Co., Inc.
<PAGE>
EXHIBIT 7
ARTICLE SIXTH OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
PRISM FINANCIAL CORPORATION
SIXTH: Limitation of Liability. No director of the Corporation shall
be personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except to the extent such exemption
from liability or limitation thereof is not permitted under the DGCL as the same
exists or may hereinafter be amended. If the DGCL is amended hereafter to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent authorized by the DGCL, as so amended. Any repeal
or modification of this Article SIXTH by the stockholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification with respect to
acts or omissions occurring prior to such repeal or modification.
<PAGE>
EXHIBIT 8
ARTICLE SEVENTH OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
PRISM FINANCIAL CORPORATION
SEVENTH: Indemnification. (a) The Corporation shall indemnify its
directors and officers to the fullest extent authorized or permitted by
law, as now or hereafter in effect, and such right to indemnification shall
continue as to a person who has ceased to be a director or officer of the
Corporation and shall inure to the benefit of his or her heirs, executors
and personal and legal representatives; provided, however, that, except for
proceedings to enforce rights to indemnification, the Corporation shall not
be obligated to indemnify any director or officer (or his or her heirs,
executors or personal or legal representatives) in connection with a
proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board
of Directors. The right to indemnification conferred by this Article
SEVENTH shall include the right to be paid by the Corporation the expenses
incurred in defending or otherwise participating in any proceeding in
advance of its final disposition.
(b) The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation similar
to those conferred in this Article SEVENTH to directors and officers of the
Corporation.
(c) The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Amended and
Restated Certificate of Incorporation, the Bylaws of the Corporation, any
statute, agreement, vote of stockholders or disinterested directors or
otherwise.
(d) Any repeal or modification of this Article SEVENTH by the
stockholders of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or officer
of the Corporation existing at the time of such repeal or modification with
respect to any acts or omissions occurring prior to such repeal or
modification.
<PAGE>
EXHIBIT 9
ARTICLE VIII OF THE SECOND AMENDED AND RESTATED BY-LAWS
OF PRISM FINANCIAL CORPORATION
ARTICLE VIII
INDEMNIFICATION
---------------
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, such person had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
such person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys'
<PAGE>
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation; except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders. To
the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe his or her conduct
was unlawful, if such person's action is based on the records or books of
account of the Corporation or another enterprise, or on information supplied to
such person by the officers of the Corporation or another enterprise in the
course of their duties, or on the advice of legal counsel for the Corporation or
another enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used
2
<PAGE>
in this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 1 or
2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery of the State of Delaware or any other
court of competent jurisdiction in the State of Delaware for indemnification to
the extent otherwise permissible under Sections 1 and 2 of this Article VIII.
The basis of such indemnification by a court shall be a determination by such
court that indemnification of the director or officer is proper in the
circumstances because such person has met the applicable standards of conduct
set forth in Section 1 or 2 of this Article VIII, as the case may be. Neither a
contrary determination in the specific case under Section 3 of this Article VIII
nor the absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any By-Law, agreement,
contract, vote of
3
<PAGE>
stockholders or disinterested directors or pursuant to the direction (howsoever
embodied) of any court of competent jurisdiction or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, it being the policy of the Corporation that indemnification
of the persons specified in Section 1 and 2 of this Article VIII shall be made
to the fullest extent permitted by law. The provisions of this Article VIII
shall not be deemed to preclude the indemnification of any person who is not
specified in Section 1 or 2 of this Article VIII but whom the Corporation has
the power or obligation to indemnify under the provisions of the GCL, or
otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such person's
status as such, whether or not the Corporation would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to be in the interest of the participants and beneficiaries of an employee
benefit plan
4
<PAGE>
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer (or
his or her heirs, executors or personal or legal representatives) or advance
expenses in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
5
<PAGE>
Exhibit 10
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 10th day of March 2000, by and among Prism
Financial Corporation, a Delaware corporation (the "Company"), Mark A. Filler
(the "Executive"), and Royal Bank of Canada, a bank organized and existing under
the laws of Canada ("Acquiror").
WHEREAS, Acquiror and the Company have determined that it is in their
respective best interests to assure that the Company will have the continued
dedication of the Executive pending the merger (the "Merger") of the Company and
Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and wholly owned
subsidiary of Acquiror ("Acquisition") pursuant to the Merger Agreement dated as
of March 10, 2000 among the Company, Acquiror and Acquisition (the "Merger
Agreement"), and to provide the Company, as the surviving corporation of the
Merger, with continuity of management. Therefore, in order to accomplish these
objectives, the Executive, Acquiror and the Company have entered into this
employment agreement.
WHEREAS, the Executive desires to accept such continued employment,
subject to the terms and provisions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE TIME. The "Effective Time" shall mean the effective
time of the Merger, provided the Executive is employed by the Company at such
time. As of the Effective Time, any and all other employment agreements entered
into between the Company and Executive prior to the Effective Time (including,
without limitation, any employment agreement entered into among the Company,
Executive and Acquiror in connection with or in contemplation of the
transactions contemplated by the Merger Agreement) shall terminate and become
null and void, provided that any option agreements between the Executive and the
Company shall terminate and become null and void only upon the final installment
payment of the special retention bonus contemplated by Section 2.10(b) of the
Merger Agreement and provided further that upon any termination of the Merger
Agreement, this sentence will be inapplicable.
2. EMPLOYMENT PERIOD. The Company hereby agrees to continue to
employ the Executive, and the Executive hereby agrees to continue in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing as of the Effective Time and ending on December 31, 2003 (the
"Employment Period").
3. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve
as President and Chief Executive Officer and as a member of the Board of
Directors of the Company with the appropriate authority, duties and
responsibilities attendant to such
<PAGE>
position. After the Employment Period, the Executive may continue to serve
the Company under a mutually agreed upon arrangement.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote substantially all of his business attention and
time to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, it shall not be a violation of this Agreement for the Executive to
continue, with respect to current positions and arrangements disclosed to
the Board of the Company (the "Board") and, with prior written approval of
the Board of Directors of the Company, with respect to future positions and
arrangements, to, (A) serve on a reasonable number of corporate, civic or
charitable boards or committees, (B) deliver a reasonable number of
lectures and speeches and (C) manage personal investments, so long as such
activities do not interfere with the proper performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. Promptly after the Effective Time, Executive will submit to the
Board a list of all existing board or committee memberships and submit to
the Board for approval a list of pending or future board or committee
memberships, which approval will not be unreasonably withheld.
(b) Compensation.
(i) Annual Base Salary. During the initial twelve months
of the Employment Period, the Executive shall receive an annual base salary
("Annual Base Salary") of $250,000, payable in accordance with regular
payroll practices of the Company. Thereafter, the Executive shall receive
an annual base salary in an amount determined by the Board, but not less
than his initial Annual Base Salary with any such increased amount
thereafter being the Annual Base Salary. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Executive shall not be entitled to receive any
additional consideration for service during the Employment Period as a
member of the Board of Directors of the Company or any of its subsidiaries.
(ii) Interim Bonus and Annual Bonus. Provided the
Executive's employment has not been terminated for Cause or due to a
voluntary termination by the Executive (other than due to Constructive
Termination, death or Disability) on the respective dates of payment, the
Executive shall be eligible to participate in a bonus pool (the "Interim
Bonus") on December 31, 2000 where the aggregate pool for all participants
shall not be less than $105,000. The Executive shall be eligible to
participate in an annual cash bonus pool for executives ("Annual Bonus")
with respect to the first 12 months of this Agreement, whereby the
aggregate pool for all participants shall not be less than $1,825,000 to be
paid no later than 13 months after the date of this Agreement. The
distribution of 50% of the Annual Bonus Pool will be unconditional and
solely at the discretion of Mark Filler (with no restriction whatsoever)
and the remainder at the discretion of the Board. Thereafter, the Executive
shall be
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eligible to receive annual bonuses during the Employment Period in an
amount and in accordance with any plan as may be determined by the Board.
(iii) Stock Options. The Executive shall be eligible to
participate in the Acquiror's 1999 Stock Option Plan (the "Plan"), with
grants made at the discretion of the Acquiror's Board of Directors. Any
stock options granted to the Executive shall be subject to all of the terms
and conditions of the Plan, including applicable provisions regarding
vesting, and expiration of options upon termination of employment. Such
stock options shall be administered in accordance with the Plan attached
hereto as Appendix A and pursuant to a Stock Option Agreement reasonably
acceptable, including as to vesting, to the Executive.
(iv) Profit Sharing. In addition, provided the Executive's
employment has not been terminated for Cause or due to a voluntary
termination by the Executive, on the one-year anniversary of the Effective
Time, the Executive shall receive, on the thirtieth day after the last day
of each of the Company's 2001, 2002 and 2003 fiscal year, a profit-sharing
bonus equal to 2.5% of the pre-tax net income of the Company (the "Profit
Sharing Bonus"), prorated for that portion of the fiscal year that the
Executive was employed by the Company. With respect to the Profit Sharing
Bonus, the parties will reasonably agree upon the allocation of profits
related to synergies with Acquiror and Acquiror's other affiliates. The
goodwill amortization associated with the acquisition of the Company
pursuant to the Merger Agreement will not be deducted from the calculation
of pre-tax net income of the Company for purposes of this Section
3(a)(iii). If Acquiror determines to reorganize the Company, the parties
will determine a fair, reasonable formula in keeping with the intent of
this Agreement. The Profit Sharing Bonus shall be earned by Executive and
accrued on a daily basis.
(v) Other Employee Benefit Plans. During the Employment
Period, except as otherwise expressly provided herein, the Executive shall
be entitled to participate in all employee benefit, welfare and other
plans, practices, policies and programs of the Company (collectively,
"Employee Benefit Plans"), subject only to the generally applicable
eligibility provisions of such plans; provided that the Executive shall at
all times during the Employment Period, be entitled to receive benefits
that are comparable to those provided to other employees in positions of
comparable rank with the Acquiror and its wholly owned subsidiaries. In
addition, during the Employment Period, the Executive will be entitled to
participate in Acquiror's leased automobile program which will provide a
leased automobile up to a capital cost limit of $27,200 plus fuel,
maintenance, insurance and reserved parking at the Executive's place of
work. The Company will pay the cost of personal initiation fees and annual
dues for a recreational or social club of the Executive's choosing.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period
and in that case the Date of Termination shall be the date of death. If the
Company determines in good faith that the
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Executive has become Disabled during the Employment Period (pursuant to the
definition of "Disabled" or "Disability" set forth below), the Company may
terminate Executive's employment by giving written notice to the Executive in
accordance with Section 10(c) of this Agreement of the Company's intention to
terminate Executive's employment. In such event, the Executive's employment with
the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For purposes of this Agreement,
whether the Executive has become "Disabled" (or incurs a Disability) shall be
determined under the Company's long-term disability plan as in effect for
employees of the Company as of the date of this Agreement. If the Executive's
employment is terminated by reason of disability, the Date of Termination shall
be the Disability Effective Date, or any later date specified by the Company.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the commission by the Executive of an act of criminal
or fraudulent misconduct that results in material economic harm or acute
public embarrassment to the Company, its parent or a subsidiary of the
Company (including, but not limited to, the willful violation of any
material law, rule, regulation, or cease and desist order applicable to the
Executive) any breach by Executive of a covenant contained in the
Stockholders' Agreement or a deliberate breach of a fiduciary duty owed by
the Executive to the Company, its parent or its parent's shareholders;
(ii) the Executive's habitual absence from work other than
as a result of illness or Disability, continuous and intentional failure to
perform stated duties, gross negligence, or gross incompetence in the
performance of the Executive's stated duties; provided that the Executive
shall be provided with notice of any situation set forth herein and a
reasonable opportunity to cure such situation;
(iii) the Executive's chronic alcohol or drug abuse that
results in a material impairment of the Executive's ability to perform his
or her duties as an employee of the Company provided that the Executive
shall be provided a reasonable opportunity to such if the Executive
demonstrates a willingness to undergo treatment or rehabilitation;
(iv) the rendering of a verdict of guilty against or the
entering of a nolo contendre plea by the Executive for any felony offense
(other than a law relating to a traffic violation or similar offense),
whether or not in the line of duty to the Company; or
(v) the final determination by a state or federal banking
agency or governmental authority having jurisdiction over the Company that
the Executive is not suitable to act in the capacity in which he is
employed by the Company or a downgrading in ratings by such authority, as
evidenced in the "Management Aspects During the Annual Review," on the
basis of such determination.
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(c) Notice of Termination. Termination of employment by the
Company or by the Executive shall be communicated by Notice of Termination to
the other party hereto given in accordance with this Section 10(c). For purposes
of this Agreement, a "Notice of Termination" means a written notice which
indicates the Date of Termination, as specified below. The "Date of Termination"
means:
(i) if the Executive's employment is terminated by the
Company for Cause, the date of receipt of the Notice of Termination or any
later date specified therein within 30 days of such notice, or
(ii) if the Executive's employment is terminated by the
Executive, a date not less than 30 days after the date of the Notice of
Termination, provided, however, that the Company may waive such 30-day
provision.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, this Agreement shall terminate without further obligations to
the Executive under this Agreement, other than for payment of:
(i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded for the
first twelve months of service, in each case to the extent not theretofore
paid;
(iii) a pro rata portion of the annual bonus awarded for the
fiscal year in which the Date of Termination occurs and the annual bonus
awarded for any fiscal year prior thereto, in each case to the extent
earned, accrued or owing to the Executive but not theretofore paid;
(iv) a pro rata portion of any Profit Sharing Bonus for the
fiscal year in which the Date of Termination occurs and the Profit Sharing
Bonus for any fiscal year prior thereto, in each case to the extent earned,
accrued or owing to the Executive but not theretofore paid; and
(iv) any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive through the Date of
Termination under any plan, program, policy or practice or contract or
agreement of the Company, to the extent not theretofore paid or provided
(such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits") through the Date of Termination and continuation of
insurance plans as provided under COBRA.
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Any Annual Base Salary, Interim Bonus and Annual Bonus payable pursuant to
this Section 5(a) shall be paid to the Executive as applicable, in a lump sum in
cash within 30 days after the Date of Termination; in the case of a pro-rated
Annual Bonus, as soon as practicable after the date such bonus is determined.
(b) Termination Without Cause. If the Executive's employment is
terminated by the Company without Cause, or if the Executive terminates as a
result of a Constructive Termination (as defined below), this Agreement shall
terminate without further obligations to the Executive under this Agreement,
other than for payment of:
(i) the Executive's Annual Base Salary through the
Employment Period to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded for the
first twelve months of service, in each case to the extent not theretofore
paid;
(iii) a pro rata portion of the annual bonus awarded for
the fiscal year in which the Date of Termination occurs and the annual
bonus for any fiscal year prior thereto, in each case to the extent earned,
accrued or owing to the Executive but not theretofore paid;
(iv) a pro rata portion of any Profit Sharing Bonus for the
fiscal year in which the Date of Termination occurs and the Profit Sharing
Bonus for any fiscal year prior thereto, in each case to the extent earned,
accrued or owing to the Executive but not theretofore paid; and
(v) Other Benefits through the Date of Termination and
continuation of insurance plans as provided under COBRA.
For purposes of this Agreement, "Constructive Termination" means the Executive's
voluntary termination of employment after any of the following are undertaken
without the Executive's express written consent: (A) the assignment to the
Executive of any duties or responsibilities inconsistent with the Executive's
title and position, authority, duties or responsibilities as contemplated by
Section 3(a)(i) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for the purpose of this clause (A) an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive; (B) a reduction
in the Executive's Annual Base Salary or a change in the Annual Bonus pool or in
the percentage of pre-tax net income payable as the Profit Sharing Bonus; (C) a
relocation of the Executive to a location more than ten (10) miles from the
location at which the Executive performed his duties immediately prior to the
Effective Time, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations prior to the Effective Time or (D) any breach by the Company
or Acquiror of this Agreement.
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(c) Termination for Cause; Voluntary Termination. If the
Executive's employment shall be terminated by the Company for Cause or the
Executive terminates his employment prior to the end of the Employment Period on
his own initiative (other than due to Constructive Termination, death or
Disability), this Agreement shall terminate without further obligation to the
Executive other than the obligation to pay to the Executive his Annual Base
Salary through the Date of Termination to the extent theretofore unpaid and the
Other Benefits through the Date of Termination.
6. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
7. COVENANT NOT TO COMPETE; CONFIDENTIAL INFORMATION; INTELLECTUAL
PROPERTY.
(a) From and after the Effective Time during the term of this
Agreement, and for a period of six (6) months after the Date of Termination, the
Executive shall not:
(i) directly or indirectly, own, manage, operate, join,
control, or participate in the ownership, management, operation or control
of, or be employed by or perform services for, any Competing Business,
whether for compensation or otherwise, without the prior written consent of
the Company. For the purposes of this Agreement, a "Competing Business"
shall be (A) any business by which the Executive is employed which is, at
the Date of Termination, a significant competitor of the Company; it being
agreed that the term "business" shall refer to the specific division or
subsidiary by which Executive is employed, not such division's or
subsidiary's corporate group; (B) any Company the primary business of which
is the origination of residential mortgage loans whether or not Executive
is employed by such business; or (C) any affordable or historic tax
syndication business;; provided, that, the Executive may own up to five
percent (5%) (measured by value) of the outstanding securities of any
public entity, the shares of which are traded on a national stock exchange
or quoted on the Nasdaq National Market;
(ii) in any manner, directly or indirectly, Solicit a Client
to transact business with a Competing Business or to reduce or refrain from
doing any business with the Company, or interfere or damage (or attempt to
interfere with or damage) any relationship between the Company and a
Client. For purposes of the Agreement, the term "Solicit" means any direct
or indirect written or oral communication, inviting, advising, encouraging,
inducing or requesting any person or entity, in any manner, to take or
refrain from taking any action. For purposes of this Agreement, the term
"Client" means any client or customer or prospective client or customer of
the Company to whom the Executive provided services, or for whom the
Executive transacted business, or whose identity became known to the
Executive in connection with the Executive's relationship with or
employment by the Company; or
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(iii) directly or indirectly (whether on the Executive's own
behalf or on behalf of any other person or entity) solicit, entice, advise
or encourage any officer, employee or consultant (determined as of the Date
of Termination of the Executive) of the Company or any of its affiliates or
subsidiaries to terminate such person's or entity's employment or
consulting relationship or with respect to any officer or employee of the
Company or its subsidiaries, hiring any such officer or employee.
(b) The Executive hereby acknowledges that, as an employee of the
Company, he will have access to, be making use of, acquiring and adding to
confidential information of a special and unique nature and value relating to
the Company and its strategic plan and financial operations. The Executive
further recognizes and acknowledges that all confidential information is the
exclusive property of the Company, is material and confidential, and is critical
to the successful conduct of the business of the Company. Accordingly, the
Executive hereby covenants and agrees that he will only use confidential
information for the benefit of the Company or any of its affiliates or
subsidiaries and in the course of his employment for the Company and shall not
at any time, directly or indirectly, during the term of this Agreement and
thereafter, divulge, reveal or communicate any confidential information to any
person, firm, corporation or entity whatsoever, or use any confidential
information for his own benefit or for the benefit of others except as provided
herein. All confidential information removed by the Executive shall be returned
to the Company upon termination of his employment and no copies thereof shall be
kept by the Executive.
(c) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 7.
(d) In addition to the cessation of payments set forth in Section
7(f), the Executive acknowledges and agrees that the Company will have no
adequate remedy at law, and could be irreparably harmed, if the Executive
breaches or threatens to breach any of the provisions of this Section 7. The
Executive agrees that the Company shall be entitled to equitable and/or
injunctive relief to prevent any breach or threatened breach of this Section 7,
and to specific performance of each of the terms hereof in addition to any other
legal or equitable remedies that the Company may have. The Executive further
agrees that he shall not, in any equity proceeding relating to the enforcement
of the terms of this Section 7, raise the defense that the Company has an
adequate remedy at law.
(e) The terms and provisions of this Section 7 are intended to be
separate and divisible provisions and if, for any reason, any one or more of
them is held to be invalid or unenforceable, neither the validity nor the
enforceability of any other provision of this Agreement shall thereby be
affected. The parties hereto acknowledge that the potential restrictions on the
Executive's future employment imposed by this Section 7 are reasonable in both
duration and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 7
unreasonable in duration or geographic scope or otherwise, the Executive and the
Company agree that the restrictions and prohibitions contained herein shall be
effective to the fullest extent allowed under applicable law in such
jurisdiction.
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(f) The parties acknowledge that this Agreement would not have
been entered into and the benefits described in Sections 3 or 5 would not have
been promised in the absence of the Executive's promises under this Section 7
and that should the Executive be finally determined by an arbitrator to have
engaged in any activity or conduct proscribed hereunder, all payments under this
Agreement other than Other Benefits to the extent required to be continued by
law or by the terms of the applicable plan shall cease.
(g) The Executive hereby assigns to the Company all of
Executive's right, title and interest in and to, inventions, trade secrets,
works of authorship, ideas, methods, improvements, databases, know-how, data,
developments or discoveries, whether or not patentable or copyrightable (the
"Work Product") which (i) will be, are or have been made, invented, conceived,
reduced to practice, developed or created during the Employment Period or (ii)
using the equipment, supplies, facilities and/or confidential or proprietary
information of the Company. The Executive will take such action as may be
necessary to assist the Company in obtaining statutory or common law protections
for the Work Product.
8. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. Any purported or
attempted assignment in violation hereof shall be null and void. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
9. ARBITRATION. Any and all disputes, claims or controversies,
arising from or regarding the interpretation, performance, enforcement or
termination of this Agreement shall (except as provided herein with respect to
injunctive relief) be resolved by final and binding confidential arbitration, to
be held in Chicago, Illinois, in accordance with the Employment Arbitration
Rules of the American Arbitration Association and this Section 9. Nothing in
this Section is intended to prevent either party from obtaining either
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration or from utilizing any judicial court system to seek
enforcement of an arbitration award.
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10. MISCELLANEOUS.
(a) Any capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Merger Agreement.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery or overnight courier to the other
parties or by registered or certified mail, return receipt requested, postage
prepaid, addressed or by facsimile transmitted as follows:
If to the Executive:
Mark A. Filler
226 Prospect
Highland Park, Illinois 60035
Telecopier: 847-266-7019
If to the Company:
440 North Orleans
Chicago, Illinois 60610
Attn: Mark A. Filler
Telecopier: 312-494-0184
If to the Acquiror:
Royal Bank of Canada
200 Bay Street
14th Floor, North Tower
Toronto, Ontario, Canada
Attn: Robert K. Horton
Telecopier: 416-974-9344
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
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(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld on such payment pursuant to any applicable law or regulation or may
condition any transfer of property to the Executive on the Executive's
satisfaction of such withholding obligations in a manner satisfactory to the
Company.
(f) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
/s/ Mark A. Filler
---------------------------------
Mark A. Filler
COMPANY
PRISM FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ David A. Fisher
------------------------------
Name: David A. Fisher
Title: Chief Financial Officer and
Senior Vice President
Acquiror agrees that as of the Effective Time it will honor this
Agreement and treat the Agreement as its own.
ACQUIROR
ROYAL BANK OF CANADA,
a Canadian commercial bank
By: /s/ Robert K. Horton
------------------------------
Name: Robert K. Horton
Title: Senior Vice President,
Strategic Initiatives
By: /s/ James T. Rager
------------------------------
Name: James T. Rager
Title: Vice Chairman, Personal and
Commercial Banking
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Exhibit 11
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 10th day of March 2000, by and among Prism
Financial Corporation, a Delaware corporation (the "Company"), David A. Fisher
(the "Executive"), and Royal Bank of Canada, a bank organized and existing under
the laws of Canada ("Acquiror").
WHEREAS, Acquiror and the Company have determined that it is in their
respective best interests to assure that the Company will have the continued
dedication of the Executive pending the merger (the "Merger") of the Company and
Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and wholly owned
subsidiary of Acquiror ("Acquisition") pursuant to the Merger Agreement dated as
of March 10, 2000 among the Company, Acquiror and Acquisition (the "Merger
Agreement"), and to provide the Company, as the surviving corporation of the
Merger, with continuity of management. Therefore, in order to accomplish these
objectives, the Executive, Acquiror and the Company have entered into this
employment agreement.
WHEREAS, the Executive desires to accept such continued employment,
subject to the terms and provisions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EFFECTIVE TIME. The "Effective Time" shall mean the effective
time of the Merger, provided the Executive is employed by the Company at such
time. As of the Effective Time, any and all other employment agreements entered
into between the Company and Executive prior to the Effective Time (including,
without limitation, any employment agreement entered into among the Company,
Executive and Acquiror in connection with or in contemplation of the
transactions contemplated by the Merger Agreement) shall terminate and become
null and void, provided that any option agreements between the Executive and the
Company shall terminate and become null and void only upon the final installment
payment of the special retention bonus contemplated by Section 2.10(b) of the
Merger Agreement and the payment of the sale bonus contemplated by the option
and provided further that upon any termination of the transactions contemplated
by the Merger Agreement, this sentence will be inapplicable.
2. EMPLOYMENT PERIOD. The Company hereby agrees to continue to
employ the Executive, and the Executive hereby agrees to continue in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing as of the Effective Time and ending on December 31, 2003 (the
"Employment Period").
3. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve
as Chief Financial Officer and Senior Vice President of the Company with
the
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appropriate authority, duties and responsibilities attendant to such
position. After the Employment Period, the Executive may continue to serve
the Company under a mutually agreed upon arrangement.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote substantially all of his business attention and
time to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, it shall not be a violation of this Agreement for the Executive to
(A) continue, with respect to current positions and arrangements disclosed
to the Board and, with prior written approval of the Board of Directors of
the Company (the "Board"), with respect to future positions and
arrangements, to serve on a reasonable number of corporate, civic or
charitable boards or committees, (and promptly after the Effective Time,
Executive will submit to the Board a list of all existing board or
committee memberships and submit to the Board for approval a list of
pending or future board or committee memberships, which approval will not
be unreasonably withheld); (B) deliver a reasonable number of lectures and
speeches and (C) manage personal investments, so long as such activities do
not interfere with the proper performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(b) Compensation.
(i) Annual Base Salary. During the initial twelve months of
the Employment Period, the Executive shall receive an annual base salary
("Annual Base Salary") of $150,000, payable in accordance with regular
payroll practices of the Company. Thereafter, the Executive shall receive
an annual base salary in an amount determined by the Board, but not less
than his initial Annual Base Salary with any such increased amount
thereafter being the Annual Base Salary. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Executive shall not be entitled to receive any
additional consideration for service during the Employment Period as a
member of the Board of Directors of the Company or any of its subsidiaries.
