SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
____________
November 15, 1996 (November 10, 1996)
(Date of Report (date of earliest event reported))
HFS Incorporated
(Exact name of Registrant as specified in its charter)
Delaware 1-11402 22-3059335
(State or other (Commission File No.) (I.R.S. Employer
Jurisdiction of Identification Number)
incorporation or organization
6 Sylvan Way
Parsippany, New Jersey 07054
(Address of principal executive office) (Zip Code)
(201) 428-9700
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On November 10, 1996, HFS Incorporated (the "Company"), a Delaware
corporation entered into an Agreement and Plan of Merger (the "Merger
Agreement") by and among the Company ("Mercury"), Mercury Acq. Corporation, a
Maryland corporation and wholly owned subsidiary of the Company and PHH
Corporation, a Maryland corporation ("PHH").
Pursuant to the Merger Agreement, Mercury will be merged with and into PHH
(the "Merger") with PHH to continue as the surviving corporation as a subsidiary
of the Company. In connection with the merger, the Company will issue
approximately $1.7 billion of Company common stock in exchange for all of the
outstanding common stock of PHH. Pursuant to the terms of the Merger Agreement,
the number of Company shares to be issued may range from 21.3 million to 28.7
million, based on the average price of the Company's common stock over a period
of 20 trading days edning five days prior to the date of the vote by PHH
shareholders on approval of the transaction. Consummation of the transaction is
subject to customary regulatory approvals and the approval of sharesholders of
the Company and PHH. The transaction is expected to close in early 1997.
PHH is the world's largest provider of corporation relocation services and
also provides mortgage banking and vehicle managment services.
The information set forth above is qualified in its entirety by reference
to the Agreement and Plan of Merger dated as of November 10, 1996 by and among
HFS Incorporated, Mercury Acquisition Corporation and PHH Corporation, a copy of
which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
Item 7(c). Exhibits
Exhibit
No. Description
2.1 Agreement and Plan of Merger dated as of November 10, 1996 by and
among HFS Incorporated, Mercury Acq. Corporation and PHH
Corporation.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HFS INCORPORATED
By: /s/ Michael P. Monaco
Michael P. Monaco
Vice Chairman
and Chief Financial Officer
Date: November 14, 1996
<PAGE>
HFS INCORPORATED
CURRENT REPORT ON FORM 8-K
Report Dated November 15, 1996 (November 10, 1996)
EXHIBIT INDEX
Exhibit No. Description
2.1 Agreement and Plan of Merger dated as of November 10, 1996 by
and among HFS Incorporated, Mercury Acq. Corporation and
PHH Corporation.
AGREEMENT AND PLAN OF MERGER
dated as of November 10, 1996
by and among
HFS INCORPORATED,
MERCURY ACQ. CORP.
and
PHH CORPORATION
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
Page
No.
ARTICLE I
THE MERGER
1.01 The Merger.......................................................
1.02 Closing..........................................................
1.03 Effective Time..................................................
1.04 Restated Articles and Bylaws of the Surviving
Corporation.................................................
1.05 Directors and Officers of the Surviving
Corporation.................................................
1.06 Effects of the Merger............................................
1.07 Further Assurances...............................................
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock......................................
2.02 Exchange of Certificates.........................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01 Organization and Qualification...................................
3.02 Capital Stock....................................................
3.03 Authority Relative to this Agreement.............................
3.04 Non-Contravention; Approvals and Consents........................
3.05 SEC Reports and Financial Statements.............................
3.06 Absence of Certain Changes or Events.............................
3.07 Absence of Undisclosed Liabilities...............................
3.08 Legal Proceedings................................................
3.09 Information Supplied.............................................
3.10 Compliance with Laws and Orders..................................
3.11 Compliance with Agreements; Certain Agreements...................
3.12 Taxes............................................................
3.13 Employee Benefit Plans; ERISA....................................
3.14 Labor Matters....................................................
3.15 Environmental Matters............................................
3.16 Intellectual Property Rights.....................................
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Page
No.
3.17 Vote Required....................................................
3.18 Opinion of Financial Advisor.....................................
3.19 Company Rights Agreement.........................................
3.20 Ownership of Parent Common Stock.................................
3.21 Sections 3-602 and 3-702 of the MGCL Not
Applicable..................................................
3.22 Accounting Matters...............................................
3.23 Insurance........................................................
3.24 Records..........................................................
3.25 Mortgage Banking Licenses and Qualifications.....................
3.26 Loan Portfolio...................................................
3.27 Loan Documents...................................................
3.28 No Recourse......................................................
3.29 Mortgage Servicing Agreements....................................
3.30 Compliance with Mortgage Banking Regulations.....................
3.31 Custodial Accounts...............................................
3.32 Inquiries........................................................
3.33 Advances.........................................................
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
4.01 Organization and Qualification...................................
4.02 Capital Stock....................................................
4.03 Authority Relative to this Agreement.............................
4.04 Non-Contravention; Approvals and Consents........................
4.05 SEC Reports and Financial Statements.............................
4.06 Absence of Certain Changes or Events.............................
4.07 Absence of Undisclosed Liabilities...............................
4.08 Legal Proceedings................................................
4.09 Information Supplied.............................................
4.10 Compliance with Laws and Orders..................................
4.11 Compliance with Agreements; Certain Agreements...................
4.12 Taxes............................................................
4.13 Employee Benefit Plans; ERISA....................................
4.14 Labor Matters....................................................
4.15 Environmental Matters............................................
4.16 Intellectual Property Rights.....................................
4.17 Opinion of Financial Advisor.....................................
4.18 Ownership of Company Common Stock................................
4.19 Accounting Matters...............................................
4.20 Vote Required....................................................
<PAGE>
Page
No.