(ii) Interim Bonus and Annual Bonus. Provided the Executive's
employment has not been terminated for Cause or due to a voluntary
termination by the Executive (other than due to Constructive Termination,
death or Disability) on the respective dates of payment, the Executive
shall be eligible to participate in a bonus pool (the "Interim Bonus") on
December 31, 2000 where the aggregate maximum of the pool for all
participants shall not be less than $105,000. The Executive shall be
eligible to participate in an annual cash bonus pool for executives
("Annual Bonus") with respect to the first 12 months of this Agreement,
whereby the aggregate pool for all participants shall not be less than
$1,825,000 to be paid no later than 13 months after the date of this
Agreement. The distribution of 50% of the Annual Bonus Pool will be
unconditional and solely at the discretion of Mark Filler (with no
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restriction whatsoever) and the remainder at the discretion of the Board.
Thereafter, the Executive shall be eligible to receive annual bonuses
during the Employment Period in an amount and in accordance with any plan
as may be determined by the Board.
(iii) Stock Options. The Executive shall be eligible to
participate in the Acquiror's 1999 Stock Option Plan (the "Plan"), with
grants made at the discretion of the Acquiror's Board of Directors. Any
stock options granted to the Executive shall be subject to all of the terms
and conditions of the Plan, including applicable provisions regarding
vesting, and expiration of options upon termination of employment. Such
stock options shall be administered in accordance with the Plan attached
hereto as Appendix A and pursuant to a Stock Option Agreement reasonably
acceptable, including as to vesting, to the Executive.
(iv) Other Employee Benefit Plans. During the Employment
Period, except as otherwise expressly provided herein, the Executive shall
be entitled to participate in all employee benefit, welfare and other
plans, practices, policies and programs of the Company (collectively,
"Employee Benefit Plans"), subject only to the generally applicable
eligibility provisions of such plans; provided that the Executive shall at
all times during the Employment Period, be entitled to receive benefits
that are comparable to those provided to other employees in positions of
comparable rank with the Acquiror and its wholly owned subsidiaries.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period
and in that case the Date of Termination shall be the date of death. If the
Company determines in good faith that the Executive has become Disabled during
the Employment Period (pursuant to the definition of "Disabled" or "Disability"
set forth below), the Company may terminate Executive's employment by giving
written notice to the Executive in accordance with Section 10(b) of this
Agreement of the Company's intention to terminate Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, whether the Executive has
become "Disabled" (or incurs a Disability) shall be determined under the
Company's long-term disability plan as in effect for employees of the Company as
of the date of this Agreement. If the Executive's employment is terminated by
reason of disability, the Date of Termination shall be the Disability Effective
Date, or any later date specified by the Company.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the commission by the Executive of an act of criminal or
fraudulent misconduct that results in material economic harm or acute
public embarrassment to the Company, its parent or a subsidiary of the
Company (including, but
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not limited to, the willful violation of any material law, rule,
regulation, or cease and desist order applicable to the Executive) or a
deliberate breach of a fiduciary duty owed by the Executive to the Company,
its parent or its parent's shareholders;
(ii) the Executive's habitual absence from work other than as
a result of illness or Disability, continuous and intentional failure to
perform stated duties, gross negligence, or gross incompetence in the
performance of the Executive's stated duties provided that the Executive
shall be provided with notice of any situation set forth herein and a
reasonable opportunity to cure such situation;
(iii) the Executive's chronic alcohol or drug abuse that
results in a material impairment of the Executive's ability to perform his
or her duties as an employee of the Company provided that the Executive
shall be provided a reasonable opportunity to cure if the Executive
demonstrates a willingness to undergo treatment or rehabilitation;
(iv) the rendering of a verdict of guilty against or the
entering of a nolo contendere plea by the Executive for any felony offense
(other than a law relating to a traffic violation or similar offense),
whether or not in the line of duty to the Company; or
(v) the final determination by a state or federal banking
agency or governmental authority having jurisdiction over the Company that
the Executive is not suitable to act in the capacity in which he is
employed by the Company or a downgrading in ratings by such authority, as
evidenced in the "Management Aspects During the Annual Review," on the
basis of such determination.
(c) Notice of Termination. Termination of employment by the
Company or by the Executive shall be communicated by Notice of Termination to
the other party hereto given in accordance with this Section 10(c). For purposes
of this Agreement, a "Notice of Termination" means a written notice which
indicates the Date of Termination, as specified below. The "Date of Termination"
means:
(i) if the Executive's employment is terminated by the
Company for Cause, the date of receipt of the Notice of Termination or any
later date specified therein within 30 days of such notice, or
(ii) if the Executive's employment is terminated by the
Executive, a date not less than 30 days after the date of the Notice of
Termination, provided, however, that the Company may waive such 30-day
provision.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, this Agreement
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shall terminate without further obligations to the Executive under this
Agreement, other than for payment of:
(i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded for the
first twelve months of service, in each case to the extent not theretofore
paid;
(iii) a pro rata portion of the annual bonus awarded for the
fiscal year in which the Date of Termination occurs and the annual bonus
awarded for any fiscal year prior thereto, in each case to the extent
earned, accrued or owing to the Executive but not theretofore paid; and
(iv) any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive through the Date of
Termination under any plan, program, policy or practice or contract or
agreement of the Company, to the extent not theretofore paid or provided
(such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits") through the Date of Termination and continuation of
insurance plans as provided under COBRA.
Any Annual Base Salary, Interim Bonus and Annual Bonus payable pursuant to
this Section 5(a) shall be paid to the Executive as applicable, in a lump sum in
cash within 30 days after the Date of Termination; in the case of a pro-rated
Annual Bonus, as soon as practicable after the date such bonus is determined.
(b) Termination Without Cause. If the Executive's employment is
terminated by the Company without Cause, or if the Executive terminates as a
result of a Constructive Termination (as defined below), this Agreement shall
terminate without further obligations to the Executive under this Agreement,
other than for payment of:
(i) the Executive's Annual Base Salary through the Employment
Period to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded for the
first twelve months of service, in each case to the extent not theretofore
paid;
(iii) a pro rata portion of the annual bonus awarded for the
fiscal year in which the Date of Termination occurs and the annual bonus
for any fiscal year prior thereto, in each case to the extent earned,
accrued or owing to the Executive but not theretofore paid; and
(iv) Other Benefits through the Date of Termination and
continuation of insurance plans as provided under COBRA.
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For purposes of this Agreement, "Constructive Termination" means the Executive's
voluntary termination of employment after any of the following are undertaken
without the Executive's express written consent: (A) the assignment to the
Executive of any duties or responsibilities inconsistent with the Executive's
title and position, authority, duties or responsibilities as contemplated by
Section 3(a)(i) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for the purpose of this clause (A) an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive; (B) a reduction
in the Executive's Annual Base Salary or a change in the Annual Bonus pool; (C)
a relocation of the Executive to a location more than ten (10) miles from the
location at which the Executive performed his duties immediately prior to the
Effective Time, except for required travel by the Executive on the Company's
business to an extent substantially consistent with the Executive's business
travel obligations prior to the Effective Time or (D) any breach by the Company
or Acquiror of this Agreement.
(c) Termination for Cause; Voluntary Termination. If the
Executive's employment shall be terminated by the Company for Cause or the
Executive terminates his employment prior to the end of the Employment Period on
his own initiative (other than due to Constructive Termination, death or
Disability), this Agreement shall terminate without further obligation to the
Executive other than the obligation to pay to the Executive his Annual Base
Salary through the Date of Termination to the extent theretofore unpaid and the
Other Benefits through the Date of Termination.
6. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
7. COVENANT NOT TO COMPETE; CONFIDENTIAL INFORMATION; INTELLECTUAL
PROPERTY.
(a) During the term of this Agreement, and for a period of six (6)
months after the Date of Termination, the Executive shall not:
(i) directly or indirectly, own, manage, operate, join,
control, or participate in the ownership, management, operation or control
of, or be employed by or perform services for, any Competing Business,
whether for compensation or otherwise, without the prior written consent of
the Company. For the purposes of this Agreement, a "Competing Business"
shall be (A) any business by which the Executive is employed which is, at
the Date of Termination, a significant competitor of the Company; it being
agreed that the term "business" shall refer to the specific division or
subsidiary by which Executive is employed, not such division's or
subsidiary's corporate group; (B) any Company the primary business of which
is the origination of residential mortgage loans whether or not the
Executive is employed by such business; or (C) any affordable or historic
tax syndication business; provided, that, the Executive may own up to five
percent (5%) (measured by value) of the outstanding securities of any
public
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entity, the shares of which are traded on a national stock exchange or
quoted on the Nasdaq National Market;
(ii) in any manner, directly or indirectly, Solicit a Client
to transact business with a Competing Business or to reduce or refrain from
doing any business with the Company, or interfere or damage (or attempt to
interfere with or damage) any relationship between the Company and a
Client. For purposes of the Agreement, the term "Solicit" means any direct
or indirect written or oral communication, inviting, advising,
encouraging, inducing or requesting any person or entity, in any manner, to
take or refrain from taking any action. For purposes of this Agreement, the
term "Client" means any client or customer or prospective client or
customer of the Company to whom the Executive provided services, or for
whom the Executive transacted business, or whose identity became known to
the Executive in connection with the Executive's relationship with or
employment by the Company; or
(iii) directly or indirectly (whether on the Executive's own
behalf or on behalf of any other person or entity) solicit, entice, advise
or encourage any officer, employee or consultant (determined as of the Date
of Termination of the Executive) of the Company or any of its affiliates or
subsidiaries to terminate such person's or entity's employment or
consulting relationship or with respect to any officer or employee of the
Company or its subsidiaries, hiring any such officer or employee.
(b) The Executive hereby acknowledges that, as an employee of the
Company, he will have access to, be making use of, acquiring and adding to
confidential information of a special and unique nature and value relating to
the Company and its strategic plan and financial operations. The Executive
further recognizes and acknowledges that all confidential information is the
exclusive property of the Company, is material and confidential, and is critical
to the successful conduct of the business of the Company. Accordingly, the
Executive hereby covenants and agrees that he will only use confidential
information for the benefit of the Company or any of its affiliates or
subsidiaries and in the course of his employment for the Company and shall not
at any time, directly or indirectly, during the term of this Agreement and
thereafter, divulge, reveal or communicate any confidential information to any
person, firm, corporation or entity whatsoever, or use any confidential
information for his own benefit or for the benefit of others except as provided
herein. All confidential information removed by the Executive shall be returned
to the Company upon termination of his employment and no copies thereof shall be
kept by the Executive.
(c) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 7.
(d) In addition to the cessation of payments set forth in Section
7(f), the Executive acknowledges and agrees that the Company will have no
adequate remedy at law, and could be irreparably harmed, if the Executive
breaches or threatens to breach any of the provisions of this Section 7. The
Executive agrees that the Company shall be entitled to equitable and/or
injunctive relief to prevent any breach or threatened breach of this Section 7,
and to specific performance of each of the terms hereof in addition to any other
legal or equitable
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<PAGE>
remedies that the Company may have. The Executive further agrees that he shall
not, in any equity proceeding relating to the enforcement of the terms of this
Section 7, raise the defense that the Company has an adequate remedy at law.
(e) The terms and provisions of this Section 7 are intended to be
separate and divisible provisions and if, for any reason, any one or more of
them is held to be invalid or unenforceable, neither the validity nor the
enforceability of any other provision of this Agreement shall thereby be
affected. The parties hereto acknowledge that the potential restrictions on the
Executive's future employment imposed by this Section 7 are reasonable in both
duration and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 7
unreasonable in duration or geographic scope or otherwise, the Executive and the
Company agree that the restrictions and prohibitions contained herein shall be
effective to the fullest extent allowed under applicable law in such
jurisdiction.
(f) The parties acknowledge that this Agreement would not have
been entered into and the benefits described in Sections 3 or 5 would not have
been promised in the absence of the Executive's promises under this Section 7
and that should the Executive be finally determined by an arbitrator to have
engaged in any activity or conduct proscribed hereunder, all payments under this
Agreement other than Other Benefits to the extent required to be continued by
law or by the terms of the applicable plan shall cease.
(g) The Executive hereby assigns to the Company all of Executive's
right, title and interest in and to, inventions, trade secrets, works of
authorship, ideas, methods, improvements, databases, know-how, data,
developments or discoveries, whether or not patentable or copyrightable (the
"Work Product") which (i) will be, are or have been made, invented, conceived,
reduced to practice, developed or created during the Employment Period or (ii)
using the equipment, supplies, facilities and/or confidential or proprietary
information of the Company. The Executive will take such action as may be
necessary to assist the Company in obtaining statutory or common law protections
for the Work Product.
8. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. Any purported or
attempted assignment in violation hereof shall be null and void. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if
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<PAGE>
no such succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
9. ARBITRATION. Any and all disputes, claims or controversies,
arising from or regarding the interpretation, performance, enforcement or
termination of this Agreement shall (except as provided herein with respect to
injunctive relief) be resolved by final and binding confidential arbitration, to
be held in Chicago, Illinois, in accordance with the Employment Arbitration
Rules of the American Arbitration Association and this Section 9. Nothing in
this Section is intended to prevent either party from obtaining either
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration or from utilizing any judicial court system to seek
enforcement of an arbitration award.
10. MISCELLANEOUS.
(a) Any capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Merger Agreement.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery or overnight courier to the other
parties or by registered or certified mail, return receipt requested, postage
prepaid, addressed or by facsimile transmitted as follows:
If to the Executive:
David Fischer
1414 W. Wolfram, Apt. 1
Chicago, Illinois 60657
Telecopier: 312-494-0184
If to the Company:
440 North Orleans
Chicago, Illinois 60610
Attn: Mark A. Filler
Telecopier: 312-494-0184
If to the Acquiror:
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Royal Bank of Canada
200 Bay Street
14th Floor, North Tower
Toronto, Ontario, Canada
Attn: Robert K. Horton
Telecopier: 416-974-9344
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation or may condition any
transfer of property to the Executive on the Executive's satisfaction of such
withholding obligations in a manner satisfactory to the Company.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
/s/ David A. Fisher
-------------------
David A. Fisher
COMPANY
PRISM FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Filler
------------------
Name: Mark A. Filler
Title: President and Chief Executive Officer
Acquiror agrees that as of the Effective Time it will honor this
Agreement and treat the Agreement as its own.
ACQUIROR
ROYAL BANK OF CANADA,
a Canadian commercial bank
By: /s/ Robert K. Horton
--------------------
Name: Robert K. Horton
Title: Senior Vice President, Strategic
Initiatives
By: /s/ James T. Rager
------------------
Name: James T. Rager
Title: Vice Chairman, Personal and
Commercial Banking
11
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Exhibit 12
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 10th day of March 2000, by and among Prism
Financial Corporation, a Delaware corporation (the "Company"), Eric A. Gurry
(the "Executive"), and Royal Bank of Canada, a bank organized and existing under
the laws of Canada ("Acquiror").
WHEREAS, Acquiror and the Company have determined that it is in their
respective best interests to assure that the Company will have the continued
dedication of the Executive pending the merger (the "Merger") of the Company and
Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and wholly owned
subsidiary of Acquiror ("Acquisition") pursuant to the Merger Agreement dated as
of March 10, 2000 among the Company, Acquiror and Acquisition (the "Merger
Agreement"), and to provide the Company, as the surviving corporation of the
Merger, with continuity of management. Therefore, in order to accomplish these
objectives, the Executive, Acquiror and the Company have entered into this
employment agreement.
WHEREAS, the Executive desires to accept such continued employment,
subject to the terms and provisions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Time. The "Effective Time" shall mean the effective time
of the Merger, provided the Executive is employed by the Company at such time.
As of the Effective Time, any and all other employment agreements entered into
between the Company and Executive prior to the Effective Time (including,
without limitation, any employment agreement entered into among the Company,
Executive and Acquiror in connection with or in contemplation of the
transactions contemplated by the Merger Agreement) shall terminate and become
null and void, provided that any option agreements between the Executive and the
Company shall terminate and become null and void only upon the final installment
payment of the special retention bonus contemplated by Section 2.10(b) of the
Merger Agreement and provided further that upon any termination of the
transactions contemplated by the Merger Agreement, this sentence will be
inapplicable.
2. Employment Period. The Company hereby agrees to continue to employ
the Executive, and the Executive hereby agrees to continue in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing as of the Effective Time and ending on December 31, 2003 (the
"Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, the Executive shall serve
as Senior Vice President of the Company with the appropriate authority,
duties and
<PAGE>
responsibilities attendant to such position. After the Employment Period,
the Executive may continue to serve the Company under a mutually agreed
upon arrangement.
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote substantially all of his business attention and
time to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period, it shall not be a violation of this Agreement for the Executive (A)
to continue, with respect to current positions and arrangements disclosed
to the Board and, with prior written approval of the Board of Directors of
the Company (the "Board"), with respect to future positions and
arrangements, to, serve on a reasonable number of corporate, civic or
charitable boards or committees (and promptly after the Effective Time,
Executive will submit to the Board a list of all existing board or
committee memberships and submit to the Board for approval a list of
pending or future board or committee memberships, which approval will not
be unreasonably withheld); (B) deliver a reasonable number of lectures and
speeches and (C) manage personal investments, so long as such activities do
not interfere with the proper performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement.
(b) Compensation.
(i) Annual Base Salary. During the initial twelve months of
the Employment Period, the Executive shall receive an annual base salary
("Annual Base Salary") of $150,000, payable in accordance with regular
payroll practices of the Company. Thereafter, the Executive shall receive
an annual base salary in an amount determined by the Board, but not less
than his initial Annual Base Salary with any such increased amount
thereafter being the Annual Base Salary. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive
under this Agreement. The Executive shall not be entitled to receive any
additional consideration for service during the Employment Period as a
member of the Board of Directors of the Company or any of its subsidiaries.
(ii) Interim Bonus and Annual Bonus. Provided the Executive's
employment has not been terminated for Cause or due to a voluntary
termination by the Executive (other than due to Constructive Termination,
death or Disability) on the respective dates of payment, the Executive
shall be eligible to participate in a bonus pool (the "Interim Bonus") on
December 31, 2000 where the aggregate pool for all participants shall not
be less than $105,000. The Executive shall be eligible to participate in an
annual cash bonus pool for executives ("Annual Bonus") with respect to the
first 12 months of this Agreement, whereby the aggregate pool for all
participants shall not be less than $1,825,000 to be paid no later than 13
months after the date of this Agreement. The distribution of 50% of the
Annual Bonus Pool will be unconditional and solely at the discretion of
Mark Filler (with no restriction whatsoever) and the remainder at the
discretion of the Board. Thereafter, the Executive shall be
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eligible to receive annual bonuses during the Employment Period in an
amount and in accordance with any plan as may be determined by the Board.
(iii) Stock Options. The Executive shall be eligible to
particpate in the Acquiror's 1999 Stock Option Plan (the "Plan"), with
grants made at the discretion of the Acquiror's Board of Directors. Any
stock options granted to the Executive shall be subject to all of the terms
and conditions of the Plan, including applicable provisions regarding
vesting, and expiration of options upon termination of employment. Such
stock options shall be administered in accordance with the Plan attached
hereto as Appendix A and pursuant to a Stock Option Agreement reasonably
acceptable, including as to vesting, to the Executive.
(iv) Other Employee Benefit Plans. During the Employment
Period, except as otherwise expressly provided herein, the Executive shall
be entitled to participate in all employee benefit, welfare and other
plans, practices, policies and programs of the Company (collectively,
"Employee Benefit Plans"), subject only to the generally applicable
eligibility provisions of such plans; provided that the Executive shall at
all times during the Employment Period, be entitled to receive benefits
that are comparable to those provided to other employees in positions of
comparable rank with the Acquiror and its wholly owned subsidiaries.
4. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period
and in that case the Date of Termination shall be the date of death. If the
Company determines in good faith that the Executive has become Disabled during
the Employment Period (pursuant to the definition of "Disabled" or "Disability"
set forth below), the Company may terminate Executive's employment by giving
written notice to the Executive in accordance with Section 10(b) of this
Agreement of the Company's intention to terminate Executive's employment. In
such event, the Executive's employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, whether the Executive has
become "Disabled" (or incurs a Disability) shall be determined under the
Company's long-term disability plan as in effect for employees of the Company as
of the date of this Agreement. If the Executive's employment is terminated by
reason of disability, the Date of Termination shall be the Disability Effective
Date, or any later date specified by the Company.
(b) Cause. The Company may terminate the Executive's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the commission by the Executive of an act of criminal or
fraudulent misconduct that results in material economic harm or acute
public embarrassment to the Company, its parent or a subsidiary of the
Company (including, but not limited to, the willful violation of any
material law, rule, regulation, or cease and
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desist order applicable to the Executive) or a deliberate breach of a
fiduciary duty owed by the Executive to the Company, its parent or its
parent's shareholders;
(ii) the Executive's habitual absence from work other than as
a result of illness or Disability, continuous and intentional failure to
perform stated duties, gross negligence, or gross incompetence in the
performance of the Executive's stated duties provided that the Executive
shall be provided notice of any situation set forth herein and a reasonable
opportunity to cure such situation;
(iii) the Executive's chronic alcohol or drug abuse that
results in a material impairment of the Executive's ability to perform his
or her duties as an employee of the Company provided that the Executive
shall be provided a reasonable opportunity to cure if the Executive
demonstrates a willingness to undergo treatment or rehabilitation;
(iv) the rendering of a verdict of guilty against or the
entering of a nolo contendere plea by the Executive for any felony offense
(other than a law relating to a traffic violation or similar offense),
whether or not in the line of duty to the Company; or
(v) the final determination by a state or federal banking
agency or governmental authority having jurisdiction over the Company that
the Executive is not suitable to act in the capacity in which he is
employed by the Company or a downgrading in ratings by such authority, as
evidenced in the "Management Aspects During the Annual Review," on the
basis of such determination.
(c) Notice of Termination. Termination of employment by the
Company or by the Executive shall be communicated by Notice of Termination to
the other party hereto given in accordance with this Section 10(c). For purposes
of this Agreement, a "Notice of Termination" means a written notice which
indicates the Date of Termination, as specified below. The "Date of Termination"
means:
(i) if the Executive's employment is terminated by the
Company for Cause, the date of receipt of the Notice of Termination or any
later date specified therein within 30 days of such notice, or
(ii) if the Executive's employment is terminated by the
Executive, a date not less than 30 days after the date of the Notice of
Termination, provided, however, that the Company may waive such 30-day
provision.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, this Agreement shall terminate without further obligations to
the Executive under this Agreement, other than for payment of:
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(i) the Executive's Annual Base Salary through the Date of
Termination to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded for the
first twelve months of service, in each case to the extent not theretofore
paid;
(iii) a pro rata portion of the annual bonus awarded for the
fiscal year in which the Date of Termination occurs and the annual bonus
awarded for any fiscal year prior thereto, in each case to the extent
earned, accrued or owing to the Executive but not theretofore paid; and
(iv) any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive through the Date of
Termination under any plan, program, policy or practice or contract or
agreement of the Company, to the extent not theretofore paid or provided
(such other amounts and benefits shall be hereinafter referred to as the
"Other Benefits") through the Date of Termination and continuation of
insurance plans as provided under COBRA.
Any Annual Base Salary, Interim Bonus and Annual Bonus payable pursuant to
this Section 5(a) shall be paid to the Executive as applicable, in a lump sum in
cash within 30 days after the Date of Termination; in the case of a pro-rated
Annual Bonus, as soon as practicable after the date such bonus is determined.
(b) Termination Without Cause. If the Executive's employment is
terminated by the Company without Cause, or if the Executive terminates as a
result of a Constructive Termination (as defined below), this Agreement shall
terminate without further obligations to the Executive under this Agreement,
other than for payment of:
(i) the Executive's Annual Base Salary through the Employment
Period to the extent not theretofore paid;
(ii) the Interim Bonus and the Annual Bonus awarded for the
first twelve months of service, in each case to the extent not theretofore
paid;
(iii) a pro rata portion of the annual bonus awarded for the
fiscal year in which the Date of Termination occurs and the annual bonus
for any fiscal year prior thereto, in each case to the extent earned,
accrued or owing to the Executive but not theretofore paid; and
(iv) Other Benefits through the Date of Termination and
continuation of insurance plans as provided under COBRA.
For purposes of this Agreement, "Constructive Termination" means the Executive's
voluntary termination of employment after any of the following are undertaken
without the Executive's express written consent: (A) the assignment to the
Executive of any duties or responsibilities
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inconsistent with the Executive's title and position, authority, duties or
responsibilities as contemplated by Section 3(a)(i) of this Agreement, or any
other action by the Company which results in a diminution in such position,
authority, duties or responsibilities, excluding for the purpose of this clause
(A) an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive; (B) a reduction in the Executive's Annual Base Salary or
change in the Annual Bonus pool; (C) a relocation of the Executive to a location
more than ten (10) miles from the location at which the Executive performed his
duties immediately prior to the Effective Time, except for required travel by
the Executive on the Company's business to an extent substantially consistent
with the Executive's business travel obligations prior to the Effective Time or
(D) any breach by the Company or Acquiror of this Agreement.
(c) Termination for Cause; Voluntary Termination. If the
Executive's employment shall be terminated by the Company for Cause or the
Executive terminates his employment prior to the end of the Employment Period on
his own initiative (other than due to Constructive Termination, death or
Disability), this Agreement shall terminate without further obligation to the
Executive other than the obligation to pay to the Executive his Annual Base
Salary through the Date of Termination to the extent theretofore unpaid and the
Other Benefits through the Date of Termination.
6. NO MITIGATION. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
7. COVENANT NOT TO COMPETE; CONFIDENTIAL INFORMATION; INTELLECTUAL
PROPERTY.
(a) During the term of this Agreement, and for a period of six (6)
months after the Date of Termination, the Executive shall not:
(i) directly or indirectly, own, manage, operate, join,
control, or participate in the ownership, management, operation or control
of, or be employed by or perform services for, any Competing Business,
whether for compensation or otherwise, without the prior written consent of
the Company. For the purposes of this Agreement, a "Competing Business"
shall be (A) any business by which the Executive is employed which is, at
the Date of Termination, a significant competitor of the Company; it being
agreed that the term "business" shall refer to the specific division or
subsidiary by which Executive is employed, not such division's or
subsidiary's corporate group; (B) any Company the primary business of which
is the origination of residential mortgage loans whether or not Executive
is employed by such business; or (C) any affordable or historic tax
syndication business; provided, that, the Executive may own up to five
percent (5%) (measured by value) of the outstanding securities of any
public entity, the shares of which are traded on a national stock exchange
or quoted on the Nasdaq National Market;
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(ii) in any manner, directly or indirectly, Solicit a Client
to transact business with a Competing Business or to reduce or refrain from
doing any business with the Company, or interfere or damage (or attempt to
interfere with or damage) any relationship between the Company and a
Client. For purposes of the Agreement, the term "Solicit" means any direct
or indirect written or oral communication, inviting, advising,
encouraging, inducing or requesting any person or entity, in any manner, to
take or refrain from taking any action. For purposes of this Agreement, the
term "Client" means any client or customer or prospective client or
customer of the Company to whom the Executive provided services, or for
whom the Executive transacted business, or whose identity became known to
the Executive in connection with the Executive's relationship with or
employment by the Company; or
(iii) directly or indirectly (whether on the Executive's own
behalf or on behalf of any other person or entity) solicit, entice, advise
or encourage any officer, employee or consultant (determined as of the Date
of Termination of the Executive) of the Company or any of its affiliates or
subsidiaries to terminate such person's or entity's employment or
consulting relationship or with respect to any officer or employee of the
Company or its subsidiaries, hiring any such officer or employee.
(b) The Executive hereby acknowledges that, as an employee of the
Company, he will have access to, be making use of, acquiring and adding to
confidential information of a special and unique nature and value relating to
the Company and its strategic plan and financial operations. The Executive
further recognizes and acknowledges that all confidential information is the
exclusive property of the Company, is material and confidential, and is critical
to the successful conduct of the business of the Company. Accordingly, the
Executive hereby covenants and agrees that he will only use confidential
information for the benefit of the Company or any of its affiliates or
subsidiaries and in the course of his employment for the Company and shall not
at any time, directly or indirectly, during the term of this Agreement and
thereafter, divulge, reveal or communicate any confidential information to any
person, firm, corporation or entity whatsoever, or use any confidential
information for his own benefit or for the benefit of others except as provided
herein. All confidential information removed by the Executive shall be returned
to the Company upon termination of his employment and no copies thereof shall be
kept by the Executive.
(c) Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 7.
(d) In addition to the cessation of payments set forth in
Section 7(f), the Executive acknowledges and agrees that the Company will have
no adequate remedy at law, and could be irreparably harmed, if the Executive
breaches or threatens to breach any of the provisions of this Section 7. The
Executive agrees that the Company shall be entitled to equitable and/or
injunctive relief to prevent any breach or threatened breach of this Section 7,
and to specific performance of each of the terms hereof in addition to any other
legal or equitable remedies that the Company may have. The Executive further
agrees that he shall not, in any equity proceeding relating to the enforcement
of the terms of this Section 7, raise the defense that the Company has an
adequate remedy at law.
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(e) The terms and provisions of this Section 7 are intended to be
separate and divisible provisions and if, for any reason, any one or more of
them is held to be invalid or unenforceable, neither the validity nor the
enforceability of any other provision of this Agreement shall thereby be
affected. The parties hereto acknowledge that the potential restrictions on the
Executive's future employment imposed by this Section 7 are reasonable in both
duration and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 7
unreasonable in duration or geographic scope or otherwise, the Executive and the
Company agree that the restrictions and prohibitions contained herein shall be
effective to the fullest extent allowed under applicable law in such
jurisdiction.
(f) The parties acknowledge that this Agreement would not have
been entered into and the benefits described in Sections 3 or 5 would not have
been promised in the absence of the Executive's promises under this Section 7
and that should the Executive be finally determined by an arbitrator to have
engaged in any activity or conduct proscribed hereunder, all payments under this
Agreement other than Other Benefits to the extent required to be continued by
law or by the terms of the applicable plan shall cease.
(g) The Executive hereby assigns to the Company all of Executive's
right, title and interest in and to, inventions, trade secrets, works of
authorship, ideas, methods, improvements, databases, know-how, data,
developments or discoveries, whether or not patentable or copyrightable (the
"Work Product") which (i) will be, are or have been made, invented, conceived,
reduced to practice, developed or created during the Employment Period or (ii)
using the equipment, supplies, facilities and/or confidential or proprietary
information of the Company. The Executive will take such action as may be
necessary to assist the Company in obtaining statutory or common law protections
for the Work Product.
8. SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. Any purported or
attempted assignment in violation hereof shall be null and void. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
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9. ARBITRATION. Any and all disputes, claims or controversies,
arising from or regarding the interpretation, performance, enforcement or
termination of this Agreement shall (except as provided herein with respect to
injunctive relief) be resolved by final and binding confidential arbitration, to
be held in Chicago, Illinois, in accordance with the Employment Arbitration
Rules of the American Arbitration Association and this Section 9. Nothing in
this Section is intended to prevent either party from obtaining either
injunctive relief in court to prevent irreparable harm pending the conclusion of
any such arbitration or from utilizing any judicial court system to seek
enforcement of an arbitration award.
10. MISCELLANEOUS.
(a) Any capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Merger Agreement.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery or overnight courier to the other
parties or by registered or certified mail, return receipt requested, postage
prepaid, addressed or by facsimile transmitted as follows:
If to the Executive:
Eric A. Gurry
1640 N. Burling Street, #3
Chicago, Illinois 60614
Telecopier: 312-494-0184
If to the Company:
440 North Orleans
Chicago, Illinois 60610
Attn: Mark A. Filler
Telecopier: 312-494-0184
If to the Acquiror:
Royal Bank of Canada
200 Bay Street
14th Floor, North Tower
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Toronto, Ontario, Canada
Attn: Robert K. Horton
Telecopier: 416-974-9344
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation or may condition any
transfer of property to the Executive on the Executive's satisfaction of such
withholding obligations in a manner satisfactory to the Company.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
EXECUTIVE
/s/ Eric A. Gurry
-----------------
Eric A. Gurry
COMPANY
PRISM FINANCIAL CORPORATION,
a Delaware corporation
By: /s/ Mark A. Filler
------------------
Name: Mark A. Filler
Title: President and Chief Executive Officer
Acquiror agrees that as of the Effective Time it will honor this
Agreement and treat the Agreement as its own.
ACQUIROR
ROYAL BANK OF CANADA,
a Canadian commercial bank
By: /s/ Robert K. Horton
--------------------
Name: Robert K. Horton
Title: Senior Vice President, Strategic
Initiatives
By: /s/ James T. Rager
------------------
Name: James T. Rager
Title: Vice Chairman, Personal and
Commercial Banking
11
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Exhibit 13
STOCK OPTION AGREEMENT
----------------------
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"),
dated as of January 21, 2000 (the "Date of Grant"), grant number PF001598, by
and between Prism Financial Corporation, a Delaware corporation (the "Company"),
and Mark A. Filler (the "Optionee"). Unless stated otherwise, any capitalized
terms not defined herein shall have their respective meanings set forth in the
Prism Financial Corporation 1999 Omnibus Stock Incentive Plan (the "Plan").
R E C I T A L S:
----------------
WHEREAS, prior to the date hereof, the Board of Directors (the
"Board") of the Company adopted, and the stockholders of the Company approved,
the Plan;
WHEREAS, the success of the Company's business is dependent on the
continued loyalty of the Optionee.
NOW THEREFORE, in consideration of Optionee's agreement to be
bound by the Confidential Information, Non-Solicitation provisions contained
herein (the "Employee Covenants") and the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
1 . Number of Shares. In consideration for Optionee's agreement
to be bound by the Employee Covenants, the Company hereby grants to the Optionee
the right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, 100,000 shares of the Company's Common Stock (the "Option
Shares") at a price of $3.3750 per share (the "Option Exercise Price"), which is
equal to the last per-share trading price of the Company's Common Stock on the
Date of Grant. The Option in not intended to constitute an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the Code").
2. Option Term, The term of the Option and of this Option
Agreement (the "Option Term") shall commence on the Date of Grant and, unless
the Option is previously terminated pursuant to this Option Agreement, shall
terminate upon the expiration of ten (10) years from the Date of Grant. Upon
expiration of the Option Term, all rights of the Optionee hereunder shall
terminate.
3. Conditions of Exercise. (a) Subject to Section 7 below,
the Option shall vest and become exercisable as to one-third (33.3%) of the
Option
<PAGE>
Shares on each of the first three anniversaries of the Date Of Grant; provided,
however, that if Optionee is employed by the Company (or any successor
corporation) upon a Change in Control (as defined below) one hundred percent
(100%) of the Option Shares shall vest and become exercisable in full as of such
date; provided further that if Optionee's employment is terminated by the
Company (or any successor corporation) without Cause (as defined below) the
Option shall become vested and fully exercisable as of the date of termination.
For purposes of this Option Agreement, a "Change in Control" of
the Company shall be deemed to occur as of such time of: (i) the acquisition by
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (other than the Company
or a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company), of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities (assuming for
purposes of this calculation that all consideration paid by such "person"
(together with its affiliates) in exchange for securities of the Company was
exchanged for Common Stock in the secondary market, regardless of whether such
consideration was actually exchanged for other securities of the Company), (ii)
the consummation of a merger or consolidation of the Company with or into any
other corporation, other than a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iii) consummation of a plan of complete liquidation of the
Company or of the sale or disposition by the Company of all or substantially all
of the Company's assets.
For purposes of this Option Agreement, "Cause" shall mean the
occurrence of any of the following events, (i) Optionee's conviction of or
guilty or nolo contenders plea to the commission of an act or acts constituting
a felony under the laws of the United States or any state thereof, (ii) an
action by Optionee involving material theft or fraud in connection with
Optionee's duties as an employee/officer of the Company, (iii) Optionee's
willful failure to abide by or follow any lawful direction of the Board of
Directors (after reasonable notice) or (iv) material, willful violation of the
Employee Covenants.
(b) Except as otherwise provided herein, the right of
the Optionee to purchase Option Shares with respect to which this Option has
become
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<PAGE>
exercisable may be exercised in whole or in part at any time or from time to
time prior to expiration of the Option Term.
4. Adjustments.
(a) In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split or similar change
affecting the Common Stock which does not constitute a Change in Control, a
substitution or proportionate adjustment shalt be made in the kind, number and
option price of shares of Common Stock subject to the unexercised portion of the
Option (after allowing Optionee the opportunity to exercise the Option to the
extent vested), as may be determined by the Board of Directors in its sole
discretion.
(b) In the event of a Change in Control, the Board of
Directors shall cause the unexercised portion of the Option (after allowing
Optionee the opportunity to exercise the Option to the extent vested) to convert
into the right to receive one of the following, at the discretion of the Board
of Directors: (i) an equivalent amount of stock that is registered under
applicable securities laws, unrestricted, actively tradable and listed on the
NYSE, AMSE or NASDAQ exchanges, (ii) if such Change in Control involves the
purchase of all Common Stock then held by the general public, the same form,
type and amount of consideration per share of Common Stock as is received by
such public shareholders in connection with such Change in Control, or (iii) the
right to receive an amount of cash equal to the product of (A) the number of
shares of Option Shares underlying the previously unexercised portion of the
Option multiplied b (B) the remainder of (x) the highest price paid (as part of
such Change in Control) per share of Common Stock sold to the public in
connection with the Company's initial public offering of Common Stock (the
"Public Price") (or, in the event such Change in Control does not involve a
purchase of such publicly traded Common Stock, the highest price paid per share
of Common Stock to any shareholder) minus (y) the Option Exercise Price.
(c) Nothing in this Section 4 shall be construed in
such a way as to prejudice the rights or treatment of Optionee as compared to
the rights or treatment afforded to other holders of options to acquire Common
Stock.
5. Nontransferability of Option and Option Shares. Except as
otherwise provided by the Administrator, the Option and this Option Agreement
shall not be transferable and, during the lifetime of Optionee, the Option may
be exercised only by Optionee. Without limiting the generality of the
foregoing, except as otherwise provided herein, the Option may not be assigned,
transferred, pledged or hypothecated in any way, shall not be assignable by
operation of law, and shall riot
3
<PAGE>
be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option shall be null and void and without effect.
6. Method of Exercise of Option. The Option may be
exercised by means of written notice of exercise to the Company specifying the
number of Option Shares to be purchased, accompanied by payment in full of the
aggregate Option Exercise Price and any applicable withholding taxes (i) in cash
or by check, (ii) by means of a cashless exercise procedure either through a
broker or, at the discretion of the Administrator, through withholding of shares
of Common Stock otherwise issuable upon exercise of the Option in an amount
sufficient to pay the exercise price and any applicable withholding taxes, (iii)
in the form of unrestricted Stock already owned by the Optionee which, (a) in
the case of unrestricted Stock acquired upon exercise of an option, has been
owned by the Optionee for more than six months on the date of surrender and (b)
has a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Stock as to which such Stock Option shall be exercised, or (iv) by
any other means of exercise authorized from time to time in the Plan and/or by
the Board of Directors.
7. Effect of Termination of Employment. Subject to
Section 3(a), upon the termination of Optionee's employment or service with the
Company or any Subsidiary under any circumstances, the Option shall immediately
terminate as to any Option Shares that have not previously vested as of the date
of such termination (the "Termination Date"). Any portion of the Option that
has vested as of the Termination Date (including any portion which vests as a
result of such termination pursuant to section 3(a) above) shall be exercisable
in whole or in part for a period of two years following the Termination Date;
provided, further, that, in the event of Optionee's termination for Cause, the
Option shall immediately terminate as to all unvested Option Shares. Upon
expiration of such two-year period any unexercised portion of the Option shall
terminate in full.
8. Confidentiality, Non-Solicit
(a) Confidential Information. Optionee agrees
not to disclose the terms of this Agreement to any officer or employee of any
Company Entity, except the Board of Directors or their respective designees.
Optionee acknowledges and agrees that (i), during the course of his employment
with the Company, Optionee will have produced and/or have access to confidential
information, knowledge or data relating to the Company and its subsidiaries and
affiliates (each a "Company Entity" and collectively the "Company Entities") and
the business
4
<PAGE>
and investments of the Company Entities, including but not limited to such
information, knowledge or data with respect to agreements, records, notebooks,
formulae, products, marketing and training techniques, methods, future plans or
operating practices, trade secrets, programs, systems, specifications,
documentation, algorithms, flow charts, logic diagrams, source codes,
works-in-progress, discoveries, improvements, designs, drawings and other
information, including customer lists, pricing methods and personnel of the
Company Entities ("Confidential Information"), and (ii) the unauthorized use or
sale of any of such Confidential Information at any time would constitute unfair
competition with the Company. Optionee shall hold in a fiduciary capacity for
the benefit of the Company Entities and shall not at any time, without the prior
written consent of the Company or as may otherwise be required by law or legal
process, knowingly communicate or divulge any Confidential Information to anyone
other than the Company and Company Entity and those designated by the Company.
(b) Removal of Documents, Rights to Inventions. All
records, files, drawings, documents, models, programs, computer media, files and
lists (including all originals and all copies) and the like relating to the
business of the Company Entities, which the Optionee prepares, uses or comes
into contact with and which contain Confidential Information shall not be
removed by the Optionee from the premises of any Company Entity (without the
written consent of the Company) during or after Optionee's employment with the
Company unless such removal shall be required or appropriate in connection with
his carrying out his duties under his employment with the Company and, if so
removed by the Optionee, shall be returned to the Company immediately upon
termination of the Optionee's employment with the Company, All tangible items
obtained by Optionee during the course of employment, and related to the
business of the Company Entities, including, without limitation, phones, keys,
computers, credit cards, lists, manuals, office equipment, furniture, and the
like, shall be the sole and exclusive property of the Company, and Optionee
shall surrender them to the Company upon termination of Optionee's employment
with the Company or at any time upon the request of Prism. Optionee shall
assign to the Company all rights to inventions, trade secrets, other products
and related intellectual property developed by him alone or in conjunction. with
others at any time while employed by any Company Entity and will cooperate in
its efforts to pursue patents, copyrights, trade secrets, trademarks, or any
other intellectual property right, whether domestic or foreign, embodying
intellectual property assigned hereunder, or in protecting its rights thereto.
(c) Non-Solicitation. Optionee shall not engage in any
Prohibited Activity while he is employed by any Company Entity. In the event of
the termination of Optionee's employment for any reason, Optionee shall not
engage in
5
<PAGE>
any Prohibited Activity for a period of eighteen (18) months following the date
of Optionee's termination,
For purposes of this Option Agreement, "Prohibited Activity"
shall mean (i) soliciting, diverting or taking away or attempting to divert or
take away, directly or indirectly, the business or patronage of any customers,
referral sources or others doing business with any Company Entity (determined as
of the date of Optionee's termination) or (ii) directly or indirectly (whether
on Optionee's own behalf or on behalf of any other person or entity) soliciting,
enticing, advising or encouraging any officer, employee or consultant
(determined as of the date of Optionee's termination) of any Company Entity to
terminate such person's or entity's employment or consulting relationship or,
with respect to any officer or employee, hiring any such officer or employee.
If, at any time, the provisions of this Section 8(c) shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 8(c) shall be considered divisible
and shall become and be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by the
court or other body having jurisdiction over the matter; and Optionee agrees
that this Section 8(c) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.
(d) In the event of a breach or threatened breach of
subsection (a), (b) or (c) of this Section 8, Optionee agrees that the Company
shall be entitled to injunctive relief in a court of appropriate jurisdiction to
remedy any such breach or threatened breach, Optionee acknowledging that damages
would be inadequate and insufficient.
(e) Any termination of Optionce's employment shall
have no effect on the continuing operation of this Section 8.
9. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first-class
mail, certified or registered with return receipt requested, and shall be deemed
to have been duly given three days after mailing or 24 hours after transmission
by facsimile to the respective parties named below:
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<PAGE>
If to Company: Prism Financial Corporation
Prism Center
440 North Orleans
Chicago, IL 60610
Attn: Corporate Secretary
Facsimile: 312-494-0082
with a copy to: Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606-1285
Attn: Rodd M. Schreiber
Facsimile: 312-407-0411
If to the Optionee: Mark A.Filler
------------------------
Name
Address:
226 Prospect
Highland Park, IL 60035
Either party hereto may change such party's address for notices by notice duly
given pursuant hereto.
10. Securities Laws Requirements. The Option shall not be
exercisable to any extent, and the Company shall not be obligated to transfer
any Option Shares to the Optionee upon exercise of such Option, if such
exercise, in the opinion of counsel for the Company, would violate the
Securities Act (or any other federal or state statutes having similar
requirements as may be in effect at that time). Further, the Company may require
as a condition of transfer of any Option Shares pursuant to any exercise of the
Option that the Optionee furnish a written representation that he or she is
purchasing or acquiring the Option Shares for investment and not with a view to
resale or distribution to the public.
11. Change of Control. Upon a Change of Control (as defined
in paragraph 3), a cash payment will be paid as determined and approved by the
Board of Directors.
12. Witholding, Requirements. The Company's obligations under
this Option Agreement shall be subject to all applicable tax and other
withholding
7
<PAGE>
requirements, and the Company shall, to the extent permitted by law, have the
right to deduct any withholding amounts from any payment or transfer of any kind
otherwise due to the Optionee.
13. Failure to Enforce Not a Waiver. The failure of the
Company to enforce at any time any provision of this Option Agreement shall in
no way be construed to be a waiver of such provision or of any other provision
hereof.
14. Governing Law, This Option Agreement shall be governed by
and construed according to the laws of the State of Delaware without regard to
its principles of conflict of laws.
15. Incorporation of Plan. The Plan is hereby incorporated by
reference and made a part hereof, and the Option and this Option Agreement shall
be subject to all terms and conditions of the Plan.
16. Amendments. This Option Agreement may be amended or
modified at any time only by an instrument in writing signed by each of the
parties hereto.
17. Rights as a Stockholder. Neither the Optionee nor any of
the Optionee's successors in interest shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock subject to the Option
until the date of issuance of a stock certificate for such shares of Common
Stock.
18. Agreement Not a Contract of Employment. Neither the Plan,
the granting of the Option, this Option Agreement nor any other action taken
pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that the Optionee has a right to continue as
an employee of the Company or any Subsidiary or affiliate of the Company for any
period of time or at any specific rate of compensation.
19. Authority of the Board. The Board of Directors shall have
full authority to interpret and construe the terms of the Plan and this Option
Agreement. The determination of the Board of Directors as to any such matter of
interpretation or construction shall be final, binding and conclusive.
20. Dispute Resolution. The parties hereto will use their
reasonable best efforts to resolve any dispute hereunder through good-faith
negotiations. A party hereto must submit a written notice to any other party to
whom such dispute pertains, and any such dispute that cannot be resolved within
30 calendar days of receipt of such notice (or such other period to which the
parties may agree) will be
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<PAGE>
submitted to an arbitrator selected by mutual agreement of the parties. In the
event that, within 50 days of the written notice referred to in the preceding
sentence, a single arbitrator has not been selected by mutual agreement of the
parties, a panel of arbitrators (with each party to The dispute being entitled
to select one arbitrator and, if necessary to prevent the possibility of
deadlock, one additional arbitrator being selected by such arbitrators selected
by the parties to the dispute) shall be selected by the parties. Except as
otherwise provided herein or as the parties to the dispute may otherwise agree,
such arbitration will be conducted in accordance with the then existing miles of
the American Arbitration Association. The decision of the arbitrator or
arbitrators, or of a majority thereof, as the case may be, made in Writing will
be final and binding upon the parties hereto as to the questions submitted, and
the parties will abide by and comply with such decision; provided, however, the
arbitrator or arbitrators, as the case may be, shall not be empowered to award
punitive damages. Unless the decision of the arbitrator or arbitrators, as the
case may be, provides for a different allocation of costs and expenses
determined by the arbitrators to be equitable under the circumstances, the
prevailing party or parties in any arbitration will be entitled to recover all
reasonable fees (including but not limited to attorneys' fees) and expenses
incurred by it or them in connection with such arbitration from the
nonprevailing party or parties.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Option Agreement on the day and year first above written.
PRISM FINANCIAL CORPORATION
By /s/ Richard L. Welleck
----------------------------------
Name Richard L. Wellek
Title Chairman
The undersigned hereby accepts and agrees
to all the terms and provisions of the
foregoing Option Agreement and to all the
terms and provisions of the Plan, herein
incorporated by reference.
/s/ Mark A. Filler
----------------------------------
The Optionee
10
<PAGE>
Exhibit 14
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Option
Agreement"), dated as of January 21, 2000 (the "Date of Grant"), grant number
PF001597, by and between Prism Financial Corporation, a Delaware corporation
(the "Company"), and Richard L. Wellek (the "Optionee"). Any capitalized terms
not defined herein shall have their respective meanings set forth in the Prism
Financial Corporation 1999 Omnibus Stock Incentive Plan (the "Plan").
Pursuant to the Plan, the Board of Directors of the Company
(the "Board"), as the Administrator of the Plan, has determined that the
Optionee is to be granted an option (the "Option") to purchase shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), on the
terms and conditions set forth herein, and hereby grants such Option. This
Option is not intended to constitute an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
1. Number of Shares. The Option entitles the Optionee to
purchase twenty thousand (20,000) shares of the Company's Common Stock (the
"Option Shares") at a price of three dollars and thirty-seven and one-half cents
($3.375) per share (the "Option Exercise Price"), which is at least equal to the
Fair Market Value of the Common Stock as of the Date of Grant.
2. Option Term. The term of the Option and of this Option
Agreement (the "Option Term") shall commence on the Date of Grant and, unless
the Option is previously terminated pursuant to this Option Agreement, shall
terminate upon the expiration of ten (10) years from the Date of Grant. Upon
expiration of the Option Term, all rights of the Optionee hereunder shall
terminate.
3. Conditions of Exercise. (a) Subject to Section 7 below, the
Option shall vest and become exercisable as to thirty-three and one-third
percent (33-1/3%) of the Option Shares on each of the first three (3)
anniversaries of the Date of Grant; provided, however, that if Optionee is
serving as a director of or is employed by the Company (or any successor
corporation) upon a Change in Control (as defined below), one hundred percent
(100%) of the Option Shares shall vest and become exercisable in full as of such
date.
(b) For purposes of this Option Agreement, a
"Change in Control" of the Company shall be deemed to occur as of such time of:
(i) the
<PAGE>
acquisition by an "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (other
than the Company), of the "beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities (assuming for purposes of
this calculation that all consideration paid by such "person" (together with its
affiliates) in exchange for securities of the Company was exchanged for Common
Stock in the secondary market, regardless of whether such consideration was
actually exchanged for other securities of the Company), (ii) the consummation
of a merger or consolidation of the Company with or into any other entity, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iii)
consummation of a plan of complete liquidation of the Company or of the sale or
disposition by the Company of all or substantially all of the Company's assets.
(c) Except as otherwise provided herein, the
right of the Optionee to purchase Option Shares with respect to which this
Option has become exercisable may be exercised in whole or in part at any time
or from time to time prior to expiration of the Option Term.
4. Adjustments. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split or similar change
affecting the Common Stock, a substitution or proportionate adjustment shall be
made in the kind, number and option price of shares of Common Stock subject to
the unexercised portion of the Option, as may be determined by the Board in its
sole discretion.
5. Nontransferability of Option and Option Shares. Except as
otherwise provided by the Administrator, the Option and this Option Agreement
shall not be transferable and, during the lifetime of Optionee, the Option may
be exercised only by Optionee. Without limiting the generality of the foregoing,
except as otherwise provided herein, the Option may not be assigned,
transferred, pledged or hypothecated in any way, shall not be assignable by
operation of law, and shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the
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<PAGE>
provisions hereof, and the levy of any execution, attachment or similar process
upon the Option shall be null and void and without effect.
6. Method of Exercise of Option. The Option may be exercised
by means of written notice of exercise to the Company specifying the number of
Option Shares to be purchased, accompanied by payment in full of the aggregate
Option Exercise Price and any applicable withholding taxes (i) in cash or by
check, (ii) by means of a cashless exercise procedure either through a broker
or, at the discretion of the Administrator, through withholding of shares of
Common Stock otherwise issuable upon exercise of the Option in an amount
sufficient to pay the exercise price and any applicable withholding taxes, (iii)
in the form of unrestricted Stock already owned by the Optionee which, (x) in
the case of unrestricted Stock acquired upon exercise of an option, have been
owned by the optionee for more than six months on the date of surrender, and (y)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Stock as to which such Stock Option shall be exercised, or
(iv) by any other means of exercise authorized from time to time in the Plan
and/or by the Board.