ARTICLE V
COVENANTS
5.01 Covenants of the Company and Parent.............................
5.02 No Solicitations.................................................
5.03 Company Rights Agreement.........................................
5.04 Conduct of Business of Sub.......................................
5.05 Third Party Standstill Agreements................................
5.06 Purchases of Common Stock of the Other Party.....................
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality...........................
6.02 Preparation of Registration Statement and Proxy
Statement...................................................
6.03 Approval of Stockholders.........................................
6.04 Company Affiliates...............................................
6.05 Stock Exchange Listing...........................................
6.06 Certain Tax Matters..............................................
6.07 Regulatory and Other Approvals...................................
6.08 Employee Benefit Plans...........................................
6.09 Company Option Plans.............................................
6.10 Directors' and Officers' Indemnification and
Insurance...................................................
6.11 Appointment of Director..........................................
6.12 Expenses.........................................................
6.13 Brokers or Finders...............................................
6.14 Takeover Statutes................................................
6.15 Conveyance Taxes.................................................
6.16 Pooling of Interests.............................................
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect
the Merger..................................................
7.02 Conditions to Obligation of Parent and Sub to
Effect the Merger...........................................
7.03 Conditions to Obligation of the Company to Effect
the Merger..................................................
<PAGE>
Page
No.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination......................................................
8.02 Effect of Termination............................................
8.03 Amendment........................................................
8.04 Waiver...........................................................
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties,
Covenants and Agreements....................................
9.02 Notices..........................................................
9.03 Entire Agreement; Incorporation of Exhibits......................
9.04 Public Announcements.............................................
9.05 No Third Party Beneficiary.......................................
9.06 No Assignment; Binding Effect....................................
9.07 Headings.........................................................
9.08 Invalid Provisions...............................................
9.09 Governing Law....................................................
9.10 Enforcement of Agreement.........................................
9.11 Certain Definitions..............................................
9.12 Counterparts.....................................................
EXHIBITS
EXHIBIT A Form of Affiliate Agreement
<PAGE>
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have
the meanings ascribed to them in the corresponding Sections of
this Agreement listed below:
"affiliate" -- Section 9.11(a)
"Affiliate Agreement" -- Section 6.04
"Agency" -- Section 3.28
"Agreement" -- Preamble
"Alternative Proposal" -- Section 5.02
"Antitrust Division" -- Section 6.07
"Articles of Merger" -- Section 1.03
"Audits" -- Section 3.12
"Average Price" -- Section 2.01(c)(i)
"beneficially" -- Section 9.11(b)
"business day" -- Section 9.11(c)
"CERCLA" -- Section 3.15(d)
"Certificates" -- Section 2.02(b)
"Closing" -- Section 1.02
"Closing Date" -- Section 1.02
"Code" -- Preamble
"Company" -- Preamble
"Company Affiliates" -- Section 6.04
"Company Common Stock" -- Section 2.01(b)
"Company Disclosure Letter" -- Section 3.01
"Company Employee Benefit Plans" -- Section 3.13(b)(i)
"Company Financial Statements" -- Section 3.05
"Company Option Plans" -- Section 2.01(d)
"Company Permits" -- Section 3.10
"Company Preferred Stock" -- Section 3.02
"Company Rights" -- Section 3.02
"Company Rights Agreement" -- Section 3.02
"Company SEC Reports" -- Section 3.05
"Company Series A Preferred Stock" -- Section 3.02
"Company Stock Option" -- Section 6.09
"Company Stockholders' Approval" -- Section 6.03
"Company Stockholders' Meeting" -- Section 6.03
"Company Tax Certificate" -- Section 7.02(d)
"Confidentiality Agreement" -- Section 6.01(b)
"Constituent Corporations" -- Section 1.01
"Contracts" -- Section 3.04(a)
"control," "controlling," "controlled
by" and "under common control with" -- Section 9.11(a)
"Conversion Number" -- Section 2.01(c)
"Custodial Accounts" -- Section 3.31
"Department" -- Section 1.03
"Effective Time" -- Section 1.03
"Environmental Claim" -- Section 3.15(g)
"Environmental Law" -- Section 3.15(g)
<PAGE>
"Environmental Permits" -- Section 3.15(a)
"ERISA" -- Section 3.13(d)(i)
"ERISA Affiliate" -- Section 3.13(d)
"Exchange Act" -- Section 3.04(b)
"Exchange Agent" -- Section 2.02(a)
"Exchange Fund" -- Section 2.02(a)