7. Effect of Termination of Service. Upon the termination of
Optionee's service with the Company or any Subsidiary under any circumstances
(including without limitation by reason of the sale of such Subsidiary or the
death of the Optionee), the Option shall continue to vest in accordance with
Section 3 hereof and shall expire in accordance with Section 2 hereof.
8. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first class
mail, certified or registered with return receipt requested, and shall be deemed
to have been duly given three days after mailing or 24 hours after transmission
by facsimile to the respective parties named below:
If to Company: Prism Financial Corporation
Prism Center
440 North Orleans
Chicago, IL 60610
Attn: Corporate Secretary
Facsimile: (312) 494-0273
3
<PAGE>
with a copy to: Skadden, Arps, Slate, Meagher & Flom
(Illinois)
333 West Wacker Drive
Chicago, IL 60606-1285
Attn: Rodd M. Schreiber
Facsimile: 312-407-0411
If to the Optionee: Richard L. Wellek
c/o Prism Financial Corporation
440 N. Orleans
Chicago, IL 60610
Facsimile: (312) 494-0273
Either party hereto may change such party's address for notices by notice duly
given pursuant hereto.
9. Protections Against Violations of Agreement. No purported
sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift,
transfer in trust (voting or other) or other disposition of, or creation of a
security interest in or lien on, any of the Option Shares by any holder thereof
in violation of the provisions of this Agreement or the Amended and Restated
Certificate of Incorporation or the Second Amended and Restated Bylaws of the
Company, will be valid, and the Company will not transfer any of said Option
Shares on its books nor will any of said Option Shares be entitled to vote, nor
will any dividends be paid thereon, unless and until there has been full
compliance with said provisions to the satisfaction of the Company. The
foregoing restrictions are in addition to and not in lieu of any other remedies,
legal or equitable, available to enforce said provisions.
10. Securities Laws Requirements. The Option shall not be
exercisable to any extent, and the Company shall not be obligated to transfer
any Option Shares to the Optionee upon exercise of such Option, if such
exercise, in the opinion of counsel for the Company, would violate the
Securities Act (or any other federal or state statutes having similar
requirements as may be in effect at that time). Further, the Company may require
as a condition of transfer of any Option Shares pursuant to any exercise of the
Option that the Optionee furnish a written representation that he or she is
purchasing or acquiring the Option Shares for investment and not with a view to
resale or distribution to the public.
11. Withholding Requirements. The Company's obligations under
this Option Agreement shall be subject to all applicable tax and other
withholding
4
<PAGE>
requirements, and the Company shall, to the extent permitted by law, have the
right to deduct any withholding amounts from any payment or transfer of any kind
otherwise due to the Optionee.
12. Failure to Enforce Not a Waiver. The failure of the
Company to enforce at any time any provision of this Option Agreement shall in
no way be construed to be a waiver of such provision or of any other provision
hereof.
13. Governing Law. This Option Agreement shall be governed by
and construed according to the laws of the State of Delaware without regard to
its principles of conflict of laws.
14. Incorporation of Plan. The Plan is hereby incorporated by
reference and made a part hereof, and the Option and this Option Agreement shall
be subject to all terms and conditions of the Plan.
15. Amendments. This Option Agreement may be amended or
modified at any time only by an instrument in writing signed by each of the
parties hereto.
16. Rights as a Stockholder. Neither the Optionee nor any of
the Optionee's successors in interest shall have any rights as a stockholder of
the Company with respect to any shares of Common Stock subject to the Option
until the date of issuance of a stock certificate for such shares of Common
Stock.
17. Agreement Not a Contract of Service. Neither the Plan, the
granting of the Option, this Option Agreement nor any other action taken
pursuant to the Plan shall constitute or be evidence of any agreement or
understanding, express or implied, that the Optionee has a right to continue in
the service of the Company or any Subsidiary or affiliate of the Company for any
period of time or at any specific rate of compensation.
18. Authority of the Board. The Board shall have full
authority to interpret and construe the terms of the Plan and this Option
Agreement. The determination of the Board as to any such matter of
interpretation or construction shall be final, binding and conclusive.
19. Dispute Resolution. The parties hereto will use their
reasonable best efforts to resolve any dispute hereunder through good faith
5
<PAGE>
negotiations. A party hereto must submit a written notice to any other party to
whom such dispute pertains, and any such dispute that cannot be resolved within
30 calendar days of receipt of such notice (or such other period to which the
parties may agree) will be submitted to an arbitrator selected by mutual
agreement of the parties. In the event that, within 50 days of the written
notice referred to in the preceding sentence, a single arbitrator has not been
selected by mutual agreement of the parties, a panel of arbitrators (with each
party to the dispute being entitled to select one arbitrator and, if necessary
to prevent the possibility of deadlock, one additional arbitrator being selected
by such arbitrators selected by the parties to the dispute) shall be selected by
the parties. Except as otherwise provided herein or as the parties to the
dispute may otherwise agree, such arbitration will be conducted in accordance
with the then existing rules of the American Arbitration Association. The
decision of the arbitrator or arbitrators, or of a majority thereof, as the case
may be, made in writing will be final and binding upon the parties hereto as to
the questions submitted, and the parties will abide by and comply with such
decision; provided, however, the arbitrator or arbitrators, as the case may be,
shall not be empowered to award punitive damages. Unless the decision of the
arbitrator or arbitrators, as the case may be, provides for a different
allocation of costs and expenses determined by the arbitrators to be equitable
under the circumstances, the prevailing party or parties in any arbitration will
be entitled to recover all reasonable fees (including but not limited to
attorneys' fees) and expenses incurred by it or them in connection with such
arbitration from the nonprevailing party or parties.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Option Agreement on the day and year first above written.
PRISM FINANCIAL CORPORATION
By /s/ Mark A. Filler
--------------------------
Name Mark A. Filler
------------------------
Title President & CEO
-----------------------
The undersigned hereby accepts and agrees to all the terms and provisions of the
foregoing Option Agreement and to all the terms and provisions of the Plan,
herein incorporated by reference.
/s/ Richard L. Wellek
----------------------------
The Optionee
Address:
--------------------
--------------------
--------------------
7
<PAGE>
Exhibit 15
RESTRICTED STOCK AGREEMENT
--------------------------
This RESTRICTED STOCK AGREEMENT (this "Agreement"), dated as of
the 17th day of February, 2000, (the "Date of Grant") is entered into by and
between Prism Financial Corporation (the "Company"), and Richard L. Wellek, a
director of the Company (the "Grantee").
RECITALS
--------
WHEREAS, the Company's Board of Directors has determined to make
a grant of restricted stock ("Restricted Stock") to the Grantee pursuant to the
Company's 1999 Omnibus Stock Incentive Plan (the "Plan").
THEREFORE, the parties agree as follows:
In consideration of the Recitals and the following mutual
covenants, and for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree that the Grantee is hereby
granted shares of Restricted Stock (the "Stock Grant") on the date hereof
subject to the terms and conditions set forth herein.
Any capitalized terms not defined herein shall have their
respective meanings set forth in the Plan.
1. Grant of Restricted Stock.
--------------------------
The Grantee is entitled to 3,147 shares of the Company's common
stock, par value $.01 per share (the "Stock"), pursuant to the terms and
conditions of this Agreement (the "Restricted Stock").
2. Restrictions and Restricted Period.
-----------------------------------
a. Restrictions. Shares of Restricted Stock granted hereunder
may not be sold, assigned, transferred, pledged, hypothecated or otherwise
disposed of and shall be subject to a risk of forfeiture as described in
Paragraph 4 below until the lapse of the Restricted Period (as defined below).
1. Restricted Period. Unless the Restricted Period is
previously terminated pursuant to Paragraph 4 of this Agreement, the
restrictions set forth above shall lapse and the Restricted Stock shall become
fully and freely transferable (provided, that such transfer is otherwise in
accordance with federal and state securities laws) and non-forfeitable as to one
hundred percent (100%) of the shares of Restricted Stock as of the date Grantee
ceases to serve as a member of the Board (the "Restricted Period").
1
<PAGE>
3. Rights of a Stockholder. From and after the Date of Grant
and for so long as the Restricted Stock is held by or for the benefit of the
Grantee, the Grantee shall have all the rights of a stockholder of the Company
with respect to the Restricted Stock, including but not limited to the right to
receive dividends and the right to vote such shares.
4. Dividends. Dividends paid on Restricted Stock shall be
paid at the dividend payment date, or be deferred for payment to such date as
determined by the Board, in cash or shares of unrestricted Stock having a fair
market value equal to the amount of such dividends as determined by the Board of
Directors. Stock distributed in connection with a Stock split or Stock dividend,
and other property distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
5. Adjustment for Stock Split. All references to the number
of Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock dividend, stock split, merger,
reorganization, consolidation, recapitalization, or other similar change
affecting the Common Stock which may be made by the Company after the date of
this Agreement.
6. Certificates. Restricted Stock granted herein may be
evidence in such manner as the Board shall determine. If certificates
representing Restricted Stock are registered in the name of the Grantee, then
such certificates shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, and the
Company shall retain physical possession of the certificate.
7. Legends. The share certificate or certificates evidencing
the Shares issued hereunder shall be endorsed with the following legend (in
addition to any other legend or legends required under applicable Federal and
state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
2
<PAGE>
8. Notices. All notices and other communications under this
Agreement shall be in writing and shall be given by facsimile or first class
mail, certified or registered with return receipt requested, and shall be deemed
to have been duly given three days after mailing or 24 hours after transmission
by facsimile to the respective parties named below:
If to Company: Prism Financial Corporation
Prism Center
440 North Orleans
Chicago, IL 60610
Attn: Corporate Secretary
Facsimile: 312-494-0082
with a copy to: Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606-1285
Attn: Rodd M. Schreiber
Facsimile: 312-407-0411
If to the Grantee: Richard L. Wellek
2587 Stowe Court
Northbrook, IL 60062
Facsimile: 847-480-1795
Either party hereto may change such party's address for notices by notice duly
given pursuant hereto.
9. Failure to Enforce Not a Waiver. The failure of the
Company or the Grantee to enforce at any time any provision of this Agreement
shall in no way be construed to be a waiver of such provision or of any other
provision hereof.
10. Survival of Terms. This Agreement shall apply to and
bind Grantee and the Company and their respective permitted assignees and
transferees, heirs, legatees, executors, administrators and legal successors.
11. Governing Law. This Agreement shall be governed by the
internal substantive laws, but not the choice of law rules, of the State of
Delaware.
12. Amendments. This Agreement may be amended or modified at
any time by an instrument in writing signed by the parties.
13. Agreement Not a Service Contract. Neither the Stock
Grant, this Agreement nor any other action taken pursuant to this Agreement
shall constitute or be evidence of any
3
<PAGE>
agreement or understanding, express or implied, that the Grantee has a right to
continue to provide services as a director of the Company or any Parent
Subsidiary or affiliate of the Company for any period of time or at any specific
rate of compensation (if any).
14. Section 83(b) Election. The Grantee hereby acknowledges
that he has been informed that, with respect to the Stock Grant of Restricted
Shares, an election may be filed by the Grantee with the Internal Revenue
Service, within 30 days of the Date of Grant, electing pursuant to Section 83(b)
of the Code to be taxed currently on the Fair Market Value of the Restricted
Stock on the Date of Grant.
THE GRANTEE ACKNOWLEDGES THAT IT IS THE GRANTEE'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b) OF THE CODE, EVEN IF THE GRANTEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO MAKE THIS FILING ON THE GRANTEE'S BEHALF.
15. Representations. Grantee has reviewed with his own tax
advisors the Federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Grantee is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. Grantee understands that he (and not the
Company) shall be responsible for any tax liability that may arise as a result
of this investment or the transactions contemplated by this Agreement.
16. Incorporation of Plan. The Plan is hereby incorporated
by reference and made a part hereof.
17. Termination of this Agreement. Upon termination of this
Agreement, all rights of the Grantee hereunder shall cease.
18. Authority of the Board. The Board shall have full
authority to interpret and construe the terms of this Agreement. The
determination of the Board as to any such matter of interpretation or
construction shall be final, binding and conclusive.
19. Dispute Resolution. The parties hereto will use their
reasonable best efforts to resolve any dispute hereunder through good faith
negotiations. A party hereto must submit a written notice to any other party to
whom such dispute pertains, and any such dispute that cannot be resolved within
30 calendar days of receipt of such notice (or such other period to which the
parties may agree) will be submitted to an arbitrator selected by mutual
agreement of the parties. In the event that, within 50 days of the written
notice referred to in the preceding sentence, a single arbitrator has not been
selected by mutual agreement of the parties, a panel of arbitrators (with each
party to the dispute being entitled to select one arbitrator and, if necessary
to prevent the possibility of deadlock, one additional arbitrator being selected
by such arbitrators selected by the parties to the dispute) shall be selected by
the parties. Except as otherwise provided herein or as the parties to the
4
<PAGE>
dispute may otherwise agree, such arbitration will be conducted in accordance
with the then existing rules of the American Arbitration Association. The
decision of the arbitrator or arbitrators, or of a majority thereof, as the case
may be, made in writing will be final and binding upon the parties hereto as to
the questions submitted, and the parties will abide by and comply with such
decision; provided, however, the arbitrator or arbitrators, as the case may be,
shall not be empowered to award punitive damages. Unless the decision of the
arbitrator or arbitrators, as the case may be, provides for a different
allocation of costs and expenses determined by the arbitrators to be equitable
under the circumstances, the prevailing party or parties in any arbitration will
be entitled to recover all reasonable fees (including but not limited to
attorneys' fees) and expenses incurred by it or them in connection with such
arbitration from the nonprevailing party or parties.
Grantee represents that he has read this Agreement and is
familiar with its terms and provisions. Grantee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Agreement.
IN WITNESS WHEREOF, this Agreement is deemed made as of the date
first set forth above.
GRANTEE: PRISM FINANCIAL CORPORATION:
/s/ Richard L. Wellek /s/ Mark A. Filler
- ---------------------------- --------------------------------
Signature By
Richard L. Wellek President & CEO
- ---------------------------- --------------------------------
Print Name Title
- ----------------------------
Social Security Number
- ----------------------------
- ----------------------------
Residence Address
5
<PAGE>
Exhibit 16
PRISM FINANCIAL CORPORATION
1999 OMNIBUS STOCK INCENTIVE PLAN
Section 1. General Purpose of Plan; Definitions.
The name of this plan is the Prism Financial Corporation 1999
Omnibus Stock Incentive Plan (the "Plan"). The Plan was adopted by the Board
(defined below) on March 23, 1999, subject to the approval of the stockholders
of the Company (defined below), which approval was obtained on March 23, 1999.
The purpose of the Plan is to enable the Company to attract and retain highly
qualified personnel who will contribute to the Company's success and to provide
incentives to Participants (defined below) that are linked directly to increases
in stockholder value and will therefore inure to the benefit of all stockholders
of the Company.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(1) "Administrator" means the Board, or if and to the extent
the Board does not administer the Plan, the Committee in accordance with Section
2 below.
(2) "Board" means the Board of Directors of the Company.
(3) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(4) "Committee" means the Compensation Committee of the Board
or any committee the Board may subsequently appoint to administer the Plan. To
the extent necessary and desirable, the Committee shall be composed entirely of
individuals who meet the qualifications referred to in Section 162(m) of the
Code and Rule 16b-3 under the Securities Exchange Act of 1934, as amended. If at
any time or to any extent the Board shall not administer the Plan, then the
functions of the Board specified in the Plan shall be exercised by the
Committee.
<PAGE>
(5) "Company" means Prism Financial Corporation, a Delaware
corporation (or any successor corporation).
(6) "Deferred Stock" means an award made pursuant to Section 7
below of the right to receive Stock at the end of a specified deferral period.
(7) "Disability" means the inability of a Participant to
perform substantially his duties and responsibilities to the Company or any
Parent Corpora tion or Subsidiary by reason of a physical or mental disability
or infirmity (i) for a continuous period of six months, or (ii) at such earlier
time as the Participant submits medical evidence satisfactory to the
Administrator that the Participant has a physical or mental disability or
infirmity that will likely prevent the Participant from returning to the
performance of the Participant's work duties for six months or longer. The date
of such Disability shall be the last day of such six-month period or the day on
which the Participant submits such satisfactory medical evidence, as the case
may be.
(8) "Eligible Recipient" means an officer, director, employee,
consultant or advisor of the Company or any Parent Corporation or Subsidiary.
(9) "Employee Director" means any director of the Company who
is also an employee of the Company, Parent Corporation or any Subsidiary.
(10) "Fair Market Value" means, as of any given date, with
respect to any awards granted hereunder, (A) if the Stock is publicly traded,
the closing sale price of the Stock on such date as reported in the Western
Edition of the Wall Street Journal, (B) the fair market value of the Stock as
determined in accordance with a method prescribed in the agreement evidencing
any award hereunder, (C) in the case of a Limited Stock Appreciation Right, the
"Change in Control Price" (as defined in the agreement evidencing such Limited
Stock Appreciation Right) of the Stock as of the date of exercise or (D) the
fair market value of the Stock as otherwise determined by the Administrator in
the good faith exercise of its discre tion.
(11) "Incentive Stock Option" means any Stock Option intended
to be designated as an "incentive stock option" within the meaning of Section
422 of the Code.
2
<PAGE>
(12) "Limited Stock Appreciation Right" means a Stock Apprecia
tion Right that can be exercised only in the event of a "Change in Control" (as
defined in the award evidencing such Limited Stock Appreciation Right).
(13) "Non-Employee Director" means a director of the Company
who is not an employee of the Company, Parent Corporation or any Subsidiary.
(14) "Non-Qualified Stock Option" means any Stock Option that
is not an Incentive Stock Option, including any Stock Option that provides (as
of the time such option is granted) that it will not be treated as an Incentive
Stock Option.
(15) "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock in
one of the other corporations in the chain.
(16) "Participant" means (i) any Eligible Recipient selected
by the Administrator, pursuant to the Administrator's authority in Section 2
below, to receive grants of Stock Options, Stock Appreciation Rights, Limited
Stock Appre ciation Rights, Restricted Stock awards, Deferred Stock awards,
Performance Share awards or any combination of the foregoing, or (ii) any
Non-Employee Director who is eligible to receive grants of Stock Options
pursuant to Section 5(9) below.
(17) "Performance Shares" means an award of shares of Stock
pursuant to Section 7 below that is subject to restrictions based upon the
attainment of specified performance objectives.
(18) "Registration Statement" means the registration statement
on Form S-1 filed with the Securities and Exchange Commission for the initial
underwritten public offering of the Company's Stock.
(19) "Restricted Stock" means an award granted pursuant to
Section 7 below of shares of Stock subject to certain restrictions.
(20) "Stock" means the common stock, par value $0.01 per
share, of the Company.
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(21) "Stock Appreciation Right" means the right pursuant to an
award granted under Section 6 below to receive an amount equal to the excess, if
any, of (A) the Fair Market Value, as of the date such Stock Appreciation Right
or portion thereof is surrendered, of the shares of Stock covered by such right
or such portion thereof, over (B) the aggregate exercise price of such right or
such portion thereof.
(22) "Stock Option" means an option to purchase shares of
Stock granted pursuant to Section 5 below.
(23) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations (other than the last corporation) in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
Section 2. Administration.
The Plan shall be administered in accordance with the
requirements of Section 162(m) of the Code (but only to the extent necessary and
desirable to maintain qualification of awards under the Plan under Section
162(m) of the Code) and, to the extent applicable, Rule 16b-3 under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3"), by the Board or, at
the Board's sole discretion, by the Committee, which shall be appointed by the
Board, and which shall serve at the pleasure of the Board.
Pursuant to the terms of the Plan, the Administrator shall
have the power and authority to grant to Eligible Recipients pursuant to the
terms of the Plan: (a) Stock Options, (b) Stock Appreciation Rights or Limited
Stock Apprecia tion Rights, (c) Restricted Stock, (d) Performance Shares, (e)
Deferred Stock or (f) any combination of the foregoing; provided, however, that
automatic, nondiscretionary grants of Stock Options shall be made to
Non-Employee Direc tors pursuant to and in accordance with the terms of Section
5(9) below. Except as otherwise provided in Section 5(9) below, the
Administrator shall have the authority:
(a) to select those Eligible Recipients who shall be
Participants;
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(b) to determine whether and to what extent Stock
Options, Stock Appreciation Rights, Limited Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Performance Shares or a combination of the
foregoing, are to be granted hereunder to Participants;
(c) to determine the number of shares of Stock to be
covered by each such award granted hereunder;
(d) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, (x) the restrictions applicable to Restricted
Stock or Deferred Stock awards and the conditions under which restrictions
applicable to such Restricted or Deferred Stock shall lapse, and (y) the
performance goals and periods applicable to the award of Performance Shares);
(e) to determine the terms and conditions, not
inconsistent with the terms of the Plan, which shall govern all written
instruments evidencing the Stock Options, Stock Appreciation Rights, Limited
Stock Appreciation Rights, Restricted Stock, Deferred Stock, Performance Shares
or any combination of the foregoing granted hereunder to Participants; and
(f) to reduce the exercise price of any Stock Option
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Stock Option has declined since the date such Stock Option
was granted.
The Administrator shall have the authority, in its sole
discretion, to adopt, alter and repeal such administrative rules, guidelines and
practices govern ing the Plan as it shall from time to time deem advisable; to
interpret the terms and provisions of the Plan and any award issued under the
Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan.
All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including the Company and the Participants.
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Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
issuance under the Plan shall be 1,500,000. Such shares may consist, in whole or
in part, of authorized and unissued shares or treasury shares. The aggregate
number of shares of Stock as to which Stock Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, and Performance Shares may be granted to any
individual during any calendar year may not, subject to adjustment as provided
in this Section 3, exceed 20% of the shares of Stock reserved for the purposes
of the Plan in accordance with the provisions of this Section 3.
Consistent with the provisions of Section 162(m) of the Code,
as from time to time applicable, to the extent that (i) a Stock Option expires
or is otherwise terminated without being exercised, or (ii) any shares of Stock
subject to any Restricted Stock, Deferred Stock or Performance Share award
granted hereun der are forfeited, such shares shall again be available for
issuance in connection with future awards under the Plan. If any shares of Stock
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of a Stock Option and such shares are returned to
the Company in satisfaction of such indebtedness, such shares shall again be
available for issuance in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapital ization, stock dividend or other change in corporate structure
affecting the Stock, an equitable substitution or proportionate adjustment shall
be made in (i) the aggregate number of shares reserved for issuance under the
Plan, (ii) the kind, number and option price of shares subject to outstanding
Stock Options granted under the Plan, and (iii) the kind, number and purchase
price of shares issuable pursuant to awards of Restricted Stock, Deferred Stock
and Performance Shares, in each case as may be determined by the Administrator,
in its sole discretion. Such other substitutions or adjustments shall be made as
may be determined by the Administrator, in its sole discretion. An adjusted
option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right or Limited Stock Appreciation
Right related to any Stock Option. In connection with any event described in
this paragraph, the Administrator may provide, in its sole discretion, for the
cancellation of any outstanding awards and payment in cash or other property
therefor.
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Section 4. Eligibility.
Officers, directors and employees of the Company or any Parent
or Subsidiary, and consultants and advisors to the Company or any Parent or
Subsid iary, who are responsible for or are in a position to contribute to the
management, growth and/or profitability of the business of the Company shall be
eligible to be granted Stock Options, Stock Appreciation Rights, Limited Stock
Appreciation Rights, Restricted Stock awards, Deferred Stock awards, Performance
Shares or any combination of the foregoing hereunder. Except for grants of Stock
Options to Non-Employee Directors made pursuant to Section 5(9) below,
Participants under the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from among the Eligible Recipients
recommended by the senior management of the Company, and the Administrator shall
determine, in its sole discretion, the number of shares of Stock covered by each
such award.
Section 5. Stock Options.
Stock Options may be granted alone or in addition to other
awards granted under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Administrator may from time to time approve, and the
provisions of Stock Option awards need not be the same with respect to each
optionee. Recipi ents of Stock Options shall enter into a subscription and/or
award agreement with the Company, in such form as the Administrator shall
determine, which agreement shall set forth, among other things, the exercise
price of the option, the term of the option and provisions regarding
exercisability of such option granted thereunder.
The Stock Options granted under the Plan may be of two types:
(i) Incentive Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority to grant any
officer or employee of the Company (including directors who are also officers of
the Com pany) Incentive Stock Options, Non-Qualified Stock Options, or both
types of Stock Options (in each case with or without Stock Appreciation Rights
or Limited Stock Appreciation Rights). Directors who are not officers of the
Company, consultants and advisors may only be granted Non-Qualified Stock
Options (with or without Stock Appreciation Rights or Limited Stock Appreciation
Rights). To the extent that any Stock Option does not qualify as an Incentive
Stock Option, it shall constitute a separate Non-Qualified Stock Option. More
than one option may be granted to the same optionee and be outstanding
concurrently hereunder.
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Stock Options granted under the Plan shall be subject to the
follow ing terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable:
(1) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Administrator in its
sole discre tion at the time of grant but shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock on such
date and shall not, in any event, be less than the par value (if any) of the
Stock. If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company, any Parent Corporation or
Subsidiary and an Incentive Stock Option is granted to such employee, the option
price of such Incentive Stock Option (to the extent required by the Code at the
time of grant) shall be no less than 110% of the Fair Market Value of the Stock
on the date such Incentive Stock Option is granted.
(2) Option Term. The term of each Stock Option shall be fixed
by the Administrator, but no Stock Option shall be exercisable more than ten
years after the date such Stock Option is granted; provided, however, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company, any Parent Corporation or Subsidiary and an Incentive
Stock Option is granted to such employee, the term of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
more than five years from the date of grant.
(3) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Administrator at or after the time of grant. The Administrator may provide
at the time of grant, in its sole discretion, that any Stock Option shall be
exercisable only in installments, and the Administrator may waive such
installment exercise provisions at any time, in whole or in part, based on such
factors as the Adminis trator may determine, in its sole discretion, including
but not limited to in connec tion with any "change in control" of the Company as
defined in any Stock Option agreement.