"FHA" -- Section 3.25
"FHA Loan" -- Section 3.25
"FHLMA" -- Section 3.25
"FNMA" -- Section 3.25
"GNMA" -- Section 3.25
"FTC" -- Section 6.07
"Governmental or Regulatory Authority" -- Section 3.04(a)
"group" -- Section 9.11(f)
"Hazardous Material" -- Section 3.15(g)
"HSR Act" -- Section 3.04(b)
"HUD" -- Section 3.30
"Indemnified Liabilities" -- Section 6.10(a)
"Indemnified Parties" -- Section 6.10(a)
"Indemnifying Party" -- Section 6.10(a)
"Insurer" -- Section 3.27
"Intellectual Property" -- Section 3.16
"knowledge" -- Section 9.11(d)
"laws" -- Section 3.04(a)
"Lien" -- Section 3.02(b)
"Licenses" -- Section 3.25
"Loan Documents" -- Section 3.27
"Loss" -- Section 3.28
"material", "material adverse
effect" and "materially adverse" -- Section 9.11(e)
"Merger" -- Preamble
"MGCL" -- Section 1.01
"Minimum Average Price" -- Section 7.03(f)
"Mortgage Loan" -- Section 3.26
"Mortgage Servicing Agreement" -- Section 3.26
"Mortgage Servicing Portfolio" -- Section 3.26
"NYSE" -- Section 2.01(c)
"Options" -- Section 3.02
"orders" -- Section 3.04(a)
"Parent" -- Preamble
"Parent Common Stock" -- Section 2.01(c)
"Parent Disclosure Letter" -- Section 4.01
"Parent Employee Benefit Plans" -- Section 4.13(c)
"Parent Financial Statements" -- Section 4.05
"Parent Permits" -- Section 4.10
"Parent Preferred Stock" -- Section 4.02(a)
"Parent SEC Reports" -- Section 4.05
"Parent Stockholders' Approval" -- Section 6.03(b)
"Parent Stockholders' Meeting" -- Section 6.03(b)
"Parent Tax Certificate" -- Section 7.02(d)
"PBGC" -- Section 3.13(c)
<PAGE>
"person
"Plan" -- Section 3.13(d)(ii)
"Proxy Statement" -- Section 3.09
"Recent Company SEC Reports" -- Section 9.11(j)
"Recent Parent SEC Reports" -- Section 9.11(k)
"Recourse Loan" -- Section 3.28
"Registration Statement" -- Section 4.09
"Regulations" -- Section 3.27
"Representatives" -- Section 9.11(g)
"Sales Price" -- Section 2.01(c)(i)
"SEC" -- Section 3.04(b)
"Securities Act" -- Section 3.04(b)
"Servicing Released Loans" -- Section 3.28
"Servicing Sale Loan" -- Section 3.28
"Significant Subsidiaries" -- Section 9.11(h)
"Stockholders' Meeting" -- Section 6.03(a)
"Sub" -- Preamble
"Sub Common Stock" -- Section 2.01(a)
"Subsidiary" -- Section 9.11(i)
"Surviving Corporation" -- Section 1.01
"Surviving Corporation Common Stock" -- Section 2.01(a)
"tax return" -- Section 3.12(c)
"taxes" -- Section 3.12(c)
"Trading Day" -- Section 2.01(c)(i)
"VA" -- Section 3.25
"VA Loans" -- Section 3.25
"VA No Bids" -- Section 3.28
"Warehouse Loans" -- Section 3.26
<PAGE>
This AGREEMENT AND PLAN OF MERGER dated as of
November 10, 1996 (this "Agreement") is made and entered into by
and among HFS INCORPORATED, a Delaware corporation ("Parent"),
MERCURY ACQ. CORP., a Maryland corporation wholly owned by Parent
("Sub"), and PHH CORPORATION, a Maryland corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have each determined that it is advisable and in the best
interests of their respective stockholders to consummate, and
have approved, the business combination transaction provided for
herein in which Sub would merge with and into the Company and the
Company would become a wholly-owned subsidiary of Parent (the
"Merger");
WHEREAS, the respective Boards of Directors of Parent
and the Company have determined that the Merger is in furtherance
of and consistent with their respective long-term business
strategies and is fair to and in the best interests of their
respective stockholders, and Parent has approved this Agreement
and the Merger as the sole stockholder of Sub;
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be
recorded for accounting purposes as a pooling of interests;
WHEREAS, Parent, Sub and the Company desire to make
certain representations, warranties and agreements in connection
with the Merger and also to prescribe various conditions to the
Merger;
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth in this Agreement, and for
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, upon the
terms and subject to the conditions of this Agreement, Sub shall
be merged with and into the Company in accordance with the
Maryland General Corporation Law (the "MGCL"). At the Effective
<PAGE>
Time, the separate existence of Sub shall cease and the Company
shall continue as the surviving corporation in the Merger (the
"Surviving Corporation"). Sub and the Company are sometimes
referred to herein as the "Constituent Corporations". As a
result of the Merger, the outstanding shares of capital stock of
the Constituent Corporations shall be converted or cancelled in
the manner provided in Article II.
1.02 Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have
been abandoned pursuant to Section 8.01, and subject to the
satisfaction or waiver (where applicable) of the conditions set
forth in Article VII, the closing of the Merger (the "Closing")
will take place at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022, at 10:00
a.m., local time, on the second business day following
satisfaction of the condition set forth in Section 7.01(a),
unless another date, time or place is agreed to in writing by the
parties hereto (the "Closing Date"). At the Closing there shall
be delivered to Parent, Sub and the Company the certificates and
other documents and instruments required to be delivered under
Article VII.