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(4) Method of Exercise. Subject to paragraph (3) of this
Section 5, Stock Options may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the Company
specifying the number of shares to be purchased, accompanied by payment in full
of the purchase price in cash or its equivalent, as determined by the
Administrator. As determined by the Administrator, in its sole discretion,
payment in whole or in part may also be made (i) by means of any cashless
exercise procedure approved by the Administrator, (ii) in the form of
unrestricted Stock already owned by the optionee which, (x) in the case of
unrestricted Stock acquired upon exercise of an option, have been owned by the
optionee for more than six months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Stock as to which such Stock Option shall be exercised, or (iii) in the case
of the exercise of a Non-Qualified Stock Option, in the form of Restricted Stock
or Performance Shares subject to an award hereunder (based, in each case, on the
Fair Market Value of the Stock on the date the option is exercised); provided,
however, that in the case of an Incentive Stock Option, the right to make
payment in the form of already owned shares may be authorized only at the time
of grant. If payment of the option exercise price of a Non-Qualified Stock
Option is made in whole or in part in the form of Restricted Stock or
Performance Shares, the shares received upon the exercise of such Stock Option
shall be restricted in accordance with the original terms of the Restricted
Stock or Performance Share award in question, except that the Administrator may
direct that such restrictions shall apply only to that number of shares equal to
the number of shares surrendered upon the exercise of such option. An optionee
shall generally have the rights to dividends and any other rights of a
stockholder with respect to the Stock subject to the Stock Option only after the
optionee has given written notice of exercise, has paid in full for such shares,
and, if requested, has given the representation described in paragraph (1) of
Section 10 below.
The Administrator may require the surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to
the grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted. Consistent with the provisions of Section 162(m),
to the extent applicable, upon their surrender, Stock Options shall be canceled
and the shares previously subject to such canceled Stock Options shall again be
available for grants of Stock Options and other awards hereunder.
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(5) Loans. The Company may make loans available to Stock
Option holders in connection with the exercise of outstanding options granted
under the Plan, as the Administrator, in its sole discretion, may determine.
Such loans shall (i) be evidenced by promissory notes entered into by the Stock
Option holders in favor of the Company, (ii) be subject to the terms and
conditions set forth in this Section 5(5) and such other terms and conditions,
not inconsistent with the Plan, as the Administrator shall determine, (iii) bear
interest at the applicable Federal interest rate or such other rate as the
Administrator shall determine, and (iv) be subject to Board approval (or to
approval by the Administrator to the extent the Board may delegate such
authority). In no event may the principal amount of any such loan exceed the sum
of (x) the exercise price less the par value (if any) of the shares of Stock
covered by the Stock Option, or portion thereof, exercised by the holder, and
(y) any Federal, state, and local income tax attributable to such exercise. The
initial term of the loan, the schedule of payments of principal and interest
under the loan, the extent to which the loan is to be with or without recourse
against the holder with respect to principal or interest and the conditions upon
which the loan will become payable in the event of the holder's termination of
employment shall be determined by the Administrator. Unless the Administra tor
determines otherwise, when a loan is made, shares of Stock having a Fair Market
Value at least equal to the principal amount of the loan shall be pledged by the
holder to the Company as security for payment of the unpaid balance of the loan,
and such pledge shall be evidenced by a pledge agreement, the terms of which
shall be determined by the Administrator, in its sole discretion; provided,
however, that each loan shall comply with all applicable laws, regulations and
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
(6) Non-Transferability of Options. Except under the laws of
descent and distribution, unless otherwise determined by the Administrator, the
optionee shall not be permitted to sell, transfer, pledge or assign any Stock
Option, and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee; provided, however, that the optionee shall be
permitted to transfer one or more Non-Qualified Stock Options to a trust
controlled by the optionee during the optionee's lifetime for estate planning
purposes.
(7) Termination of Employment or Service. If an optionee's
employment with or service as a director, consultant or advisor to the Company
terminates by reason of death, Disability or for any other reason, the Stock
Option
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may thereafter be exercised to the extent provided in the applicable
subscription or award agreement, or as otherwise determined by the
Administrator.
(8) Annual Limit on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined as of the date the Incentive
Stock Option is granted) of shares of Stock with respect to which Incentive
Stock Options granted to an optionee under this Plan and all other option plans
of the Company, any Parent Corporation or Subsidiary become exercisable for the
first time by the optionee during any calendar year exceeds $100,000, such Stock
Options shall be treated as Non-Qualified Stock Options.
(9) Automatic Grants of Stock Options to Non-Employee Direc
tors. The Company shall grant Non-Qualified Stock Options to Non-Employee
Directors pursuant to this subsection (9), which grants shall be automatic and
nondiscretion-ary and otherwise subject to the terms and conditions set forth in
this subsection (9) and the terms of the Plan ("Automatic Non-Employee Director
Options"). On the later of (i) the date on which the Securities and Exchange
Commission declares the Company's Registration Statement effective (the "IPO
date") or (ii) the date a Non-Employee Director first becomes a director of the
Company, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy, the Company shall grant to each
director of the Company who is, at that time, a Non-Employee Director a Non
Qualified Stock Option to purchase 5,000 shares (an "Initial Option"). There
after, each Non-Employee Director shall be automatically granted a Non-Qualified
Stock Option to purchase 2,500 shares on the date immediately following the
Company's annual meeting of stockholders; provided, however, that he or she is
then a director of the Company and, provided, further, that as of such date,
such director shall have served on the Board for at least the preceding six (6)
months. The term of each Automatic Non-Employee Director Option shall be ten
(10) years, and the option price per share of Stock purchasable under an
Automatic Non-Employee Director Option shall be no less than 100% of the Fair
Market Value of the Stock on the date of grant, provided, however, that for
purposes of Initial Options granted on the IPO Date only, Fair Market Value
shall equal the initial price to the public as set forth in the final prospectus
included within the Registration Statement and, provided, further, that in no
event shall the option price per share of Stock purchasable under an Automatic
Non-Employee Director Option be less than the par value (if any) of the Stock.
Each Automatic Non- Employee Director Option shall vest in equal twenty percent
(20%) installments on each of the first, second, third, fourth and fifth
anniversaries of the date of grant.
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Section 6. Stock Appreciation Rights and Limited Stock Appreciation Rights.
(1) Grant and Exercise. Stock Appreciation Rights and Limited
Stock Appreciation Rights may be granted either alone ("Free Standing Rights")
or in conjunction with all or part of any Stock Option granted under the Plan
("Re lated Rights"). In the case of a Non-Qualified Stock Option, Related Rights
may be granted either at or after the time of the grant of such Stock Option. In
the case of an Incentive Stock Option, Related Rights may be granted only at the
time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted in
conjunction with a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option, except
that, unless otherwise provided by the Administrator at the time of grant, a
Related Right granted with respect to less than the full number of shares
covered by a related Stock Option shall only be reduced if and to the extent
that the number of shares covered by the exercise or termination of the related
Stock Option exceeds the number of shares not covered by the Related Right.
A Related Right may be exercised by an optionee, in accordance
with paragraph (2) of this Section 6, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (2) of this Section 6. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the Related
Rights have been so exercised.
(2) Terms and Conditions. Stock Appreciation Rights shall be
subject to such terms and conditions, not inconsistent with the provisions of
the Plan, as shall be determined from time to time by the Administrator,
including the following:
(b) Stock Appreciation Rights that are Related
Rights ("Related Stock Appreciation Rights") shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
shall be exercis able in accordance with the provisions of Section 5 and this
Section 6 of the Plan; provided, however, that no Related Stock Appreciation
Right shall be exercisable during the first six months of its term, except that
this additional limitation shall
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not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(c) Upon the exercise of a Related Stock
Appreciation Right, an optionee shall be entitled to receive up to, but not more
than, an amount in cash or that number of shares of Stock (or in some
combination of cash and shares of Stock) equal in value to the excess of the
Fair Market Value of one share of Stock as of the date of exercise over the
option price per share specified in the related Stock Option multiplied by the
number of shares of Stock in respect of which the Related Stock Appreciation
Right is being exercised, with the Adminis trator having the right to determine
the form of payment.
(d) Related Stock Appreciation Rights shall be
transferable only when and to the extent that the underlying Stock Option would
be transferable under paragraph (6) of Section 5 of the Plan.
(e) Upon the exercise of a Related Stock
Appreciation Right, the Stock Option or part thereof to which such Related Stock
Appreciation Right is related shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on the number of
shares of Stock to be issued under the Plan, but only to the extent of the
number of shares issued under the Related Stock Appreciation Right.
(f) A Related Stock Appreciation Right granted in
connec tion with an Incentive Stock Option may be exercised only if and when the
Fair Market Value of the Stock subject to the Incentive Stock Option exceeds the
exercise price of such Stock Option.
(g) Stock Appreciation Rights that are Free Standing
Rights ("Free Standing Stock Appreciation Rights") shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Administrator at or after grant; provided, however, that no Free Standing
Stock Appreciation Right shall be exercisable during the first six months of its
term, except that this limitation shall not apply in the event of death or
Disability of the recipient of the Free Standing Stock Appreciation Right prior
to the expiration of such six-month period.
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(h) The term of each Free Standing Stock
Appreciation Right shall be fixed by the Administrator, but no Free Standing
Stock Appreciation Right shall be exercisable more than ten years after the date
such right is granted.
(i) Upon the exercise of a Free Standing Stock
Appreciation Right, a recipient shall be entitled to receive up to, but not more
than, an amount in cash or that number of shares of Stock (or any combination of
cash or shares of Stock) equal in value to the excess of the Fair Market Value
of one share of Stock as of the date of exercise over the price per share
specified in the Free Standing Stock Appreciation Right (which price shall be no
less than 100% of the Fair Market Value of the Stock on the date of grant)
multiplied by the number of shares of Stock in respect of which the right is
being exercised, with the Administrator having the right to determine the form
of payment.
(j) Free Standing Stock Appreciation Rights shall be
transferable only when and to the extent that a Stock Option would be
transferable under paragraph (6) of Section 5 of the Plan.
(k) In the event of the termination of employment or
service of a Participant who has been granted one or more Free Standing Stock
Apprecia tion Rights, such rights shall be exercisable at such time or times and
subject to such terms and conditions as shall be determined by the Administrator
at or after grant.
(l) Limited Stock Appreciation Rights may only be
exercised within the 30-day period following a "Change in Control" (as defined
by the Administrator in the agreement evidencing such Limited Stock Appreciation
Right) and, with respect to Limited Stock Appreciation Rights that are Related
Rights ("Related Limited Stock Appreciation Rights"), only to the extent that
the Stock Options to which they relate shall be exercisable in accordance with
the provisions of Section 5 and this Section 6 of the Plan.
(m) Upon the exercise of a Limited Stock
Appreciation Right, the recipient shall be entitled to receive an amount in cash
equal in value to the excess of the "Change in Control Price" (as defined in the
agreement evidenc ing such Limited Stock Appreciation Right) of one share of
Stock as of the date of exercise over (A) the option price per share specified
in the related Stock Option, or (B) in the case of a Limited Stock Appreciation
Right which is a Free Standing Stock Appreciation Right, the price per share
specified in the Free Standing Stock
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Appreciation Right, such excess to be multiplied by the number of shares in
respect of which the Limited Stock Appreciation Right shall have been exercised.
Section 7. Restricted Stock, Deferred Stock and Performance Shares.
(1) General. Restricted Stock, Deferred Stock or Performance
Share awards may be issued either alone or in addition to other awards granted
under the Plan. The Administrator shall determine the Eligible Recipients to
whom, and the time or times at which, grants of Restricted Stock, Deferred Stock
or Performance Share awards shall be made; the number of shares to be awarded;
the price, if any, to be paid by the recipient of Restricted Stock, Deferred
Stock or Performance Share awards; the Restricted Period (as defined in
paragraph (3) of this Section 7) applicable to Restricted Stock or Deferred
Stock awards; the performance objectives applicable to Performance Share or
Deferred Stock awards; the date or dates on which restrictions applicable to
Restricted Stock or Deferred Stock awards shall lapse during the Restricted
Period; and all other conditions of the Restricted Stock, Deferred Stock and
Performance Share awards. Subject to the requirements of Section 162(m) of the
Code, as applicable, the Administrator may also condition the grant of
Restricted Stock, Deferred Stock awards or Performance Shares upon the exercise
of Stock Options, or upon such other criteria as the Administrator may
determine, in its sole discretion. The provisions of Restricted Stock, Deferred
Stock or Performance Share awards need not be the same with respect to each
recipient. In the sole discretion of the Administrator, loans may be made to
Participants in connection with the purchase of Restricted Stock under
substantially the same terms and conditions as provided in paragraph (5) of
Section 5 of the Plan with respect to the exercise of stock options.
(2) Awards and Certificates. The prospective recipient of a
Restricted Stock, Deferred Stock or Performance Share award shall not have any
rights with respect to such award, unless and until such recipient has executed
an agreement evidencing the award (a "Restricted Stock Award Agreement," "De
ferred Stock Award Agreement" or "Performance Share Award Agreement," as
appropriate) and delivered a fully executed copy thereof to the Company, within
a period of sixty days (or such other period as the Administrator may specify)
after the award date. Except as otherwise provided below in this Section 7(2),
(i) each Participant who is awarded Restricted Stock or Performance Shares shall
be issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the name of
the Participant,
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and shall bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award.
The Company may require that the stock certificates evidencing
Restricted Stock or Performance Share awards hereunder be held in the custody of
the Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award or Performance Share award, the Partici
pant shall have delivered a stock power, endorsed in blank, relating to the
Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of
the Restricted Period, stock certificates in respect of such shares of Deferred
Stock shall be delivered to the participant, or his legal representative, in a
number equal to the number of shares of Stock covered by the Deferred Stock
award.
(3) Restrictions and Conditions. The Restricted Stock,
Deferred Stock and Performance Share awards granted pursuant to this Section 7
shall be subject to the following restrictions and conditions:
(b) Subject to the provisions of the Plan and the
Restricted Stock Award Agreement, Deferred Stock Award Agreement or Performance
Share Award Agreement, as appropriate, governing such award, during such period
as may be set by the Administrator commencing on the grant date (the "Restricted
Period"), the Participant shall not be permitted to sell, transfer, pledge or
assign shares of Restricted Stock, Performance Shares or Deferred Stock; awarded
under the Plan; provided, however, that the Administrator may, in its sole
discretion, provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part based on such factors
and such circum stances as the Administrator may determine, in its sole
discretion, including, but not limited to, the attainment of certain performance
related goals, the Partici pant's termination of employment or service, death or
Disability or the occurrence of a "Change in Control" as defined in the
agreement evidencing such award.
(c) Except as provided in paragraph (3)(a) of this
Section 7, the Participant shall generally have, with respect to shares of
Restricted Stock or Performance Shares, all of the rights of a stockholder with
respect to such stock during the Restricted Period. The Participant shall
generally not have the rights of a stockholder with respect to stock subject to
Deferred Stock awards during the Restricted Period; provided, however, that
dividends declared during the Re-
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stricted Period with respect to the number of shares covered by a Deferred Stock
award shall be paid to the Participant. Certificates for shares of unrestricted
Stock shall be delivered to the Participant promptly after, and only after, the
Restricted Period shall expire without forfeiture in respect of such shares of
Restricted Stock, Performance Shares or Deferred Stock, except as the
Administrator, in its sole discretion, shall otherwise determine.
(d) The rights of holders of Restricted Stock,
Deferred Stock and Performance Share awards upon termination of employment or
service for any reason during the Restricted Period shall be set forth in the
Restricted Stock Award Agreement, Deferred Stock Award Agreement or Performance
Share Award Agreement, as appropriate, governing such awards.
Section 8. Amendment and Termination.
The Board may amend, alter or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made that would impair the
rights of a Participant under any award theretofore granted without such Partici
pant's consent, or that, without the approval of the stockholders (as described
below), would:
(1) except as provided in Section 3 of the Plan, increase the
total number of shares of Stock reserved for the purpose of the Plan;
(2) change the class of directors, officers, employees,
consultants and advisors eligible to participate in the Plan; or
(3) extend the maximum option period under paragraph (2) of
Section 5 of the Plan.
Notwithstanding the foregoing, stockholder approval under this
Section 8 shall only be required at such time and under such circumstances as
stockholder approval would be required under Section 162(m) of the Code or other
applicable law, rule or regulation with respect to any material amendment to any
employee benefit plan of the Company.
The Administrator may amend the terms of any award theretofore
granted, prospectively or retroactively, but, subject to Section 3 of Plan, no
such amendment shall impair the rights of any holder without his or her consent.
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Section 9. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.
Section 10. General Provisions.
(1) The Administrator may require each person purchasing
shares pursuant to a Stock Option to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Administrator deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan
shall be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable federal or state securities
law, and the Administra tor may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such restrictions.
(2) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval, if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of the
Plan shall not confer upon any officer, director, employee, consultant or
advisor of the Company any right to continued employment or service with the
Company, as the case may be, nor shall it interfere in any way with the right of
the Company to terminate the employment or service of any of its officers,
directors, employees, consultants or advisors at any time.
(3) Each Participant shall, no later than the date as of which
the value of an award first becomes includible in the gross income of the
Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on the making of
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such payments or arrangements, and the Company shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
(4) No member of the Board or the Administrator, nor any
officer or employee of the Company acting on behalf of the Board or the
Administrator, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Administrator and each and any officer or employee
of the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and pro tected by the Company in respect of any such action,
determination or interpreta tion.
Section 11. Effective Date of Plan.
The Plan shall become effective upon approval by the
stockholders of the Company.
Section 12. Term of Plan.
No Stock Option, Stock Appreciation Right, Limited Stock
Appreciation Right, Restricted Stock, Deferred Stock or Performance Share award
shall be granted pursuant to the Plan on or after the tenth anniversary of the
Effective Date, but awards theretofore granted may extend beyond that date.
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Exhibit 17
PRISM FINANCIAL CORPORATION
2000 STOCK OPTION PLAN
Section 1. General Purpose of Plan; Definitions.
The name of this plan is the Prism Financial Corporation 2000
Stock Option Plan (the "Plan"). The Plan was adopted by the Board (defined
below) on January 12, 2000 (the "Effective Date"). The purpose of the Plan is to
enable the Company to attract and retain highly qualified personnel who will
contribute to the Company's success and to provide incentives to Participants
(defined below) that are linked directly to increases in stockholder value and
will therefore inure to the benefit of all stockholders of the Company. This
Plan is intended to qualify as a "broadly based" plan for purposes of the
shareholder approval rules promulgated by the NASD (defined below).
For purposes of the Plan, the following terms shall be defined
as set forth below:
(1) "Administrator" means the Board, or if and to the extent
the Board does not administer the Plan, the Committee in accordance with Section
2 below.
(2) "Board" means the Board of Directors of the Company.
(3) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor thereto.
(4) "Committee" means any committee the Board may appoint to
administer the Plan. To the extent necessary and desirable, the Committee shall
be composed entirely of individuals who meet the qualifications referred to in
Rule 16b-3 under the Exchange Act. If at any time or to any extent the Board
shall not administer the Plan, then the functions of the Board specified in the
Plan shall be exercised by the Committee.
<PAGE>
(5) "Company" means Prism Financial Corporation, a Delaware
corporation (or any successor corporation).
(6) "Disability" means the inability of a Participant to
perform substantially his or her duties and responsibilities to the Company or
to any Parent or Subsidiary by reason of a physical or mental disability or
infirmity (i) for a continu ous period of six months, or (ii) at such earlier
time as the Participant submits medical evidence satisfactory to the
Administrator that the Participant has a physical or mental disability or
infirmity that will likely prevent the Participant from returning to the
performance of the Participant's work duties for six months or longer. The date
of such Disability shall be the last day of such six-month period or the day on
which the Participant submits such satisfactory medical evidence, as the case
may be.
(7) "Eligible Recipient" means any officer, employee,
consultant or advisor of the Company or of any Parent or Subsidiary or any
Employee Director and shall not include any Non-Employee Director.
(8) "Employee Director" means any director of the Company or
of any Parent or Subsidiary who is an employee of the Company or of any Parent
or Subsidiary.
(9) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(10) "Fair Market Value" means, as of any given date, with
respect to any Stock Options granted hereunder, (A) if the Stock is publicly
traded, the closing sale price of a share of Stock, (B) the fair market value of
a share of Stock as determined in accordance with a method prescribed in the
agreement evidencing any Stock Option hereunder or (C) the fair market value of
a share of Stock as otherwise determined by the Administrator in the good faith
exercise of its discretion.
(11) "NASD" means the National Association of Securities
Dealers, Inc.
(12) "Non-Employee Director" means any director of the Company
or of any Parent or Subsidiary who is not an employee of the Company or of any
Parent or Subsidiary.
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(13) "Parent" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.
(14) "Participant" means any Eligible Recipient selected by
the Administrator, pursuant to the Administrator's authority in Section 2 below,
to receive grants of Stock Options.
(15) "Stock" means the common stock, par value $0.01 per
share, of the Company.
(16) "Stock Option" means an option that is not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of the
Code.
(17) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations (other than the last corporation) in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
Section 4. Administration.
To the extent necessary and desirable, the Plan shall be
administered in accordance with the requirements of Rule 16b-3 under the
Exchange Act by the Board or, at the Board's sole discretion, by the Committee,
which shall be appointed by the Board, and which shall serve at the pleasure of
the Board.
Pursuant to the terms of the Plan, the Administrator shall
have the power and authority to grant Stock Options to Eligible Recipients
pursuant to the terms of the Plan. In particular, the Administrator shall have
the authority:
(a) to select those Eligible Recipients who shall be
Participants;
(b) to determine whether and to what extent Stock
Options are to be granted hereunder to Participants;
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(c) to determine the number of shares of Stock to be
covered by each Stock Option granted hereunder;
(d) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of each Stock Option granted hereunder;
(e) to determine the terms and conditions, not
inconsistent with the terms of the Plan, which shall govern all written
instruments evidencing Stock Options; and
(f) to reduce the option price of any Stock Option
to the then current Fair Market Value if the Fair Market Value of the Stock
covered by such Stock Option has declined since the date such Stock Option was
granted.
The Administrator shall have the authority, in its sole
discretion, to adopt, alter and repeal such administrative rules, guidelines and
practices governing the Plan as it shall from time to time deem advisable; to
interpret the terms and provisions of the Plan and any Stock Option issued under
the Plan (and any agree ments relating thereto); and to otherwise supervise the
administration of the Plan.
All decisions made by the Administrator pursuant to the
provisions of the Plan shall be final, conclusive and binding on all persons,
including, but not limited to the Company and the Participants.
Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available for
issuance under the Plan shall be 750,000 shares. Such shares may consist, in
whole or in part, of authorized and unissued shares or treasury shares. To the
extent that a Stock Option expires or is otherwise terminated without being
exercised, such shares of Stock shall again be available for issuance in
connection with future Stock Options granted under the Plan. If any shares of
Stock have been pledged as collateral for indebtedness incurred by a Participant
in connection with the exercise of a Stock Option and such shares of Stock are
returned to the Company in satisfac tion of such indebtedness, such shares of
Stock shall again be available for issuance in connection with future Stock
Options granted under the Plan.
4
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In the event of any merger, reorganization, consolidation,
recapitaliza tion, stock dividend or other change in corporate structure
affecting the Stock, an equitable substitution or proportionate adjustment shall
be made in (i) the aggregate number of shares of Stock reserved for issuance
under the Plan and (ii) the kind, number and option price of shares of Stock
subject to outstanding Stock Options granted under the Plan, in each case as may
be determined by the Administrator, in its sole discretion. Such other
substitutions or adjustments shall be made as may be determined by the
Administrator, in its sole discretion. In connection with any event described in
this paragraph, the Administrator may provide, in its sole discretion, for the
cancellation of any outstanding Stock Options and payment in cash or other
property therefor.
Section 4. Eligibility.
The Participants under the Plan shall be selected from time to
time by the Administrator, in its sole discretion, from among the Eligible
Recipients; and the Administrator shall determine, in its sole discretion, the
number of shares of Stock covered by the grant of Stock Options; provided,
however, that the aggregate number of shares of Stock as to which Stock Options
may be granted to all officers of the Company or of any Parent or Subsidiary and
Employee Directors during the term of the Plan shall not, subject to adjustment
as provided in Section 3 hereof, exceed twenty-five percent (25%) of the shares
of Stock reserved for issuance hereunder.
Section 5. Stock Options.
Any Stock Option granted under the Plan shall be in such form
as the Administrator may from time to time approve, and the provisions of Stock
Option awards need not be the same with respect to each Participant. More than
one Stock Option may be granted to the same Participant and be outstanding
concurrently hereunder. Participants who are granted Stock Options shall enter
into a subscription and/or award agreement with the Company, in such form as the
Administrator shall determine, which agreement shall set forth, among other
things, the option price of the Stock Option, the term of the Stock Option and
provisions regarding exercisability of the Stock Option granted thereunder.
Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions,
5
<PAGE>
not inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Administrator in its
sole discretion at the time of grant but shall not be less than the par value of
the Stock on such date.
(2) Option Term. The term of each Stock Option shall be fixed
by the Administrator.
(3) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Admin istrator at or after the time of grant. The Administrator may provide
at the time of grant, in its sole discretion, that any Stock Option shall be
exercisable only in installments, and the Administrator may waive such
installment exercise provisions at any time, in whole or in part, based on such
factors as the Administrator may determine, in its sole discretion, including
but not limited to in connection with any change of control.
(4) Method of Exercise. Subject to paragraph (3) of this
Section 5, Stock Options may be exercised in whole or in part at any time during
the option period, by giving written notice of exercise to the Company
specifying the number of shares of Stock to be purchased, accompanied by payment
in full of the purchase price in cash or its equivalent, as determined by the
Administrator. As determined by the Administrator, in its sole discretion,
payment in whole or in part may also be made (i) by means of any cashless
exercise procedure approved by the Administra tor, or (ii) in the form of
unrestricted Stock already owned by the Participant which, (x) in the case of
unrestricted Stock acquired upon exercise of an option, have been owned by the
Participant for more than six months on the date of surrender, and (y) has a
Fair Market Value on the date of surrender equal to the aggregate option price
of the Stock as to which such Stock Option shall be exercised.
A Participant shall generally have the rights to dividends and
any other rights of a stockholder with respect to the Stock subject to the Stock
Option only after the Participant has given written notice of exercise, has paid
in full for such shares, and, if requested, has given the representation
described in paragraph (2) of Section 8 below.
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The Administrator may require the surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to
the grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted. Upon their surrender, Stock Options shall be
canceled and the shares of Stock previously subject to such canceled Stock
Options shall again be available for future grants of Stock Options hereunder.