1.03 Effective Time. On the Closing Date, articles of
merger (the "Articles of Merger") shall be executed by the
Constituent Corporations and thereafter delivered to the
Department of Assessments and Taxation of the State of Maryland
(the "Department") for filing, as provided in Section 3-107 of
the MGCL, as soon as practicable on the Closing Date. The Merger
shall become effective at the time of the filing of the Articles
of Merger with the Department (the date and time of such filing
being referred to herein as the "Effective Time").
1.04 Restated Articles and Bylaws of the Surviving
Corporation. At the Effective Time, (i) the Restated Articles of
the Company as in effect immediately prior to the Effective Time
shall be the Restated Articles of the Surviving Corporation until
thereafter amended as provided by law and such Restated Articles,
and (ii) the Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law, the Restated
Articles of the Surviving Corporation and such Bylaws.
1.05 Directors and Officers of the Surviving
Corporation. The directors and the officers of Sub immediately
prior to the Effective Time shall, from and after the Effective
Time, be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly
elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving
Corporation's Restated Articles and Bylaws. Upon the reasonable
<PAGE>
request of Parent, the Company will use reasonable efforts to
cause the directors of Company as of the Effective Time to resign
as directors of Company, and will cause any directors of the
Company's Subsidiaries to resign.
1.06 Effects of the Merger. Subject to the foregoing,
the effects of the Merger shall be as provided in the applicable
provisions of the MGCL.
1.07 Further Assurances. Each party hereto will,
either prior to or after the Effective Time, execute such further
documents, instruments, deeds, bills of sale, assignments and
assurances and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger,
to vest the Surviving Corporation with full title to all assets,
properties, privileges, rights, approvals, immunities and
franchises of either of the Constituent Corporations or to effect
the other purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part
of the holder thereof:
(a) Capital Stock of Sub. Each issued and outstanding
share of the common stock, par value $.01 per share, of Sub ("Sub
Common Stock") shall be converted into and become one (1) fully
paid and nonassessable share of common stock, without par value,
of the Surviving Corporation ("Surviving Corporation Common
Stock"). Each certificate representing outstanding shares of Sub
Common Stock shall at the Effective Time represent an equal
number of shares of Surviving Corporation Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by
Parent and Subsidiaries. All shares of common stock, without par
value, of the Company ("Company Common Stock"), together with the
associated Company Rights, that are owned by the Company as
treasury stock and any shares of Company Common Stock, together
with the associated Company Rights owned by Parent, Sub or any
other wholly-owned Subsidiary of Parent shall be canceled and
retired and shall cease to exist and no stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Common Stock.
(i) Each issued and outstanding share of Company Common Stock
(other than shares to be canceled in accordance with
Section 2.01(b)), together with the associated Company Right,
<PAGE>
shall be converted into the right to receive the number (the
"Conversion Number") of fully paid and nonassessable shares of
common stock, par value $.01 per share, of Parent ("Parent Common
Stock") represented by a quotient (rounded upward, if necessary,
to the nearest one-thousandth) determined by dividing $49.50 by
the Average Price with respect to the date of the Company
Stockholders' Meeting; provided, however, that in no event will
such quotient be greater than .8250 or less than .6111, subject
to adjustment in accordance with the next following subsection.
The "Average Price", with respect to any date, shall be
equal to the arithmetic average of the Sales Price on each of the
last twenty (20) Trading Days preceding the fifth Trading day
before such date. The term "Sales Price" shall mean, on any
Trading Day, the closing sales price of Parent Common Stock
reported on the New York Stock Exchange, Inc. ("NYSE") Composite
Tape on such day. The term "Trading Day" shall mean any day on
which securities are traded on the NYSE.
(ii) If, prior to the Effective Time, Parent shall pay a
dividend in, subdivide, combine into a smaller number of shares
or issue by reclassification of its shares, any shares of Parent
Common Stock, the Conversion Number or the Minimum Average Price,
as applicable, shall be multiplied by a fraction, the numerator
of which shall be the number of shares of Parent Common Stock
outstanding immediately after, and the denominator of which shall
be the number of such shares outstanding immediately before, the
occurrence of such event, and the resulting product shall from
and after the date of such event be the Conversion Number or the
Minimum Average Price, as applicable, subject to further
adjustment in accordance with this sentence.
(iii) All shares of Company Common Stock converted in
accordance with paragraph (i) of this Section 2.01(c) and
associated Company Rights shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such
shares shall cease to have any rights with respect thereto,
except the right to receive the shares of Parent Common Stock and
any cash in lieu of fractional shares of Parent Common Stock to
be issued or paid in consideration therefor (determined in
accordance with Section 2.02(e)), upon the surrender of such
certificate in accordance with Section 2.02, without interest.
(d) Stock Option Plans. The Company stock option
plans set forth in Section 2.01(d) of the Company Disclosure
Letter (the "Company Option Plans") and each option to purchase
Company Common Stock granted thereunder that is outstanding at
the Effective Time shall be converted as described in
Section 6.09, subject to receipt of required consents, if any,
<PAGE>
necessary in order to avoid a violation of any Company Option
Plan or agreement thereunder.
2.02 Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective
Time, Parent shall make available to the Surviving Corporation
for deposit with a bank or trust company designated before the
Closing Date by Parent and reasonably acceptable to the Company
(the "Exchange Agent"), certificates representing the number of
duly authorized whole shares of Parent Common Stock issuable in
connection with the Merger plus an amount of cash equal to the
aggregate amount payable in lieu of fractional shares in
accordance with Section 2.02(e), to be held for the benefit of
and distributed to such holders in accordance with this Section.