(5) Loans. The Company or any Parent or Subsidiary may make
loans available to Stock Option holders in connection with the exercise of
outstand ing Stock Options, as the Administrator, in its sole discretion, may
determine. Such loans shall (i) be evidenced by promissory notes entered into by
the Stock Option holders in favor of the Company or any Parent or Subsidiary,
(ii) be subject to the terms and conditions set forth in this Section 5(5) and
such other terms and condi tions, not inconsistent with the Plan, as the
Administrator shall determine, (iii) bear interest at the applicable Federal
interest rate or such other rate as the Administrator shall determine, and (iv)
be subject to Board approval (or to approval by the Admin istrator to the extent
the Board may delegate such authority). In no event may the principal amount of
any such loan exceed the sum of (x) the aggregate option price less the par
value (if any) of the shares of Stock covered by the Stock Option, or portion
thereof, exercised by the holder, and (y) any Federal, state, and local income
tax attributable to such exercise. The initial term of the loan, the schedule of
payments of principal and interest under the loan, the extent to which the loan
is to be with or without recourse against the holder with respect to principal
and/or interest and the conditions upon which the loan will become payable in
the event of the holder's termination of service to the Company or to any Parent
or Subsidiary shall be determined by the Administrator. Unless the Administrator
determines otherwise, when a loan is made, shares of Stock having a Fair Market
Value at least equal to the principal amount of the loan shall be pledged by the
holder to the Company as security for payment of the unpaid balance of the loan,
and such pledge shall be evidenced by a pledge agreement, the terms of which
shall be determined by the Administrator, in its sole discretion; provided,
however, that each loan shall comply with all applicable laws, regulations and
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.
(6) Non-Transferability of Stock Options. Except under the
laws of descent and distribution, unless otherwise determined by the
Administrator, the
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<PAGE>
Participant shall not be permitted to sell, transfer, pledge or assign any Stock
Option, and all Stock Options shall be exercisable, during the Participant's
lifetime, only by the Participant; provided, however, that the Participant shall
be permitted to transfer one or more Stock Options to a trust controlled by the
Participant during the Partici pant's lifetime for estate planning purposes.
(7) Termination of Employment or Service. If a Participant's
employment with or service as a director, consultant or advisor to the Company
or to any Parent or Subsidiary terminates by reason of his or her death,
Disability or for any other reason, the Stock Option may thereafter be exercised
to the extent provided in the agreement evidencing such Stock Option, or as
otherwise determined by the Administrator following termination of employment.
Section 6. Amendment and Termination.
The Board may amend, alter or discontinue the Plan, but no
amend ment, alteration, or discontinuation shall be made that would impair the
rights of a Participant under any Stock Option theretofore granted without such
Participant's consent.
The Administrator may amend the terms of any Stock Option
thereto fore granted, prospectively or retroactively, but, subject to Section 3
of Plan, no such amendment shall impair the rights of any Participant without
his or her consent.
Section 7. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for
incentive compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.
Section 8. General Provisions.
(1) Shares of Stock shall not be issued pursuant to the
exercise of any Stock Option granted hereunder unless the exercise of such Stock
Option and the issuance and delivery of such shares of Stock pursuant thereto
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Exchange Act and the requirements of
any stock ex-
8
<PAGE>
change upon which the Stock may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance.
(2) The Administrator may require each person acquiring shares
of Stock hereunder to represent to and agree with the Company in writing that
such person is acquiring the shares of Stock without a view to distribution
thereof. The certificates for such shares of Stock may include any legend which
the Administrator deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan
shall be subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, and any applicable Federal or state securities
law, and the Administrator may cause a legend or legends to be placed on any
such certificates to make appropriate reference to such restrictions.
(3) Nothing contained in the Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval, if such approval is required; and such arrangements may be either
gener ally applicable or applicable only in specific cases. The adoption of the
Plan shall not confer upon any Eligible Recipient any right to continued
employment or service with the Company or any Parent or Subsidiary, as the case
may be, nor shall it interfere in any way with the right of the Company or any
Parent or Subsidiary to terminate the employment or service of any of its
Eligible Recipients at any time.
(4) Each Participant shall, no later than the date as of which
the value of a Stock Option first becomes includible in the gross income of the
Participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfac tory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such Stock Option. The obligations of the Company under the Plan
shall be conditional on the making of such payments or arrangements, and the
Company shall, to the extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the Participant.
(5) No member of the Board or the Administrator, nor any
officer or employee of the Company acting on behalf of the Board or the
Administrator,
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shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administra tor and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
Section 9. Term of Plan.
No Stock Option shall be granted pursuant to the Plan on or
after the tenth anniversary of the Effective Date, but Stock Options theretofore
granted may extend beyond that date.
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Exhibit 18
REGISTRATION RIGHTS AGREEMENT
May 28, 1999
To the several persons
named at the foot hereof:
Ladies and Gentlemen:
WHEREAS, Prism Financial Corporation, a Delaware corporation (the
"Company"), is undertaking an initial public offering of its Common Stock (as
defined herein) pursuant to an underwriting agreement, dated as of the date
hereof, by and among the Company, the Initial Shareholders (as defined herein)
and the underwriters named therein (the "Underwriting Agreement");
WHEREAS, in connection with the Company's initial public offering, the
Company and each Initial Shareholder have entered into a Share Exchange Agree
ment or received shares of the Company pursuant to acquisition agreements, such
that upon consummation of the Company's initial public offering, each Initial
Shareholder shall own the number of shares of Common Stock set forth opposite
such Initial Shareholder's name on Annex I hereto; and
WHEREAS, the Company desires to provide to each of you, rights to
register the Common Stock of the Company owned by you.
NOW, THEREFORE, as an inducement to each of you to consummate the
transactions contemplated by the Underwriting Agreement, the Company hereby
covenants and agrees with each of you, and with each subsequent holder of Re
stricted Stock (as defined herein) as follows:
1. Certain Definitions. As used herein, the following
terms shall have the following respective meanings:
<PAGE>
"Common Stock" shall mean the Common Stock, par value $0.01
per share, of the Company.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar federal statute, and the rules and regulations of the
Commis sion thereunder, all as the same shall be in effect at the time.
"Initial Shareholders" shall mean those persons who are
signatories to this Agreement, and their successors and assigns, and other
persons who may become holders of Restricted Stock.
"Initial Shareholder Shares" means all shares of Common Stock
owned by the Initial Shareholders on the date hereof as set forth in Annex I
hereto, as such shares may be adjusted from time to time in accordance with
Section 8 hereof.
"IPO" shall mean the initial public offering of the Company's
Com mon Stock under the Securities Act.
"person" means any individual, firm, corporation, partnership,
limited liability company, trust, incorporated or unincorporated association,
joint venture, joint stock company, limited liability company, government (or an
agency or political subdivision thereof) or other entity of any kind, and shall
include any successor (by merger or otherwise) of such entity.
"Public Sale" shall mean any sale of shares of Common Stock to
the public pursuant to an offering registered under the Securities Act or to the
public pursuant to the provisions of Rule 144 (or any successor or similar rule)
adopted under the Securities Act.
"Registration Expenses" shall mean the expenses so described
in Section 6 hereof.
"Restricted Stock" shall mean the shares of Common Stock
issued to the Initial Shareholders or other persons which are required to bear a
restrictive legend, excluding Initial Shareholder Shares which have been (i)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and
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disposed of in accordance with the registration statement covering them or (ii)
publicly sold pursuant to Rule 144 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereun der, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in
Section 6 hereof.
2. Required Registration.
---------------------
(a) At any time on or after the 180 day
anniversary of the consummation of the IPO, the holders of at least 50% of the
Restricted Stock outstanding at such time may request the Company to register
all or any portion of the Restricted Stock held by such requesting holder or
holders for sale in the manner specified in such notice; provided, however, that
the Company shall not be obligated to effect any such registration unless the
proceeds to be realized in connection with such registration shall not
reasonably be expected to be less than $1,000,000.
(b) Promptly following receipt of any notice
under this Section 2, the Company shall immediately notify any holders of
Restricted Stock from whom notice has not been received and shall use its best
efforts to register under the Securities Act, for Public Sale in accordance with
the method of disposi tion specified in such notice from requesting holders, the
number of shares of Restricted Stock specified in such notice (and in any
notices received from other holders of Restricted Stock within thirty (30) days
after their receipt of notice from the Company); provided, however, that the
number of shares of Restricted Stock to be included in such an underwriting may
be reduced pro rata among the requesting holders of Restricted Stock if and to
the extent that the managing underwriter, if the proposed method of disposition
specified by the requesting holders shall be an under written public offering,
shall be of the opinion that such inclusion would materially adversely affect
the marketing of the Restricted Stock. If such method of disposition shall be an
underwritten public offering, the Company shall designate the managing
underwriter of such offering, subject to the approval of the selling holders of
a majority of the Restricted Stock covered by the offering, which approval shall
not be unreasonably withheld. Subject to paragraph (c) below, the Company shall
be obligated to use its reasonable best efforts to cause the registration
statement filed pursuant to this Section 2 to become effective not later than 90
(ninety) days after receipt of notice pursuant to Section 2. The Company shall
be obligated to register
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Restricted Stock pursuant to this Section 2 on two (2) occasions only; provided
that such obligation shall be deemed satisfied only when a registration
statement covering all shares of Restricted Stock specified in notices received
as aforesaid, for sale in accordance with the method of disposition specified by
the requesting holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto; provided, however, that a registration
statement shall not constitute a registration request pursuant to this Section 2
if (x) after such registration statement has become effective, such registration
or the related offer, sale or distribution of Restricted Stock thereunder is
interfered with by any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason not
attributable to the holders of such Restricted Stock and such interference is
not thereafter eliminated or (y) the conditions specified in the underwriting
agreement, if any, entered into in connection with such registration statement
are not satisfied or waived, other than by reason of a failure by any holder of
such Restricted Stock.
(c) Notwithstanding anything to the contrary in
this Agreement, the Company may delay for up to ninety (90) days the filing or
effective ness of a registration statement pursuant to a request under this
Section 2 if the Board of Directors of the Company shall determine that such a
registration would not be in the best interests of the Company at such time,
during which period the requesting holders may withdraw their request (provided
that, if not so withdrawn, the Company will not have breached its obligations
under this Section 2 during such delay period), in which case the requesting
holders will not be deemed to have made a request for registration under this
Section 2.
(d) The Company shall be entitled to include in
any registration statement referred to in this Section 2, for sale in accordance
with the method of disposition specified by the requesting holders, shares of
Common Stock to be sold by the Company for its own account, except as and to the
extent that, in the opinion of the managing underwriter (if such method of
disposition shall be an underwritten public offering), such inclusion would
adversely affect the marketing of the Restricted Stock (if any) to be sold.
3. Form S-3 Registration.
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If at any time (i) the Company shall receive from the holders
of at least 50% of the Restricted Stock a written request or requests that the
Company effect a registration of all or any portion of the shares of Restricted
Stock on Form S-
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3 or any successor thereto, and (ii) the Company is a registrant entitled to use
Form S-3 or any successor thereto to register such shares, the Company will:
(i) promptly give written notice of the proposed
registra tion, and any related qualification or compliance, to all
other holders of any shares of Restricted Stock; and
(ii) as soon as practicable, effect such
registration (in cluding, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws
and appropriate compliance with applicable regula tions issued under
the Securities Act and any other government requirements or
regulations) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such holder's or
holders' Re stricted Stock as are specified in such request, together
with all or such portion of the Restricted Stock of any holder or
holders of Restricted Stock joining in such request as are specified in
a written request given within thirty (30) days after receipt of such
written notice from the Company; provided that the Company shall not be
obligated to effect any such registration, qualification or compliance
pursuant to this Section 3 more than once in any 180-day period and
provided further that the Company shall not be obligated to effect any
such registration unless the proceeds to be realized in connection with
such registration shall not reasonably be expected to be less than
$1,000,000. Subject to the foregoing, the Company shall file a
registration statement covering the Restricted Stock so requested to be
registered as soon as practicable after receipt of the request or
requests of the holder or holders of Restricted Stock to do so.
Notwithstanding anything to the contrary in this Agreement, (i) the Company may
delay for up to ninety (90) days the effectiveness of, and (ii) the Company may
suspend for up to thirty (30) days, not more than once during the term of this
Agreement, the effectiveness of, a registration statement pursuant to a request
under this Section 3 if the Board of Directors of the Company shall determine
such registration (or, in the case of a suspension of a registration, sales
under such registration statement) would not be in the best interests of the
Company at such time, during which period the requesting holders may withdraw
their request, in which case the requesting holders will not be deemed to have
made a request for registration under this Section 3.
5
<PAGE>
(a) Commencing one year after the Company
becomes subject to the requirements of Section 12 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall use its reasonable best
efforts to satisfy the registrant requirements applicable for use of
registration statements on Form S-3 (or any successor form thereto) for the
resale of securities by selling stockholders.
(b) Registrations effected pursuant to this
Section 3 shall not be counted as requests for registration effected pursuant to
Section 2.
4. Incidental Registration. If the Company at any time
(other than pursuant to Section 2 or 3 hereof) proposes to register any of its
Common Stock under the Securities Act for sale for cash only to the public,
whether for its own account or for the account of other security holders or both
(except with respect to registration statements on Forms S-4 or S-8 or another
form not available for registering the Restricted Stock for sale to the public,
a registration statement on Form S-3 to be filed by the Company to register
shares of Common Stock issued in consideration for an acquisition, or a
registration statement on Form S-1 covering solely an employee benefit plan), it
will give written notice at such time to all holders of outstanding Restricted
Stock of its intention to do so. Upon the written request of any such holder,
given within thirty (30) days after receipt of any such notice by the Company,
to register any of its Restricted Stock (which request shall state the intended
method of disposition thereof), the Company will use its reasonable best efforts
to cause the Restricted Stock as to which registration shall have been so
requested, to be included in the securities to be covered by the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition by the holder (in accordance with its
written request) of such Restricted Stock so registered; provided that nothing
herein shall prevent the Company from abandoning or delaying any such
registration at any time. In the event that any registration pursuant to this
Section 4 shall be, in whole or in part, an underwritten public offering of
Common Stock, the Company shall not be required to include any Restricted Stock
in such underwritten offering unless the holder shall agree to the terms and
conditions of the underwritten offering as agreed by the Company and the
underwriters. The number of shares of Restricted Stock to be included in such an
underwriting may be reduced pro rata among the requesting holders of Restricted
Stock, if and to the extent that the managing underwriter shall be of the
opinion that such inclusion would adversely affect the marketing of the
securities to be sold by the Company therein. In such event, the Company shall
be required to include in such registration, to the extent of the amount that
the managing underwriter believes may be sold without causing such adverse
effect, first, all of the securities to be offered for the account of the
Company; second, the Restricted Stock
6
<PAGE>
to be offered for the account of the holders pursuant to this Section 4, pro
rata based on the number of shares of Restricted Stock owned by each such
holder; and third, any other securities requested to be included in such
underwritten offering.
5. Registration Procedures. If and whenever the Company
is required by the provisions of Section 2, 3 or 4 hereof to use its reasonable
best efforts or best efforts, as the case may be, to effect the registration of
any of the Restricted Stock under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare (and afford counsel for the selling
holders up to 10 business days' opportunity to review and comment thereon) and
file with the Commission a registration statement (which, in the case of an
underwritten public offering pursuant to Section 2 hereof, shall be on Form S-1
or other form of general applicability satisfactory to the managing underwriter
selected as therein provided) with respect to such securities and use its
reasonable best efforts or best efforts, as the case may be, to cause such
registration statement to become and remain effective for the period of the
distribution contemplated thereby (determined as hereinafter provided);
(b) prepare (and afford counsel for the selling
holders up to 10 business days' opportunity to review and comment thereon) and
file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such regis tration statement effective for the period specified in
paragraph (a) above and to comply with the provisions of the Securities Act with
respect to the disposition of all Restricted Stock covered by such registration
statement in accordance with the sellers' intended method of disposition set
forth in such registration statement for such period;
(c) furnish to each seller and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
persons may reasonably request in order to facilitate the Public Sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its reasonable best efforts or best
efforts, as the case may be, to register or qualify the Restricted Stock covered
by such registration statement under the securities or blue sky laws of such
jurisdictions as the sellers of Restricted Stock or, in the case of an
underwritten public offering, the managing underwriter, shall reasonably request
and do any and all other acts and things which
7
<PAGE>
may be reasonably necessary or advisable to enable any such seller to consummate
the disposition in such jurisdictions of the Restricted Stock owned by such
seller (provided that the Company will not be required to (i) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
jurisdiction);
(e) use its reasonable best efforts to list the
Restricted Stock covered by such registration statement with any securities
exchange on which any Common Stock of the Company is then listed;
(f) immediately notify each seller under such
registration statement and each underwriter, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus contained in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing;
(g) use its reasonable best efforts or best
efforts, as the case may be (if the offering is underwritten and at the request
of any seller of Restricted Stock), to furnish, at the request of any seller, on
the date that Restricted Stock is delivered to the underwriters for sale
pursuant to such registration: (i) an opinion dated such date of counsel
representing the Company, for the purposes of such registration, addressed to
the underwriters and either addressed to such seller or specifically entitling
such seller to rely thereupon, stating that such registration statement has
become effective under the Securities Act and that (A) to the best knowledge of
such counsel, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
contemplated under the Securities Act, (B) the registration statement, the
related prospectus, and each amendment or supplement thereof, comply as to form
in all material respects with the requirements of the Securities Act and the
applicable rules and regulations of the Commission thereunder (except that such
counsel need express no opinion as to financial statements, the notes thereto,
and the financial schedules and other financial and statistical data contained
therein) and (C) to such other effects as may reasonably be requested by counsel
for the underwriters or by such seller or its counsel; and (ii) a letter dated
such date from the independent public accountants retained by the Company,
addressed to the underwriters and to such seller, stating that they are
independent public accountants within the meaning of the Securities Act and
that, in the opinion of such accountants, the financial statements of the
Company
8
<PAGE>
included in the registration statement or the prospectus, or any amendment or
supplement thereof, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five (5) business days prior to the date of such
letter) with respect to the registration in respect of which such letter is
being given as such underwriters or seller may reasonably request; and
(h) make available for inspection by each
seller, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accoun tant or agent in connection with such
registration statement.
(i) cooperate with each seller of Restricted
Stock and each underwriter participating in the disposition of such Restricted
Stock and their respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc. (the "NASD"); and
(j) immediately notify each seller of Restricted
Stock of any stop order issued or threatened by the Commission.
For purposes of paragraphs (a) and (b) above and of Section 2(d) hereof, the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Re stricted Stock covered thereby or
six (6) months after the effective date thereof.
In connection with each registration hereunder, as a condition
to the right to sell under any registration statement (a) the selling holders of
Restricted Stock will furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as shall be
reasonably necessary in order to assure compliance with federal and applicable
state securities laws; (b) any such selling holder of Restricted Stock will
enter into a written agreement with the underwriters and the Company in such
form and containing such provisions as are customary in the securities business
for such an arrangement between major under writers and companies of the
Company's size and investment stature, and such
9
<PAGE>
selling holder of Restricted Stock will use its reasonable best efforts to cause
its counsel to give any opinion customarily given, in connection with secondary
distributions under similar circumstances; (c) during such time as any such
selling holder of Restricted Stock may be engaged in a distribution of such
stock, such selling holder of Restricted Stock will comply with all applicable
laws and, to the extent required by such laws, will, among other things (i) not
engage in any stabiliza tion activity in connection with the securities of the
Company in contravention of such rules, (ii) distribute the Restricted Stock
owned by such selling holder of Restricted Stock solely in the manner described
in applicable registration statement or as otherwise permitted by law, (iii)
cause to be furnished to each agent or broker-dealer to or through whom the
Restricted Stock owned by such selling holder of Restricted Stock may be
offered, or to the offeree if an offer is made directly by such holder, such
copies of the applicable prospectus (as amended and supplemented to such date)
and the documents incorporated by reference therein as may be required by such
agent, broker-dealer or offeree, provided that the Company shall have provided
such selling holder of Restricted Stock with an adequate number of copies
thereof and (iv) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the Company; and (d)
on notice from the Company of the happening of any event specified in paragraph
(f) of Section 5 hereof or the suspension of effectiveness of the registration
statement under Section 3, then such selling holder will cease offering or
distributing the Restricted Stock until the Company notifies such selling holder
that the offering and distribution of the Restricted Stock may recommence.
In connection with each registration pursuant to Sections 2, 3
and 4 hereof covering an underwritten public offering, the Company agrees to
enter into a written agreement with the managing underwriter selected in the
manner herein provided in such form and containing such provisions as are
customary in the securities business for such an arrangement between major
underwriters and compa nies of the Company's size and investment stature;
provided, however, that such agreement shall not contain any such provision
applicable to the Company which is inconsistent with the provisions hereof; and
provided, further, that the time and place of the closing under said agreement
shall be as mutually agreed upon between the Company and such managing
underwriter.
6. Expenses. All expenses incurred by the Company in
comply ing with Sections 2, 3 or 4 hereof, including without limitation all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees of the NASD,
transfer taxes, fees of transfer agents and registrars, costs of insurance and
reasonable fees and expenses of
10
<PAGE>
not more than one counsel for the Initial Shareholders (not more than $50,000 in
fees for such counsel), but excluding any Selling Expenses, are herein called
"Regis tration Expenses." All underwriting discounts and selling commissions
applicable to the sale of Restricted Stock are herein called "Selling Expenses."
The Company will pay all Registration Expenses in connection
with each registration statement filed pursuant to Sections 2, 3 and 4 hereof.
All Selling Expenses in connection with any registration statement filed
pursuant to Section 2, 3 or 4 hereof shall be borne by the participating sellers
in proportion to the number of shares sold by each, or by such persons other
than the Company (except to the extent the Company shall be a seller) as they
may agree.
7. Indemnification.
----------------
(a) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 2, 3 or 4 hereof,
the Company will indemnify and hold harmless each seller of such Restricted
Stock thereunder and each underwriter of Restricted Stock thereunder and each
officer, director and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller or
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant to Section 2, 3 or 4, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of or
are based upon the omis sion or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each such seller, each such underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that (i) the indemnity in this
Section 7 shall not apply to any amounts paid in settlement of any such loss,
claim, damage or liability if settlement is affected without the consent of the
Company, and (ii) the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission so made in conformity with information furnished by such seller, such
underwriter or such controlling person in writing specifically for use in such
registra tion statement or prospectus.
11
<PAGE>
(b) In the event of a registration of any of the
Restricted Stock under the Securities Act pursuant to Section 2, 3 or 4 hereof,
to the extent permitted by law each seller of such Restricted Stock thereunder,
severally and not jointly, will indemnify and hold harmless the Company and each
officer, director and each other person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer or director or underwriter or controlling person may
become subject under the Securi ties Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Restricted Stock
was registered under the Securities Act pursuant to Sec tion 2, 3 or 4, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company and each such officer, director, underwriter and controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus; and
provided, further, that the liability of each seller hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of shares sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not to exceed the proceeds (net of
underwriting discounts and commissions) received by such seller from the sale of
Restricted Stock covered by such registration statement.
(c) Promptly after receipt by an indemnified
party here under of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party hereunder, notify the indemnifying party in writing thereof,
but the omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any
12
<PAGE>
indemnified party other than under this Section 7. In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 7 for any legal
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reason able costs of investigation and of liaison
with counsel so selected; provided, how ever, that, if the defendants in any
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there are reasonable
defenses available to it which are different from or addi tional to those
available to the indemnifying party, or if the interests of the indemni fied
party reasonably are in conflict with the interests of the indemnifying party,
the indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred. No settlement of any such claim, loss, damage, liability or
action shall be made by the indemnified party without the prior written consent
(not to be unreasonably withheld or delayed) of the indemnifying party.
Notwithstanding the foregoing, any indemnified party shall
have the right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemni fying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in
paragraphs (a) and (b) of this Section 7 is unavailable or insufficient to hold
harmless an indemni fied party under such paragraphs in respect of any losses,
claims, damages or
13
<PAGE>
liabilities or actions in respect thereof referred to therein, then each
indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, dam ages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the sellers of such Restricted Stock, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or actions as well as any other relevant equitable considerations,
including the failure to give any notice under paragraph (c) of this Section 7.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact relates to
informa tion supplied by the Company, on the one hand, or the sellers of such
Restricted Stock, on the other hand, and to the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the sellers of Restricted Stock agree
that it would not be just and equitable if contributions pursuant to this
paragraph were determined by pro rata allocation (even if all of the sellers of
such Restricted Stock were treated as one entity for such purpose) or by any
other method of allocation which did not take account of the equitable
considerations referred to above in this paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or action in respect thereof, referred to above in this paragraph, shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this paragraph, the sellers of such
Re stricted Stock shall not be required to contribute any amount in excess of
the amount, if any, by which the total price at which the Common Stock sold by
each of them was offered to the public exceeds the amount of any damages which
they would have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
The indemnification of underwriters provided for in this
Section 7 shall be on such other terms and conditions as are at the time
customary and reason ably required by such underwriters. In that event the
indemnification of the sellers of Restricted Stock in such underwriting shall at
the sellers' request be modified to conform to such terms and conditions.
8. Changes in Restricted Stock. If, and as often as,
there are any changes in the Common Stock by way of stock split, stock dividend,
combination or reclassification, or through merger, consolidation,
reorganization or recapitalization,
14
<PAGE>
or by any other means, appropriate adjustment shall be made in the provisions
hereof, as may be required, so that the rights and privileges granted hereby
shall continue with respect to the Common Stock as so changed and shall apply to
any securities received in any such transaction.
9. Rule 144 Reporting. The Company agrees with you as
follows:
(a) From and after such time as the Company
becomes subject to the reporting requirements of the Exchange Act, the Company
shall make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times from and after
the date it is first required to do so.
(b) The Company shall file with the Commission
in a timely manner all reports and other documents as the Commission may
prescribe under Section 13(a) or 15(d) of the Exchange Act at any time after the
Company has become subject to such reporting requirements of the Exchange Act.
(c) The Company shall furnish to such holder of
Restricted Stock forthwith upon request (i) a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after the date it first becomes subject to such reporting
requirements), and of the Securities Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Com pany, and (iii) such other reports
and documents so filed as a holder may reasonably request to avail itself of any
rule or regulation of the Commission allowing a holder of Restricted Stock to
sell any such securities without registration.
10. Holdback Agreement. If and to the extent requested by
the Company, the Initial Shareholders agree (i) not to effect any public sale or
distribu tion of any Restricted Stock or of any securities convertible into or
exchangeable or exercisable for such Restricted Stock, including a sale pursuant
to Rule 144, and (ii) not to make any request for a registration under Sections
2 or 3 of this Agreement, during the 120-day period or such shorter period
agreed upon by such holder beginning thirty days prior to the anticipated
effective date of a registration statement filed by the Company (except as part
of such registration filed by the Company).