The Exchange Agent shall agree to hold such shares of Parent
Common Stock and funds (such shares of Parent Common Stock and
funds, together with earnings thereon, being referred to herein
as the "Exchange Fund") for delivery as contemplated by this
Section 2.02 and upon such additional terms as may be agreed upon
by the Exchange Agent, the Company and Parent.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Surviving Corporation
shall cause the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common
Stock and associated Company Rights (the "Certificates") whose
shares and associated Company Rights are converted pursuant to
Section 2.01(c) into the right to receive shares of Parent Common
Stock (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 Exchange Agent and shall be in such form and have such
other provisions as the Surviving Corporation may reasonably
specify (including, but not limited to, a request that each
holder surrendering a Certificate state its adjusted tax basis,
as determined for United States federal income tax purposes, in
such surrendered Certificate) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock and cash
in lieu of fractional shares. Upon surrender of a Certificate
for cancellation to the Exchange Agent, together with such letter
of transmittal duly executed and completed in accordance with its
terms, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock, plus the cash
amount payable in lieu of fractional shares in accordance with
Section 2.02(e), which such holder has the right to receive
pursuant to the provisions of this Article II, and the
<PAGE>
Certificate so surrendered shall forthwith be canceled. In no
event shall the holder of any Certificate be entitled to receive
interest on any funds to be received in the Merger. In the event
of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, a certificate
representing that number of whole shares of Parent Common Stock,
plus the cash amount payable in lieu of fractional shares in
accordance with Section 2.02(e), may be issued to a transferee if
the Certificate representing such Company Common Stock is
presented to the Exchange 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 2.02(b), each
Certificate shall be deemed at any time after the Effective Time
for all corporate purposes of Parent, except as limited by
paragraph (c) below, to represent ownership of the number of
shares of Parent Common Stock into which the number of shares of
Company Common Stock shown thereon have been converted as
contemplated by this Article II. Notwithstanding the foregoing,
Certificates representing Company Common Stock surrendered for
exchange by any person constituting an "affiliate" of the Company
for purposes of Section 6.04 shall not be exchanged until Parent
has received an Affiliate Agreement as provided in Section 6.04.
(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record
date on or after the Effective Time shall be paid to the holder
of any unsurrendered Certificate with respect to the shares of
Parent Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e) until the holder of record of such
Certificate shall surrender such Certificate in accordance with
this Section. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid
to the record holder of the certificates representing whole
shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount
of dividends or other distributions, if any, with a record date
on or after the Effective Time which theretofore became payable,
but which were not paid by reason of the immediately preceding
sentence, with respect to such whole shares of Parent Common
Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date on or after
the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares
of Parent Common Stock.
(d) No Further Ownership Rights in Company Common
Stock. All shares of Parent Common Stock issued upon the
surrender for exchange of Certificates in accordance with the
<PAGE>
terms hereof (including any cash paid pursuant to Section
2.02(e)) shall be deemed to have been issued at the Effective
Time in full satisfaction of all rights pertaining to the shares
of Company Common Stock represented thereby, subject, however, to
the Surviving Corporation's obligation to pay any dividends which
may have been declared by the Company on such shares of Company
Common Stock in accordance with the terms of this Agreement and
which remained unpaid at the Effective Time. From and after the
Effective Time, the stock transfer books of the Company shall be
closed and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the
shares of Company Common Stock 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
Section 2.02.
(e) No Fractional Shares. No certificate or scrip
representing fractional shares of Parent Common Stock will be
issued in the Merger upon the surrender for exchange of
Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a
stockholder of Parent. In lieu of any such fractional shares,
each holder of Certificates who would otherwise have been
entitled to a fraction of a share of Parent Common Stock in
exchange for such Certificates pursuant to this Section shall
receive from the Exchange Agent a cash payment in lieu of such
fractional share determined by multiplying (A) the Average Price
with respect to the date of the Company Stockholders' Meeting by
(B) the fractional share interest to which such holder would
otherwise be entitled.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former
stockholders of the Company for twelve (12) months after the
Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any former stockholders of the Company who have
not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation (subject to abandoned
property, escheat and other similar laws) as general creditors
for payment of their claim for Parent Common Stock, any cash in
lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock if
entitled thereto under this Agreement. Neither Parent nor the
Surviving Corporation shall be liable to any holder of shares of
Company Common Stock for shares of Parent Common Stock (or
dividends or distributions with respect thereto) or cash payable
in respect of fractional share interests delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub
as follows:
3.01 Organization and Qualification. Each of the
Company and its Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and
authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties,
except for such failures to be so incorporated, existing and in
good standing or to have such power and authority which,
individually or in the aggregate, are not having and are not
reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Each of the
Company and its Subsidiaries is duly qualified, licensed or
admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets
and properties, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in
good standing which, individually or in the aggregate, are not
having and are not reasonably expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
Section 01 of the letter dated the date hereof and delivered to
Parent and Sub by the Company concurrently with the execution and
delivery of this Agreement (the "Company Disclosure Letter") sets
forth (i) the name and jurisdiction of incorporation of each
Significant Subsidiary of the Company, (ii) its authorized
capital stock, (iii) the number of issued and outstanding shares
of capital stock and (iv) the record and beneficial owners of
such shares. The Subsidiaries of the Company (other than its
Significant Subsidiaries) represent in the aggregate less than 1%
of each of the consolidated assets and earnings of the Company.