15
<PAGE>
11. Effectiveness. This agreement shall become effective
upon consummation of the IPO; provided, however, that if the IPO has not
occurred on or prior to July 31, 1999, this agreement shall not become effective
and shall be void.
12. Miscellaneous.
(a) All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto, including, without
limitation, the rights to indemnification under Section 7 hereof, shall bind and
inure to the benefit of the respective successors and permitted assigns of the
parties hereto whether so expressed or not. Without limiting the generality of
the foregoing, the registration rights conferred herein on the holders of
Restricted Stock shall inure to the benefit of any and all subsequent holders
from time to time of the Restricted Stock.
(b) All notices, requests, consents and other
communica tions hereunder shall be in writing and shall be mailed by first class
registered mail, postage prepaid, addressed as follows:
if to the Company, to it at 440 N. Orleans Street, Chicago,
Illinois 60610, attention: Chief Financial Officer, facsimile number (312)
494-0273, with a copy to Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 W.
Wacker Drive, Chicago, Illinois 60606, attention: Rodd Schreiber, Esq.,
facsimile number (312) 407-0411;
if to any holder of Restricted Stock, to him, her or it, as
the case may be, at its address as set forth on Annex I hereto or any subsequent
address provided by such holder to the Company and the other Initial
Shareholders;
or, in any case, at such other address or addresses as shall
have been furnished in writing to the Company (in the case of a holder of
Restricted Stock), or to the holders of Restricted Stock (in the case of the
Company).
(c) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
(d) This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be waived, modified or amended, nor may the Company grant any
third party any registration rights more favorable than or inconsistent with any
of those contained
16
<PAGE>
herein as long as any of the registration rights under this Agreement remains in
effect, except in writing executed by the Company, the holders of a majority of
the Initial Shareholders' Shares; provided, however, that any such amendment,
modifica tion or waiver shall affect all of the holders of Initial Shareholders'
Shares in the same manner and that no such amendment, modification or waiver
that would adversely affect the rights or alter the obligations of any holder of
Initial Sharehold ers' Shares hereunder or confer on any holder of Initial
Shareholders' Shares any benefit not shared ratably by all of the other holders
of Initial Shareholders' Shares will be effective without the prior written
approval of any such adversely affected holder of Initial Shareholders' Shares.
(e) This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this letter
(herein sometimes called "this Agreement") shall be a binding agreement between
the Company and you.
Very truly yours,
PRISM FINANCIAL CORPORATION
By: /s/ Bruce C. Abrams
----------------------------
Name:
Title:
<PAGE>
/s/ Bruce C. Abrams
---------------------------------
Bruce C. Abrams
/s/ Terry A. Markus
---------------------------------
Terry A. Markus
/s/ Mark A. Filler
---------------------------------
Mark A. Filler
/s/ Abby Polin Reisler
---------------------------------
Abby Reisler
/s/ William D. Osenton
---------------------------------
William D. Osenton
/s/ Bruce P. Barbera
---------------------------------
Bruce P. Barbera
/s/ Robert Siefert
---------------------------------
Robert Siefert
CTC TRUST
By: /s/ Thomas J. Pritzker
------------------------------
Thomas J. Pritzker, Co-Trustee
By: /s/ Marshall E. Eisenberg
------------------------------
Name: Marshall E. Eisenberg
Title: Co-Trustee
DONROSE TRUST
By: /s/ Nicholas J. Pritzker
------------------------------
Name: Nicholas J. Pritzker
Title: Trustee
<PAGE>
JBR TRUST #4
By: /s/ Marshall E. Eisenberg
----------------------------
Name: Marshall E. Eisenberg
Title: Trustee
T&M CHILDREN'S TRUST
By: /s/ Simon Zunamon
----------------------------
Name: Simon Zunamon
Title: Trustee
GEM VALUE/PRISM, LLC
By: GEM Value Fund, L.P.
By: GEM Value Partners, LLC
By: /s/ Barry Malkin
----------------------------
Name: Barry Malkin
Title: President
ABRAMS CAPITAL TRUST
By: /s/ Andrew S. Hochberg
----------------------------
Name: Andrew S. Hochberg
Title: Solely in his capacity as
Trustee
[Annex 1 intentionally omitted. Such annex will be supplied supplementally to
the Securities and Exchange Commission upon its request.]
<PAGE>
Exhibit 19
- ------------------------------------------------------------------------------
PRISM FINANCIAL CORPORATION
and
LASALLE BANK NATIONAL ASSOCIATION
Rights Agent
--------------------------------------------
Rights Agreement
Dated as of January 27, 2000
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
Table of Contents
-----------------
<S> <C>
Section Page
- ------- ----
Section 1. Certain Definitions...............................................................1
Section 2. Appointment of Rights Agent.......................................................7
Section 3. Issue of Rights Certificates......................................................7
Section 4. Form of Rights Certificates.......................................................9
Section 5. Countersignature and Registration................................................11
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.....................................................................11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....................12
Section 8. Cancellation and Destruction of Rights Certificates..............................15
Section 9. Reservation and Availability of Capital Stock....................................15
Section 10. Preferred Stock Record Date......................................................17
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights..............................................................17
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.......................28
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power....................................................................28
Section 14. Fractional Rights and Fractional Shares..........................................31
Section 15. Rights of Action.................................................................33
Section 16. Agreement of Rights Holders......................................................33
Section 17. Rights Certificate Holder Not Deemed a Stockholder...............................34
Section 18. Concerning the Rights Agent......................................................35
Section 19. Merger or Consolidation or Change of Name of Rights Agent........................35
Section 20. Duties of Rights Agent...........................................................36
Section 21. Change of Rights Agent...........................................................38
Section 22. Issuance of New Rights Certificates..............................................39
Section 23. Redemption and Termination.......................................................40
Section 24. Exchange.........................................................................41
Section 25. Notice of Certain Events.........................................................42
Section 26. Notices..........................................................................43
Section 27. Supplements and Amendments.......................................................44
Section 28. Successors.......................................................................45
Section 29. Determinations and Actions by the Board of Directors, etc........................45
Section 30. Benefits of This Agreement.......................................................46
Section 31. Severability.....................................................................46
Section 32. Governing Law....................................................................46
Section 33. Counterparts.....................................................................46
Section 34. Descriptive Headings.............................................................46
</TABLE>
i
<PAGE>
Exhibit A - Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights
ii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of January 27, 2000 (the "Agree
ment"), between PRISM FINANCIAL CORPORATION, a Delaware corporation (the
"Company"), and LASALLE BANK NATIONAL ASSOCIATION, a national banking
association (the "Rights Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, on January 27, 2000 (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of common stock, par value $.01 per
share, of the Company (the "Common Stock") outstanding at the close of business
on February 7, 2000 (the "Record Date") and has authorized and directed the
issuance of one Right (as such number may be hereinafter adjusted pursuant to
Section 11(i) or 11(p) hereof) for each share of Common Stock of the Company
issued between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribu tion Date and, in certain circumstances
provided in Section 22 hereof, after the Distribution Date, each Right initially
representing the right to purchase one one-thousandth of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share, of the Company
having the rights, powers and preferences set forth in the form of Certificate
of Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth (the "Rights").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include:
(i) the Company,
(ii) any Subsidiary of the Company,
<PAGE>
(iii) any employee benefit plan of the
Company or of any Subsidiary of the Company or any Person or entity
organized, appointed or established by the Company for or pursuant to
the terms of any such plan,
(iv) any Person who becomes the Beneficial
Owner of fifteen percent (15%) or more of the shares of Common Stock
then outstanding as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of shares of Common
Stock by the Company unless and until such Person, after becoming aware
that such Person has become the Beneficial Owner of fifteen percent
(15%) or more of the then outstanding shares of Common Stock, acquires
beneficial ownership of additional shares of Common Stock representing
one percent (1%) or more of the shares of Common Stock then
outstanding, or
(v) any such Person who has reported or is
re quired to report such ownership (but less than 20%) on Schedule 13G
under the Exchange Act (or any comparable or successor report) or on
Schedule 13D under the Exchange Act (or any comparable or successor
report) which Schedule 13D does not state any intention to or reserve
the right to control or influence the management or policies of the
Company or engage in any of the actions specified in Item 4 of such
Schedule (other than the disposition of the Common Stock) and, within
10 Business Days of being requested by the Company to advise it
regarding the same, certifies to the Company that such Person acquired
shares of Common Stock representing in excess of 14.9% of the
outstanding Common Stock inadvertently or without knowledge of the
terms of the Rights and who, together with all Affiliates and
Associates, thereafter does not acquire additional shares of Common
Stock while the Benefi cial Owner of 15% or more of the shares of
Common Stock then out standing, provided, however, that if the Person
described in this clause (v) is requested to so certify and fails to do
so within 10 Business Days, then such Person shall become an Acquiring
Person immediately after such 10 Business Day period.
(b) "Adverse Person" shall mean any Person declared
to be an Adverse Person by the Board of Directors upon determination that the
criteria set forth in Section 11(a)(ii)(B) apply to such Person; provided,
however, that the Board of
2
<PAGE>
Directors shall not declare any Person who is the Beneficial Owner of 10% or
more of the outstanding Common Stock of the Company to be an Adverse Person if
such Person has reported or is required to report such ownership on Schedule 13G
under the Ex change Act (as defined) (or any comparable or successor report) or
on Schedule 13D under the Exchange Act (or any comparable or successor report)
which Schedule 13D does not state any intention to or reserve the right to
control or influence the manage ment or policies of the Company or engage in any
of the actions specified in Item 4 of such Schedule (other than the disposition
of the Common Stock) so long as such Person neither reports nor is required to
report such ownership other than as described in this proviso to Section 1(b).
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended and as in
effect on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner"
of, and shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, other rights, warrants or options,
or otherwise; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or
any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of
a Triggering Event or (C) securities issuable upon exercise of Rights
from and after the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a)
or Section 22 hereof (the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with respect to any
Original Rights;
3
<PAGE>
(ii) which such Person or any of such
Person's Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including pursuant to any agreement,
arrangement or understand ing, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned,
directly or indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person (or any of such Person's
Affiliates or Associ ates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subpara graph (ii) of this paragraph (d))
or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (d) shall cause a Person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
(e) "Board of Directors" shall mean the board of
directors of the Company.
(f) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New York
or the State of Illinois are authorized or obligated by law or executive order
to close.
4
<PAGE>
(g) "Close of business" on any given date shall mean
5:00 P.M., New York City time, on such date; provided, however, that if such
date is not a Business Day, it shall mean 5:00 P.M., New York City time, on the
next succeeding Business Day.
(h) "Common Stock" shall mean the common stock, par
value $.01 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(i) "Common Stock Equivalent" shall have the meaning
set forth in Section 11(a) (iii) hereof.
(j) "Current Market Price" shall have the meaning
ascribed to such term in Section 11(d) hereof.
(k) "Current Value" shall have the meaning set forth
in Section 11(a)(iii).
(l) "Distribution Date" shall have the meaning
ascribed to such term in Section 3(a) hereof.
(m) "Exchange Act" shall have the meaning ascribed
to such term in Section 1(c) hereof.
(n) "Exchange Ratio" shall have the meaning set
forth in Section 24 hereof.
(o) "Expiration Date" shall have the meaning
ascribed to such term in Section 7 hereof.
(p) "Final Expiration Date" shall have the meaning
set forth in Section 7(a) hereof.
(q) "Person" shall mean any individual, firm,
corporation, partnership, limited liability company or other entity.
5
<PAGE>
(r) "Preferred Stock" shall mean shares of Series A
Junior Participating Preferred Stock, par value $.01 per share, of the Company,
and, to the extent there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, without par value, of the
Company designated for such purpose containing terms substantially similar to
the terms of the Series A Junior Participating Preferred Stock.
(s) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(t) "Purchase Price" shall have the meaning ascribed
to such term in Section 4(a).
(u) "Qualified Offer" shall have the meaning set
forth in Section 11(a)(ii) hereof.
(v) "Record Date" shall mean February 7, 2000.
(w) "Rights" shall have the meaning ascribed to such
term in the Recitals.
(x) "Rights Agent" shall have the meaning set forth
in the parties clause at the beginning of this Agreement.
(y) "Rights Certificate" shall have the meaning
ascribed to such term in Section 3(a).
(z) "Rights Dividend Declaration Date" shall have
the meaning set forth in the WHEREAS clause at the beginning of this Agreement.
(aa) "Section 11 Event" shall mean any event
described in Section 11(a)(ii)(A) or (B) hereof.
(ab) "Section 13 Event" shall mean any event
described in clauses (x), (y) or (z) of Section 13(a) hereof.
(ac) "Spread" shall have the meaning set forth in
Section 11(a)(iii) hereof.
6
<PAGE>
(ad) "Securities Act" shall have the meaning
ascribed to such term in Section 9(c).
(ae) "Stock Acquisition Date" shall mean the first
date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such other than pursuant to a Qualified Offer.
(af) "Subsidiary" shall mean, with reference to any
Person, any corporation of which an amount of voting securities sufficient to
elect at least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by such
Person.
(ag) "Substitution Period" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(ah) "Summary of Rights" shall have the meaning set
forth in Section 3(b) hereof.
(ai) "Trading Day" shall have the meaning set forth
in Section 11(d)(i) hereof.
(aj) "Triggering Event" shall mean any Section 11
Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-rights agents as
it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business
on the tenth day after the Stock Acquisition Date (or, if the tenth day after
the Stock Acquisition Date occurs before the Record Date, the close of business
on the Record Date), (ii) the close of business on the tenth Business Day (or
such later date as the Board of Directors shall
7
<PAGE>
determine) after the date that a tender or exchange offer by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company or any Person organized,
appointed or established by the Company for or pursuant to the terms of any such
plan) is first published or sent or given within the meaning of Rule 14d-2(a) of
the General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding or (iii) the close of business on the tenth
Business Day after the Board of Directors determines, pursuant to the criteria
set forth in Section 11(a)(ii)(B) hereof, that a Person is an Adverse Person
(the earliest of clauses (i), (ii) and (iii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable after
the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more right certificates, in substantially the
form of Exhibit B hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held, subject to adjustment as provided herein. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made pursuant to Section 11(i) or 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company shall make the necessary
and appropriate rounding adjustments (in accordance with Section 14(a) hereof)
so that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) The Company will make available, as promptly as
practicable following the Record Date, a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights") to
any holder of Rights who may so request from time to time prior to the
Expiration Date. With respect to certificates for the Common Stock outstanding
as of the Record Date, until the Dis tribution Date, the Rights will be
evidenced by such certificates for the Common Stock and the registered holders
of the Common Stock shall also be the registered holders of the associated
Rights. Until the earlier of the Distribution Date or the Expiration Date, the
transfer of any certificates representing shares of Common Stock in respect of
which
8
<PAGE>
Rights have been issued shall also constitute the transfer of the Rights
associated with such shares of Common Stock.
(c) Rights shall be issued in respect of all shares
of Common Stock which are issued (whether originally issued or delivered from
the Company's trea sury) after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date or, in certain circumstances provided
in Section 22 hereof, after the Distribution Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for Rights,
and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between Prism
Financial Corporation (the "Company") and LaSalle Bank National
Association, dated as of January 27, 2000, as from time to time amended
(the "Rights Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal
offices of the Company. Under certain circumstances, as set forth in
the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certifi cate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquir ing Person or an
Adverse Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether cur rently held by or on
behalf of such Person or by any subsequent hold er, may become null and
void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
9
<PAGE>
(a) The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-thousandths
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to
Section 3(a), Section 11(i) or Section 22 hereof that represents Rights
beneficially owned by (i) an Acquiring Person, an Adverse Person or any
Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person or Adverse Person
becomes such, or (iii) a transferee of an Acquiring Person or Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person or Adverse Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to holders of equity
interests in such Acquiring Person or Adverse Person or to any Person with whom
such Acquiring Person or Adverse Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person,
Adverse Person or an Affiliate or Associate of an Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement).
Accord-
10
<PAGE>
ingly, this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section 7(e) of
such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be valid
for any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights
Agent will keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each of
the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b),
Section 7(e) and Section 14 hereof, at any time after the close of business on
the Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates (other than Rights
Certificates representing Rights that have been exchanged
11
<PAGE>
pursuant to Section 24 hereof) may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-thousandths of a share of
Preferred Stock (or, following a Trig gering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such re quest in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate or Certificates until the registered holder shall have
completed and signed the certificate contained in the form of assignment set
forth on the reverse side of such Rights Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 4(b),
7(e), 14 and 24 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent
of evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersigna ture and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) Subject to Section 7(e) hereof, the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23(a) hereof) in whole or in part at any time after the Distribution
Date upon surrender of the Rights Certificate, with the form
12
<PAGE>
of election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the principal office or offices of the Rights
Agent designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of one one-thousandths of a
share of Preferred Stock (or other securities, cash or other assets, as the case
may be) as to which such surrendered Rights are then exercisable, at or prior to
the earlier of (i) 5:00 p.m. New York City time on January 27, 2010 or such
later date as may be established by the Board of Directors prior to the
expiration of the Rights (such date, as may be extended by the Board, the "Final
Expira tion Date"), (ii) the time at which the Rights are redeemed as provided
in Section 23 hereof, or (iii), the time at which such Rights are exchanged
pursuant to Section 24 hereof (the earliest of clauses (i), (ii) and (iii) being
herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth
of a share of Preferred Stock pursuant to the exercise of a Right shall
initially be $17.00, and shall be subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below ("Purchase Price").
(c) Upon receipt of a Rights Certificate
representing exercisable Rights, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, accompanied by payment,
with respect to each Right so exer cised, of the Purchase Price per one
one-thousandth of a share of Preferred Stock (or other shares, securities, cash
or other assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable transfer tax, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the shares of Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of one
one-thousandths of a share of Preferred Stock to be purchased, and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of shares of Preferred Stock issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock as
are to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer agent with
the depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or
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names as may be designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by
certified bank check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities (including Common
Stock) of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(d) In case the registered holder of any Rights
Certificate shall exercise less than all the Rights evidenced thereby, a new
Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, sub ject to the provisions of
Section 14 hereof.
(e) Notwithstanding anything in this Agreement to
the contrary, from and after the first occurrence of a Section 11 Event, any
Rights beneficially owned by (i) an Acquiring Person, an Adverse Person or an
Associate or Affiliate of an Acquiring Person or Adverse Person, (ii) a
transferee of an Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person or Adverse Person
becomes such, or (iii) a transferee of an Acquiring Person or Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person or Adverse Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or Adverse Person to holders of equity
interests in such Acquiring Person or Adverse Person or to any Person with whom
the Acquiring Person or Adverse Person has any continuing agreement, arrangement
or understanding regarding the transferred Rights or (B) a transfer which the
Board of Directors of the Company has in its sole discretion determined is part
of a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 7(e), shall become null and void without any
further action, and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b)
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hereof are complied with, but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or Adverse Person or any of
their respective Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to
the contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affili ates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combina tion or exchange shall, if surrendered to the
Company or any of its agents, be delivered to the Rights Agent for cancellation
or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled
by it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
shares of Preferred Stock (and, following the occurrence of a Triggering Event,
out of its authorized and unissued shares of Common Stock and/or other
securities or out of any authorized and issued shares held in its treasury), the
number of shares of Preferred Stock (and, following the occurrence of a
Triggering Event, shares of Common Stock and/or other securities) that, as
provided in this Agreement including Section 11(a)(iii) hereof, will be
sufficient to permit the exercise in full of all outstanding Rights.
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(b) So long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and/or
other securities) issuable and deliverable upon the exercise of the Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable (but
only to the extent that it is reasonably likely that the Rights will be
exercised), all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i)
file, as soon as practicable following the earliest date after the first
occurrence of a Section 11 Event on which the consideration to be delivered by
the Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), or as soon
as is required by law following the Distribution Date, as the case may be, a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained or the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all one one-thousandths
of a share of Preferred Stock (and, following the occurrence of a Triggering
Event, shares of Common Stock
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and/or other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
Section 10. Preferred Stock Record Date. Each person in whose
name any certificate for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next suc ceeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the number and kind of shares
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide the
outstanding Preferred Stock, (C) combine the outstanding Preferred
Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including
any such reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e)
hereof, the Purchase Price in effect
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at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the
case may be, issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in effect,
the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Person, at any time after
the Rights Dividend Declaration Date, shall become an Acquiring Person,
unless the event causing such Person to become an Acquiring Person is a
transaction set forth in Section 13(a) hereof, or is an acquisition of
shares of Common Stock pursuant to a tender offer or exchange offer for
all outstanding shares of Common Stock at a price and on terms
determined by at least a majority of the members of the Board of Direc
tors who are not officers of the Company and who are not representa
tives, nominees, Affiliates or Associates of an Acquiring Person, after
receiving advice from one or more investment banking firms, to be (a)
at a price which is fair to stockholders and not inadequate (taking
into account all factors which such members of the Board deem relevant,
including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the best
interests of the Company and its stockholders (a "Qualified Offer"), or
(B) the Board of Directors of the
Company shall declare any Person to be an Adverse Person, upon a
determination that such Person, alone or together with its Affiliates
and
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<PAGE>
Associates, has, at any time after this Agreement has been filed with
the Securities and Exchange Commission as an exhibit to a filing under
the Exchange Act, become the Beneficial Owner of a number of shares of
Common Stock which the Board of Directors of the Company deter mines to
be substantial (which number of shares shall in no event represent less
than 10% of the outstanding shares of Common Stock) and a determination
by the Board of Directors of the Company, after reasonable inquiry and
investigation, including consultation with such persons as such
directors shall deem appropriate and consideration of such factors as
are permitted by applicable law, that (a) such Beneficial Ownership by
such Person is intended to cause the Company to repurchase the shares
of Common Stock beneficially owned by such Person or to cause pressure
on the Company to take action or enter into a transaction or series of
transactions intended to provide such Person with short-term financial
gain under circumstances where the Board of Directors determines that
the best long-term interests of the Company would not be served by
taking such action or entering into such trans action or series of
transactions at that time or (b) such Beneficial Ownership is causing
or reasonably likely to cause a material adverse impact (including, but
not limited to, impairment of relationships with customers or
impairment of the Company's ability to maintain its competitive
position) on the business or prospects of the Company, on the Company's
employees, customers or suppliers or on the communi ties in which the
Company operates or is located,
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof, at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-thousandths of a share of Preferred Stock, such number of
shares of Common Stock as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the then number of one one-thousandths of a share
of Preferred Stock for which a Right was exercisable immediately prior to the
first occurrence of a Section 11 Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement) by 50%
of the Current Market Price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
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(ii) In the event that the number of shares
of Common Stock which are authorized by the Company's Certificate of
Incorporation, but not outstanding or reserved for issuance for
purposes other than upon exercise of the Rights, are not sufficient to
permit the exercise in full of the Rights in accordance with the
foregoing subpara graph (ii) of this Section 11(a), the Company shall:
(A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exer cise of a Right (the "Current Value") over (2)
the Purchase Price (such excess, the "Spread"), and (B) with respect to
each Right, subject to Section 7(e) hereof, make adequate provision to
substitute for the Adjustment Shares, upon the exercise of a Right and
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of
preferred stock, such as the Preferred Stock, which the Board of
Directors of the Company has deemed to have essentially the same value
or economic rights as shares of Common Stock (such shares or units of
shares of preferred stock are referred to herein as "Common Stock
Equivalents")), (4) debt securities of the Company, (5) other assets,
or (6) any combination of the forego ing, having an aggregate value
equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined by the
Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors
of the Company; provided, however, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days fol lowing the later of (x) the first
occurrence of a Section 11 Event and (y) the date on which the
Company's right of redemption pursuant to Sec tion 23(a) expires (the
later of (x) and (y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requir ing payment of
the Purchase Price, shares of Common Stock (to the extent available)
and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the
Company shall determine in good faith that it is likely that suffi
cient additional shares of Common Stock could be authorized for issu
ance upon exercise in full of the Rights, the thirty (30) day period
set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the
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<PAGE>
Company may seek stockholder approval for the authorization of such
additional shares (such thirty (30) day period, as it may be extended,
the "Substitution Period"). To the extent that the Company determines
that some action should be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the exercisability of
the Rights until the expiration of the Substitution Period in order to
seek stockhold er approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made
pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of each Adjust ment Share shall be the Current
Market Price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per share or per unit value of any Common Stock
Equivalent shall be deemed to have the Current Market Price per share
of the Common Stock on such date.
(b) In case the Company shall fix a record date for
the issuance of rights (other than the Rights), options or warrants to all
holders of Preferred Stock entitling them to subscribe for or purchase (for a
period expiring within forty-five (45) calendar days after such record date)
Preferred Stock (or shares having the same rights, privileges and preferences as
the shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the Current Market Price per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock and/or equivalent
preferred stock so to be offered (and/or the aggregate initial conversion price
of the convertible securities so to be offered) would purchase at such Current
Market Price, and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of additional
shares of Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into
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<PAGE>
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for
a distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price per share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such Current Market Price
per share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder,
other than computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days immediately
prior to such date, and for purposes of computations made pursuant to
Section 11(a)(iii) hereof, the
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"Current Market Price" per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that the
Current Market Price per share of Common Stock is determined during a
period following the announcement by the issuer of the Common Stock of
(A) any dividend or distribution on such Common Stock, payable in
shares of such Common Stock or securities convertible into shares of
such Common Stock (other than the Rights), or (B) any subdivision,
combination or reclassification of such Common Stock, and the
ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification shall not have
occurred prior to the commencement of the requisite thirty (30) Trading
Day period or ten (10) Trading Day period, as set forth above, then,
and in each such case, the "Current Market Price" shall be properly
adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by
any such system, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock selected by the Board of Directors of the Compa ny. If on any
such date no market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used. The term "Trading
Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading is open for the transaction of business or, if the shares of
Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "Current Market
23
<PAGE>
Price" per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose
determination shall be de scribed in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "Current Market Price" per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock
in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of Preferred Stock
cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in
clause (i) of this Section 11(d), the "Current Market Price" per share
of Preferred Stock shall be conclusively deemed to be an amount equal
to 1,000 (as such number may be appropriately adjusted for such events
as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied
by the Current Market Price per share of the Common Stock. If neither
the Common Stock nor the Preferred Stock is publicly held or so listed
or traded, "Current Market Price" per share of the Preferred Stock
shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of a Unit shall be equal to the Current Market
Price of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding,
no adjustment in the Purchase Price shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share or one millionth of a share of Preferred Stock,
as the case may be. Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which mandates
such adjust ment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall
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<PAGE>
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall evidence
the right to purchase, at the adjusted Purchase Price, the number of one
one-thousandths of a share of Preferred Stock purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of Rights, in lieu of
any adjustment in the number of one one-thousandths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the number
of one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been
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issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may con tinue to express the Purchase Price
per one one-thousandths of a share and the number of one one-thousandths of a
share which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated value, if any, of
the number of one one-thousandths of a share of Preferred Stock issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable such number of one
one-thousandths of a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date the number of one one-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one one-thousandths of a share of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
26
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holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares (fractional or otherwise) or securities upon
the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at less than the Current Market Price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall
not, at any time after the Distribution Date, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distri bution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reason ably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
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(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.