All such Subsidiaries are wholly-owned, directly or indirectly,
by the Company. Except for interests in the Subsidiaries of the
Company and as disclosed in Section 3.01 of the Company
Disclosure Letter, the Company does not directly or indirectly
own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity
or similar interest in, any corporation, partnership, joint
venture or other business association or entity (other than non-
controlling investments in the ordinary course of business and
corporate partnering, development, cooperative marketing and
similar undertakings and arrangements entered into in the
ordinary course of business which, in the aggregate, are less
than $25,000,000). The Company has previously delivered to
Parent correct and complete copies of the certificate or articles
<PAGE>
of incorporation and bylaws (or other comparable charter
documents) of the Company and its Significant Subsidiaries.
3.02 Capital Stock. (a) The authorized capital stock
of the Company consists solely of 75,000,000 shares of Company
Common Stock and 3,000,000 shares of preferred stock, without par
value ("Company Preferred Stock"). As of November 7, 1996,
34,884,299 shares of Company Common Stock were issued and
outstanding and no shares were held in the treasury of the
Company and 4,045,738 shares were held in reserve pursuant to the
Company Option Plans or Company Benefit Plans as set forth in the
Company SEC Reports and of which, on the date hereof, options for
3,371,194 shares of Company Common Stock were outstanding. Since
such date, except as set forth in Section 3.02 of the Company
Disclosure Letter, there has been no change in the number of
issued and outstanding shares of Company Common Stock or shares
of Company Common Stock held in treasury or reserved for
issuance. As of the date hereof, no shares of Company Preferred
Stock are issued and outstanding and 375,000 shares are
designated Series A Junior Participating Preferred Stock
("Company Series A Preferred Stock") and are reserved for
issuance in accordance with the Rights Agreement dated as of
March 15, 1996, by and between the Company and First Chicago
Trust Company of New York, as Rights Agent (the "Company Rights
Agreement"), pursuant to which the Company has issued rights (the
"Company Rights") to purchase shares of Company Series A
Preferred Stock. All of the issued and outstanding shares of
Company Common Stock are, and all shares reserved for issuance
will be, upon issuance in accordance with the terms specified in
the instruments or agreements pursuant to which they are
issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and the Company
Rights Agreement and except as set forth in Section 3.02 of the
Company Disclosure Letter, there are no outstanding
subscriptions, options, warrants, rights (including "phantom"
stock rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion
or exchange under any outstanding security, instrument or
agreement (together, "Options"), obligating the Company or any of
its Subsidiaries to issue or sell any shares of capital stock of
the Company or to grant, extend or enter into any Option with
respect thereto.
(b) Except as disclosed in Section 3.02 of the Company
Disclosure Letter, all of the outstanding shares of capital stock
of each Significant Subsidiary of the Company are duly
authorized, validly issued, fully paid and nonassessable and are
owned, beneficially and of record, by the Company or a Subsidiary
wholly owned, directly or indirectly, by the Company, free and
clear of any liens, claims, mortgages, encumbrances, pledges,
security interests, equities and charges of any kind (each a
<PAGE>
"Lien"). Except as disclosed in Section 3.02 of the Company
Disclosure Letter, there are no (i) outstanding Options
obligating the Company or any of its Significant Subsidiaries to
issue or sell any shares of capital stock of any Significant
Subsidiary of the Company or to grant, extend or enter into any
such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any
person other than the Company or a Subsidiary wholly owned,
directly or indirectly, by the Company with respect to the voting
of or the right to participate in dividends or other earnings on
any capital stock of any Significant Subsidiary of the Company.
(c) Except as disclosed in Section 3.02 of the Company
Disclosure Letter, there are no outstanding contractual
obligations of the Company or any Significant Subsidiary of the
Company to repurchase, redeem or otherwise acquire any shares of
Company Common Stock or any capital stock of any Significant
Subsidiary of the Company or to provide funds to, or make any
investment (in the form of a loan, capital contribution or
otherwise) in, any Subsidiary of the Company or any other person.