(q) The failure of the Board of Directors to declare
a Person to be an Adverse Person following such Person becoming the Beneficial
Owner of shares of Common Stock representing 10% or more of the outstanding
shares of Common Stock shall not imply that such Person is not an Adverse Person
or limit the Board of Directors' right at any time in the future to declare such
Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) mail a brief summary thereof to each holder of a Rights Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which
28
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complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section 11(o)
hereof), then, and in each such case (except as may be contemplated by Section
13(d) hereof), proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter defined), not
subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11 Event has occurred prior
to the first occurrence of a Section 13 Event, multiplying the number of such
one one-thousandths of a share for which a Right was exercisable immediately
prior to the first occurrence of a Section 11 Event by the Purchase Price in
effect immediately prior to such first occurrence) and dividing that product
(which, following the first occurrence of a Section 13 Event shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter
29
<PAGE>
be applicable, as nearly as reasonably may be, in relation to its shares of
Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction
described in clause (x) or (y) of the first sentence of Section 13(a),
the Person that is the issuer of any securities for or into which
shares of Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person that is
the other party to such merger or consolidation; and
(ii) in the case of any transaction
described in clause (z) of the first sentence of Section 13(a), the
Person that is the party receiving the greatest portion of the assets
or earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13
Event unless the Principal Party shall have a sufficient number of authorized
shares of its Common Stock which have not been issued or reserved for issuance
to permit the exer cise in full of the Rights in accordance with this Section 13
and unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any such Section 13
Event, the Principal Party will:
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<PAGE>
(i) prepare and file a registration
statement under the Securities Act, with respect to the Rights and the
securities purchas able upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or
register the Rights and the securities purchasable upon exercise of the
Rights under blue sky laws of such jurisdiction, as may be necessary or
appropriate; and
(iii) will deliver to holders of the Rights
historical financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the first occurrence of a Section 11 Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to
the contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons (or a wholly-owned Subsidiary of any such
Person or Persons) who acquired shares of Common Stock pursuant to a Qualified
Offer, (ii) the price per share of Common Stock offered in such transaction is
not less than the price per share of Common Stock paid to all holders of shares
of Common Stock whose shares were purchased pursuant to such Qualified Offer,
and (iii) the form of consideration being offered to the remaining holders of
shares of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such Qualified Offer. Upon consummation of any
such transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
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(a) The Company shall not be required to issue
fractions of Rights, except prior to the Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to the
same fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing price of
the Rights for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such system, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Compa ny. If on any such date
no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the Board of Directors of the
Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock). In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth of a share
of Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be one one-thousandth of the closing price of a share of Preferred
Stock (as determined pursu-
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ant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the
date of such exercise.
(c) Following the occurrence of a Triggering Event,
the Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price per share of Common Stock (deter mined pursuant
to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
Section 15. Rights of Action. All rights of action in respect
of this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
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<PAGE>
(a) prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent and
only if surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates fully
executed;
(c) subject to Section 6(a) and Section 7(f) hereof,
the Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (not withstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to
the contrary, neither the Company nor the Rights Agent shall have any liability
to any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the number of
one one-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive
34
<PAGE>
notice of meetings or other actions affecting stockholders (except as provided
in Section 25 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
Section 25. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disburse ments and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent, for anything done or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises. The
foregoing indemnities in this paragraph shall survive the resignation or
substitution of the Rights Agent or the termination of this Agreement.
(b) The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent or
any suc cessor Rights Agent may be merged or with which it may be consolidated,
or any corporation resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or shareholder services business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties
35
<PAGE>
hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent
shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under
this Agreement the Rights Agent shall deem it necessary or desirable that any
fact or matter (including, without limitation, the identity of any Acquiring
Person or Adverse Person and the determination of "Current Market Price") be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent;
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<PAGE>
and such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only
for its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except as to
its countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11, Section 13 or Section 24 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertain ing of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Common Stock or Pre ferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be valid ly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform,
execute, ac knowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company or any designee of any of the
37
<PAGE>
foregoing, and to apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securi ties of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or other wise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the perfor mance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indem nification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or the form of election to purchase, as the
case may be, has either not been completed or indicates an affirmative response
to clause 1 and/or 2 thereof, the Rights Agent shall not take any further action
with respect to such requested exercise or transfer without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing,
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<PAGE>
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by any registered holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then any registered holder of a Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (A)
a corporation orga nized and doing business under the laws of the United States
or of the State of New York or Delaware (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of New York or Delaware), in good standing, having a
principal office in the State of New York or Delaware which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$100,000,000 or (B) an affiliate of a corporation described in clause (A) of
this sentence and which shall otherwise meet any requirements imposed by the New
York Stock Exchange on transfer agents and registrars. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the prede cessor Rights Agent shall deliver and
transfer to the successor Rights Agent any proper ty at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. The predecessor Rights Agent shall be paid any
outstanding fees and expenses prior to transferring assets to a successor Rights
Agent. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred Stock, and mail a notice
thereof in writing to the registered holders of the Rights Certificates. Failure
to give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the Rights, Rights
Agreement or the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be
39
<PAGE>
approved by its Board of Directors to reflect any adjustment or change in the
Purchase Price and the number or kind or class of shares or other securities or
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrange ment, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at
its option, at any time prior to the earlier of (i) the close of business on the
tenth day following the Stock Acquisition Date (or, if the Stock Acquisition
Date shall have occurred prior to the Record Date, the close of business on the
tenth day following the Record Date), or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at a redemption price of
$0.001 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"). Notwithstanding the foregoing, the Board of Directors may not redeem
any Rights following a determination pursuant to Section 11(a)(ii)(B) that any
Person is an Adverse Person. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11 Event until such time as the Company's right of
redemption set forth in the first sentence of this Section 23(a) has expired.
The Company may, at its option, pay the Redemption Price in cash, shares of
Common Stock (based on the Current Market Price of the Common Stock at the time
of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
40
<PAGE>
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person or is
determined to be an Adverse Person pursuant to Section 11(a)(ii)(B), exchange
all or part of the then out standing and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an ex change ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwith standing
the foregoing, the Board of Directors shall not be empowered to effect such ex
change at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any entity holding Common Stock for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Common Stock then
outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
41
<PAGE>
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the
Company, at its option, may substitute shares of Preferred Stock (or Equivalent
Preferred Stock, as such term is defined in paragraph (b) of Section 11 hereof)
for shares of Common Stock exchangeable for Rights, at the initial rate of one
one-thousandth of a share of Preferred Stock (or Equivalent Preferred Stock) for
each share of Common Stock, as appropriately adjusted to reflect adjustments in
the voting rights of the Preferred Stock pursuant to Section 3(A) of the rights,
powers and preferences attached hereto as Exhibit A, so that the fraction of a
share of Preferred Stock delivered in lieu of each share of Common Stock shall
have one one-thousandth of the voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit any ex change of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue
fractions of shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of Common
Stock, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional share of Common Stock would otherwise be
issuable, an amount in cash equal to the same fraction of the Current Market
Value of a whole share of Common Stock. For the purposes of this subsection (e),
the "Current Market Value" of a whole share of Common Stock shall be the closing
price of a share of Common Stock (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
42
<PAGE>
(a) In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Stock (other than a reclassification involving only the
subdivision of outstanding shares of Preferred Stock), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case any Section 11 Event shall occur, then,
in any such case, (i) the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the conse quences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or other
securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or
43
<PAGE>
on the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Attention: Mark A. Filler, President and Chief Executive
Officer
Prism Financial Corporation
440 N. Orleans
Chicago, Illinois 60610
Fax#: 312-494-0273
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Attention: Mark Rimkus
LaSalle Bank National Association
135 South LaSalle
Suite 1960
Chicago, Illinois 60603
Fax#: 312-904-2236
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribu tion Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 27,
the Company and, if so directed by the Company, the Rights Agent, shall
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock and associated
Rights. From and after the Distribution Date and subject to the penultimate
sentence of this Section 27, the Company may and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order to: (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period
44
<PAGE>
hereunder, or (iv) change or supplement the provisions hereunder in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates (other than an
Acquiring Person, Adverse Person or an Affiliate or Associate of an Acquiring
Person or Adverse Person); provided, however, that this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights (other than an Acquiring
Person or Adverse Person and its Associates and Affiliates). Upon the delivery
of a certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment. Prior
to the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock. Notwithstanding
anything herein to the contrary, this Agreement may not be amended at a time
when the Rights are not redeemable.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock or any other class of capital stock outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other
45
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parties, and (y) not subject the Board or any of the directors on the Board to
any liability to the holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be per formed entirely within such state.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
PRISM FINANCIAL CORPORATION
By: /s/ David A. Fisher
-----------------------------------
Name: David A. Fisher
Title: Senior Vice President, Chief
Financial Officer and Secretary
LASALLE BANK NATIONAL ASSOCIATION,
as Rights Agent
By: /s/ Mark Rimkus
-----------------------------------
Name: Mark Rimkus
Title: Authorized Signatory
47
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EXHIBIT A
---------
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK
of
PRISM FINANCIAL CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned officer of Prism Financial Corporation, a
corporation orga nized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Restated Certificate of Incorporation of the said Corporation,
the said Board of Directors on January 27, 2000 adopted the following resolution
creating a series of 20,000 shares of Pre ferred Stock designated as Series A
Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of its
Restated Certificate of Incorpo ration, a series of Preferred Stock of the
Corporation be and it hereby is created, and that the designation and amount
thereof and the voting powers, preferences and relative, participat ing,
optional and other special rights of the shares of such series, and the
qualifications, limi tations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be 20,000.
A-1
<PAGE>
Section 2. Dividends and Distributions.
(A) The holders of shares of Series A Junior Participating
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of March, June, September and December
in each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Pay ment Date after
the first issuance of a share or fraction of a share of Series A Junior Partici
pating Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participat ing Preferred Stock. In the
event the Corporation shall at any time after January 27, 2000 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Junior Participating Preferred
Stock were enti tled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in Paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock); provided that,
in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series A Junior Participating Preferred Stock shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from the
Quarterly Dividend Payment Date
A-2
<PAGE>
next preceding the date of issue of such shares of Series A Junior Participating
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Junior Participating Preferred Stock shall entitle
the holder thereof to 1 vote on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Participating Preferred Stock were entitled immediately prior
to such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of stockholders of the Cor poration.
(C) (i) If at any time dividends on any Series A
Junior Participating Preferred Stock shall be in arrears in an amount
equal to six (6)
A-3
<PAGE>
quarterly dividends thereon, the occurrence of such contingency shall
mark the beginning of a period (herein called a "default period") which
shall extend until such time when all accrued and unpaid dividends for
all previous quarterly dividend periods and for the current quarterly
dividend period on all shares of Series A Junior Participating
Preferred Stock then outstanding shall have been declared and paid or
set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six
(6) quarterly dividends thereon, voting as a class, irrespective of
series, shall have the right to elect two (2) directors.
(ii) During any default period, such voting right of
the holders of Series A Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders,
provided that neither such voting right nor the right of the holders of
any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of directors shall be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock
outstanding shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect the exercise by
the holders of Preferred Stock of such voting right. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect directors to fill such vacancies, if any,
in the Board of Directors as may then exist up to two (2) directors or,
if such right is exercised at an annual meeting, to elect two (2)
directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the number of
directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect direc tors in any default period and
during the continuance of such period, the number of directors shall
not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with the Series A
Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect direc tors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than ten
percent (10%) of the total number
A-4
<PAGE>
of shares of Preferred Stock outstanding, irrespective of series, may
request, the calling of special meeting of the holders of Preferred
Stock, which meeting shall thereupon be called by the President, a
Vice-President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Stock
are entitled to vote pursuant to this Paragraph (C)(iii) shall be given
to each holder of record of Preferred Stock by mailing a copy of such
notice to him or her at his or her last address as the same appears on
the books of the Corporation. Such meeting shall be called for a time
not earlier than 20 days and not later than 60 days after such order or
request or in default of the calling of such meeting within 60 days
after such order or request, such meeting may be called on similar
notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Preferred
Stock outstanding. Notwithstanding the provisions of this Paragraph
(C)(iii), no such special meeting shall be called during the period
within 60 days immediately preceding the date fixed for the next annual
meeting of the stockholders.
(iv) In any default period, the holders of Common
Stock, and other classes of stock of the Corporation if applicable,
shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right
to elect two (2) directors voting as a class, after the exercise of
which right (x) the directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period,
and (y) any vacancy in the Board of Directors may (except as provided
in Paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining directors theretofore elected by the holders of the
class of stock which elected the director whose office shall have
become vacant. Refer ences in this Paragraph (C) to directors elected
by the holders of a particular class of stock shall include directors
elected by such directors to fill vacancies as provided in clause (y)
of the foregoing sentence.
(v) Immediately upon the expiration of a default
period, (x) the right of the holders of Preferred Stock as a class to
elect directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and (z) the
number of directors shall be such number as may be provided for in the
certificate of incorporation or by-laws irrespective of any increase
made pursuant to the provisions of Paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner
provided by law or in the certificate of incorporation
A-5
<PAGE>
or by-laws). Any vacancies in the Board of Directors effected by the
provi sions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of Series A Junior
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not de clared, on shares of
Series A Junior Participating Preferred Stock outstanding shall have been paid
in full, the Corporation shall not
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make
any other distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Par ticipating Preferred Stock, except
dividends paid ratably on the Series A Junior Participating Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Junior Par ticipating Preferred Stock, provided that
the Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior
Participating Preferred Stock; or
A-6
<PAGE>
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Junior Participating Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under Paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatso ever shall be retired and cancelled promptly after the
acquisition thereof. All such shares shall upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part of
a new series of Preferred Stock to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon
any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distri bution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to $1,000 per share of Series A
Participating Preferred Stock, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in subparagraph
(C) below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all
A-7
<PAGE>
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event
A-8
<PAGE>
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the Corporation's
Preferred Stock as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series A
Junior Participating Preferred Stock are outstanding, neither the Restated
Certificate of Incorpo ration of the Corporation nor this Certificate of
Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Junior Participating
Preferred Stock may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise voting
rights, receive dividends, participate in distributions and to have the benefit
of all other rights of holders of Series A Junior Participating Preferred Stock.
A-9
<PAGE>
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this __ day of __________, 2000.
PRISM FINANCIAL CORPORATION
---------------------------------
Name:
Title:
A-10
<PAGE>
EXHIBIT B
---------
[Form of Rights Certificate]
Certificate No. R- _____Rights
NOT EXERCISABLE AFTER JANUARY 27, 2010 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFI CIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSE QUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFI CIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.
Rights Certificate
PRISM FINANCIAL CORPORATION
This certifies that _________________, or registered assigns,
is the regis tered holder of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of January 27,2000 (the "Rights Agreement"),
between PRISM FINANCIAL CORPORATION, a Delaware corporation (the "Company"), and
LASALLE BANK NATIONAL ASSOCIATION, a national banking association (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 PM (New York
City time) on January 27, 2010, at the office or offices of the Rights Agent
designated for such purpos e, or its successors as Rights Agent, one
one-thousandth of a fully-paid, nonassessable
B-1
<PAGE>
share of Series A Junior Participating Preferred Stock (the "Preferred Stock")
of the Company, at a purchase price of $17.00 per one one-thousandth of a share
(the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase set forth on the reverse
hereof and the Certificate contained therein duly executed. The Purchase Price
shall be paid in cash. The number of Rights evidenced by this Rights Certificate
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number of
Rights, number and Purchase Price as of __________ ___, 2000, based on the
Preferred Stock as constituted at such date, and are subject to adjustment upon
the happening of certain events as provided in the Rights Agreement. The Company
reserves the right to require prior to the occurrence of a Triggering Event (as
such term is defined in the Rights Agreement) that a number of Rights be
exercised so that only whole shares of Preferred Stock will be issued.
Upon the occurrence of a Section 11 Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or Adverse Person
or an Affiliate or Associate of any such Acquiring Person or Adverse Person (as
such terms are defined in the Rights Agree ment), (ii) a transferee of any such
Acquiring Person, Adverse Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
concurrently with or after such transfer, became an Acquiring Person, Adverse
Person or an Affiliate or Associate of an Acquiring Person or Adverse Person,
such Rights shall become null and void and no holder hereof shall have any
rights whatsoever with respect to such Rights from and after the occurrence of
such Section 11 Event.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obliga tions, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such pur pose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of
B-2
<PAGE>
one one-thousandths of a share of Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Certificates representing the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.001 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be extended or shortened pursuant to the Rights Agreement)
or (ii) the Final Expiration Date. In addition, under certain circumstances
following the Stock Acquisition Date, the Rights may be exchanged, in whole or
in part, for shares of Common Stock, or shares of preferred stock of the Company
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depositary receipts),
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder, as such, of this Rights Certificate shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
the shares of Preferred Stock or of any other securities of the Company which
may at any time be issuable on the exercise hereof, nor shall anything contained
in the Rights Agreement or herein be construed to confer upon the holder hereof,
as such, any of the rights of a stockholder of the Company or any right to vote
for the election of directors or upon any matter submitted to stockholders at
any meeting thereof, or to give or withhold consent to any corporate action, or
to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
B-3
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _____________, _____
PRISM FINANCIAL CORPORATION
By
------------------------------
Name:
Title:
Countersigned:
LASALLE BANK NATIONAL ASSOCIATION, as Rights Agent
By
-----------------------------------
Authorized Signature
B-4
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
Please print social security or other
identifying number of the transferor:________________________
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto:
--------------------------------------------------------------
(Please print name and address of transferee)
--------------------------------------------------------------
(Please print social security or other
identifying number of the transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ,
------------------ ----
---------------------------
Signature
Signature Guaranteed:
--------------------------
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person.
Dated:_________________, ____ _________________________
Signature
Signature Guaranteed:________________________
NOTICE
------
The signatures to the foregoing Assignment and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if the registered holder desires to
exercise Rights represented by the Rights Certificate.)
To: PRISM FINANCIAL CORPORATION
The undersigned hereby irrevocably elects to exercise ________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
--------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------
(Please print social security or other
identifying number)
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
--------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------
(Please print social security or other
identifying number)
Dated: ,
--------------- -----
-----------------------
Signature
Signature Guaranteed:
---------------------------
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are
[ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person, Adverse Person or an Affiliate or Associate of any such
Acquiring Person or Adverse Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person, Adverse Person or an Affiliate or Associate of any such Acquiring Person
or Adverse Person.
Dated: , -------------------------
----------------- ----- Signature
Signature Guaranteed:
-------------------------
NOTICE
------
The signatures to the foregoing Assignment and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 21, 2000, the Board of Directors of Prism Financial
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of Company Common Stock to stockholders of record at the
close of business on February 7, 2000 (the "Record Date"). Each Right entitles
the registered holder to purchase from the Company a unit consisting of one
one-thousandth of a share (a "Unit") of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Series A Preferred Stock"), at a Purchase
Price of $17.00 per Unit, subject to adjustment. The description and terms of
the Rights are set forth in a Rights Agreement (the "Rights Agreement") between
the Company and LaSalle Bank National Association, as Rights Agent.
Initially, the Rights will be attached to all Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. Subject to certain exceptions specified in the
Rights Agreement, the Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock other than as a result of repurchases of
stock by the Company or certain inadvertent actions by institutional or certain
other stockholders or the date a Person has entered into an agreement or
arrangement with the Company or any Subsidiary of the Company providing for an
Acquisition Transaction (the "Stock Acquisition Date"), (ii) 10 business days
(or such later date as the Board shall determine) following the commencement of
a tender offer or exchange offer that would result in a person or group becoming
an Acquiring Person or (iii) the date on which the Board of Directors determines
that a person or group, having obtained beneficial ownership of at least 10% of
the Company's common stock, is seeking short-term financial gain which would not
serve the long-term interests of the Company or whose ownership is causing or is
likely to cause a material adverse impact on the Company (as "Adverse Person").
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Record Date
will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.
C-1
<PAGE>
The Rights are not exercisable until the Distribution Date and
will expire at 5:00 P.M. New York City time on January 27, 2010, unless such
date is extended or the Rights are earlier redeemed or exchanged by the Company
as described below.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, except
pursuant to an offer for all outstanding shares of Common Stock which the
independent directors determine to be fair and not inadequate to and to
otherwise be in the best interests of the Company and its stockholders, after
receiving advice from one or more investment banking firms (a "Qualified
Offer"), or is deemed an Adverse Person, each holder of a Right will thereafter
have the right to receive, upon exercise, Common Stock (or, in certain circum
stances, cash, property or other securities of the Company) having a value equal
to two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person or Adverse Person,
as the case may be, will be null and void. However, Rights are not exercisable
following the occurrence of the event set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $17.00 per Right, each
Right not owned by an Acquiring Person or an Adverse Person, as the case may be,
(or by certain related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase $34.00 worth of Common Stock (or
other consideration, as noted above) for $17.00. Assuming that the Common Stock
had a per share value of $2.00 at such time, the holder of each valid Right
would be entitled to purchase 17 shares of Common Stock for $17.00.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company engages in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than
with an entity which acquired the shares pursuant to a Qualified Offer), (ii)
the Company engages in a merger or other business combination transaction in
which the Company is the surviving corporation and the Common Stock of the
Company is changed or exchanged, or (iii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights
which have previously been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times
C-2
<PAGE>
the exercise price of the Right. The events set forth in this paragraph and in
the second preceding paragraph are referred to as the "Triggering Events."
At any time after a person becomes an Acquiring Person and
prior to the acquisition by such person or group of fifty percent (50%) or more
of the outstanding Common Stock, the Board may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one share of Common Stock, or one one-thousandth
of a share of Preferred Stock (or of a share of a class or series of the
Company's preferred stock having equivalent rights, preferences and privileges),
per Right (subject to adjustment).
The Company will generally be entitled to redeem the Rights in
whole, but not in part, at $0.001 per Right (payable in cash, Common Stock or
other consideration deemed appropriate by the Board of Directors) at any time
until ten days (subject to extension) following the Stock Acquisition Date. The
Company will not be entitled, however, to redeem the Rights following a
determination by the Board of Directors that any person or group is an Adverse
Person. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company or in the event of the
redemption of the Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended
by the Board of Directors of the Company prior to the Distribution Date. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights, or to shorten or lengthen any time
period under the Rights Agreement. The foregoing notwithstanding, no amendment
may be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Current Report on Form 8-K
dated February, 2000. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
C-3
<PAGE>
Exhibit 20
FIRST AMENDMENT TO RIGHTS AGREEMENT
This First Amendment (the "Amendment"), dated as of March 10,
2000, is entered into by and between Prism Financial Corporation, a Delaware
corporation, (the "Company"), and LaSalle Bank National Association, a national
banking association, as Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent have entered into a
Rights Agreement, dated as of January 27, 2000 (the "Agreement");
WHEREAS, the Company wishes to amend the Agreement; and
WHEREAS, Section 27 of the Agreement provides, among other
things, that prior to the Distribution Date (as such term is defined in the
Agreement) the Company may and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of the Agreement without the approval
of any holders of certificates representing shares of the Company's common
stock, par value $.01 per share.
NOW, THEREFORE, the Company and the Rights Agent hereby amend
the Agreement as follows:
1. Paragraph (d) of Section 1 of the Agreement is hereby
amended by adding to the end of such paragraph (d) the following:
Notwithstanding the foregoing, for purposes of this Agreement,
none of Royal Bank of Canada, a Canadian corporation ("Parent"),
Rainbow Acquisition Subsidiary, Inc., a Delaware corporation and a
wholly-owned indirect subsidiary of Parent ("Purchaser"), and their
Affiliates or Associates shall be deemed to be the "Beneficial Owner"
of, or "beneficially own," any shares of Common Stock solely by virtue
of (i) the execution of the Merger Agreement, dated as of March 10,
2000 (the "Merger Agreement," which term shall include any amendments
thereto) by and among the Company, Parent and Purchaser, or (ii) the
execution of the Stockholders' Agreement, dated as of March 10, 2000
(the "Stockholders' Agreement," which term shall include any amendments
thereto) by and among Parent, Purchaser and certain holders of the
Common Stock, or (iii) the consummation of any of the transactions
contemplated by either the Merger Agreement or the Stockholders'
Agreement, including, without limitation, the public or other
announcement of the tender offer provided for by the Merger
<PAGE>
Agreement (the "Offer"), the consummation of the Offer, the public or
other announcement of the merger provided for by the Merger Agreement
(the "Merger"), the consummation of the Merger, the public or other
announcement of the acquisition by Parent, Purchaser or any of their
Affiliates of beneficial ownership of any securities of the Company
pursuant to the Stockholders' Agreement, and the acquisition by Parent,
Purchaser or any of their Affiliates of beneficial ownership of any
securities of the Company pursuant to the Offer, the Merger Agreement
or the Stockholders' Agreement.
2. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
3. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original, and
all of which together shall constitute but one and the same instrument.
4. Except as expressly set forth herein, this Amendment
shall not by implication or otherwise alter, modify, amend or in any way affect
any of the terms, conditions, obligations, covenants or agreements contained in
the Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and affect.
SIGNATURE PAGE FOLLOWS
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
Attest: PRISM FINANCIAL CORPORATION
By: /s/ Brad Simon By: /s/ David A. Fisher
------------------------------ ------------------------------
Name: Brad Simon Name: David A. Fisher
Title: Assistant Secretary Title: Chief Financial Officer
Attest: LASALLE BANK NATIONAL
ASSOCIATION
By: /s/ Mark F. Rimkus By: /s/ Gregory Malatia
--------------------------------- ------------------------------
Name: Mark F. Rimkus Name: Gregory Malatia
Title: Assistant Vice President Title: First Vice President
3