3.03 Authority Relative to this Agreement. The
Company has full corporate power and authority to enter into this
Agreement and to perform its obligations hereunder (subject to,
in the case of consummation of the Merger, obtaining the Company
Stockholders' Approval) and to consummate the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of the Company; the
Board of Directors of the Company has recommended adoption and
approval of this Agreement by the stockholders of the Company and
directed that this Agreement be submitted to the stockholders of
the Company for their consideration; and no other corporate
proceedings on the part of the Company or its stockholders are
necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, other than obtaining the
Company Stockholders' Approval. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms (subject to, in
the case of consummation of the Merger, obtaining the Company
Stockholders' Approval), except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
<PAGE>
3.04 Non-Contravention; Approvals and Consents. (a)
Except as disclosed in Section 3.04 of the Company Disclosure
Letter, the execution and delivery of this Agreement by the
Company do not, and the performance by the Company of its
obligations hereunder and the consummation of the transactions
contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, result in or give to any
person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or
properties of the Company or any of its Significant Subsidiaries
under, any of the terms, conditions or provisions of (i) the
certificates or articles of incorporation or bylaws (or other
comparable charter documents) of the Company or any of its
Significant Subsidiaries, or (ii) (x) subject to the obtaining of
the Company Stockholders' Approval and the taking of the actions
described in paragraph (b) of this Section, any statute, law,
rule, regulation or ordinance (together, "laws"), or any
judgment, decree, order, writ, permit or license (together,
"orders"), of any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United
States, any foreign country or any domestic or foreign state,
county, city or other political subdivision (a "Governmental or
Regulatory Authority") applicable to the Company or any of its
Subsidiaries or any of their respective assets or properties, or
(y) any note, bond, mortgage, security agreement, indenture,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind (together,
"Contracts") to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any
of their respective assets or properties is bound, excluding from
the foregoing clauses (x) and (y) conflicts, violations,
breaches, defaults, terminations, modifications, accelerations
and creations and impositions of Liens which, individually or in
the aggregate, are not reasonably expected to have a material
adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the
transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger
notification report by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), (ii) for the filing of
the Proxy Statement and the Registration Statement with the
Securities and Exchange Commission (the "SEC") pursuant to the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act"), and the Securities
Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), the declaration of the effectiveness of
the Registration Statement by the SEC and filings with various
<PAGE>
state securities authorities that are required in connection with
the transactions contemplated by this Agreement, (iii) for the
filing of the Articles of Merger and other appropriate merger
documents required by the MGCL with the Department and
appropriate documents with the relevant authorities of other
states in which the Constituent Corporations are qualified to do
business and (iv) as disclosed in Section 3.04 of the Company
Disclosure Letter, no consent, approval or action of, filing with
or notice to any Governmental or Regulatory Authority or other
public or private third party is necessary or required under any
of the terms, conditions or provisions of any law or order of any
Governmental or Regulatory Authority or any Contract to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any of their respective
assets or properties is bound for the execution and delivery of
this Agreement by the Company, the performance by the Company of
its obligations hereunder or the consummation of the transactions
contemplated hereby, other than such consents, approvals,
actions, filings and notices which the failure to make or obtain,
as the case may be, individually or in the aggregate, are not
reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole or on the ability
of the Company to consummate the transactions contemplated by
this Agreement.
3.05 SEC Reports and Financial Statements. The
Company delivered to Parent prior to the execution of this
Agreement a true and complete copy of each form, report,
schedule, registration statement, definitive proxy statement and
other document (together with all amendments thereof and
supplements thereto) filed by the Company or any of its
Subsidiaries with the SEC since April 30, 1994 (as such documents
have since the time of their filing been amended or supplemented,
the "Company SEC Reports"), which are all the documents (other
than preliminary material) that the Company and its Subsidiaries
were required to file or did file with the SEC since such date.
As of their respective dates, the Company SEC Reports (i)
complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial
statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto)
included in the Company SEC Reports (the "Company Financial
Statements") complied as to form in all material respects with
the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the
<PAGE>
periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as
permitted by Form 10-Q of the SEC) and fairly present (subject,
in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments (which are not
expected to be, individually or in the aggregate, materially
adverse to the Company and its Subsidiaries taken as a whole))
the consolidated financial position of the Company and its
consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows for
the respective periods then ended. Except as set forth in
Section 3.05 of the Company Disclosure Letter, each Significant
Subsidiary of the Company is treated as a consolidated subsidiary
of the Company in the Company Financial Statements for all
periods covered thereby.
3.06 Absence of Certain Changes or Events. Except as
disclosed in the Recent Company SEC Reports filed prior to the
date of this Agreement, (a) since July 31, 1996 there has not
been any change, event or development having, or that is
reasonably expected to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries taken
as a whole, and (b) except as disclosed in Section 3.06 of the
Company Disclosure Letter, between such date and the date hereof
(i) the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with
past practice and (ii) neither the Company nor any of its
Subsidiaries has taken any action which, if taken after the date
hereof, would constitute a breach of any provision of clause (ii)
of Section 5.01(b).
3.07 Absence of Undisclosed Liabilities. Except for
matters reflected or reserved against in the balance sheet for
the period ended July 31, 1996 included in the Company Financial
Statements or as disclosed in Section 3.07 of the Company
Disclosure Letter, neither the Company nor any of its
Subsidiaries had at such date, or has incurred since that date,
any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due)
of any nature that would be required by generally accepted
accounting principles to be reflected on a consolidated balance
sheet of the Company and its consolidated subsidiaries (including
the notes thereto), except liabilities or obligations (i) which
were incurred in the ordinary course of business consistent with
past practice or (ii) which have not been, and are not reasonably
expected to be, individually or in the aggregate, materially
adverse to the Company and its Subsidiaries taken as a whole.
3.08 Legal Proceedings. Except as disclosed in the
Recent Company SEC Reports or in Section 3.08 of the Company
Disclosure Letter, (i) there are no actions, suits, arbitrations
M&A/47881_3
<PAGE>
or proceedings pending or, to the knowledge of the Company,
threatened against, relating to or affecting, nor to the
knowledge of the Company are there any Governmental or Regulatory
Authority investigations or audits pending or threatened against,
relating to or affecting, the Company or any of its Subsidiaries
or any of their respective assets and properties which,
individually or in the aggregate, are reasonably expected to have
a material adverse effect on the Company and its Subsidiaries
taken as a whole or on the ability of the Company to consummate
the transactions contemplated by this Agreement, and (ii) neither
the Company nor any of its Subsidiaries is subject to any order
of any Governmental or Regulatory Authority which, individually
or in the aggregate, is having or is reasonably expected to have
a material adverse effect on the Company and its Subsidiaries
taken as a whole or on the ability of the Company to consummate
the transactions contemplated by this Agreement.
3.09 Information Supplied. The proxy statement
relating to the Stockholders' Meetings, as amended or
supplemented from time to time (as so amended and supplemented,
the "Proxy Statement"), and any other documents to be filed by
the Company with the SEC or any other Governmental or Regulatory
Authority in connection with the Merger and the other
transactions contemplated hereby will (in the case of the Proxy
Statement and any such other documents filed with the SEC under
the Exchange Act or the Securities Act) comply as to form in all
material respects with the requirements of the Exchange Act and
the Securities Act, respectively, and will not, on the date of
its filing or, in the case of the Proxy Statement, at the date it
is mailed to stockholders of the Company and of Parent and at the
times of the Stockholders' Meetings, 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 are made,
not misleading, except that no representation is made by the
Company with respect to information supplied in writing by or on
behalf of Parent or Sub expressly for inclusion therein and
information incorporated by reference therein from documents
filed by Parent or any of its Subsidiaries with the SEC.
3.10 Compliance with Laws and Orders. The Company and
its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for
failures to hold such permits, licenses, variances, exemptions,
orders and approvals which, individually or in the aggregate, are
not having and are not reasonably expected to have a material
adverse effect on the Company and its Subsidiaries taken as a
whole. The Company and its Subsidiaries are in compliance with
the terms of the Company Permits, except failures so to comply
<PAGE>
which, individually or in the aggregate, are not having and are
not reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole. Except as
disclosed in the Recent Company SEC Reports, the Company and its
Subsidiaries are not in violation of or default under any law or
order of any Governmental or Regulatory Authority, except for
such violations or defaults which, individually or in the
aggregate, are not having and are not reasonably expected to have
a material adverse effect on the Company and its Subsidiaries
taken as a whole.
3.11 Compliance with Agreements; Certain Agreements.
(a) Except as disclosed in Section 3.11 of the Company
Disclosure Letter or in the Recent Company SEC Reports, neither
the Company nor any of its Subsidiaries nor, to the knowledge of
the Company, any other party thereto is in breach or violation
of, or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or
lapse of time or both, is reasonably expected to result in a
default under, (i) the certificates or articles of incorporation
or bylaws (or other comparable charter documents) of the Company
or any of its Significant Subsidiaries or (ii) any Contract to
which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their
respective assets or properties is bound, except in the case of
clause (ii) for breaches, violations and defaults which,
individually or in the aggregate, are not having and are not
reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in Section 3.11 of the Company
Disclosure Letter or in the Recent Company SEC Reports or as
provided for in this Agreement, as of the date hereof, neither
the Company nor any of its Subsidiaries is a party to any oral or
written (i) consulting agreement not terminable on thirty (30)
days' or less notice, (ii) union or collective bargaining
agreement, (iii) agreement with any executive officer or other
key employee of the Company or any of its Subsidiaries the
benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction
involving the Company or any of its Subsidiaries of the nature
contemplated by this Agreement, (iv) agreement with respect to
any executive officer or other key employee of the Company or any
of its Subsidiaries providing any term of employment or
compensation guarantee or (v) agreement or plan, including any
stock option, stock appreciation right, restricted stock or stock
purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
<PAGE>
calculated on the basis of any of the transactions contemplated
by this Agreement.
3.12 Taxes. (a) Except as disclosed in Section 3.12
of the Company Disclosure Letter, each of the Company and its
Subsidiaries has filed or caused to be filed with the appropriate
Governmental or Regulatory Authority all tax returns required to
be filed by it, or requests for extensions to file such tax
returns have been timely filed or granted and have not expired,
and all such tax returns are true, complete and accurate in all
respects, except to the extent that such failures to file, have
extensions granted that remain in effect or be complete and
accurate in all respects, as applicable, individually or in the
aggregate, would not have a material adverse effect on the
Company and its Subsidiaries taken as a whole. The Company and
each of its Subsidiaries has paid (or the Company has paid on its
behalf) all taxes shown as due on such tax returns or otherwise
due or claimed to be due by any Governmental or Regulatory
Authority. The most recent financial statements contained in the
Company SEC Reports reflect an adequate reserve for all taxes
payable by the Company and its Subsidiaries for all taxable
periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Company or any of its
Subsidiaries that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved
deficiencies that would not, individually or in the aggregate,
have a material adverse effect on the Company and its
Subsidiaries taken as a whole. No requests for waivers or
comparable consents with respect to the time to assess any taxes
against the Company or any of its Subsidiaries have been granted
or are pending, except for requests with respect to such taxes
that have been adequately reserved for in the most recent
financial statements contained in the Company SEC Reports, or, to
the extent not adequately reserved, the assessment of which would
not, individually or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries taken as a whole. The
Company and its Subsidiaries have complied in all respects with
all applicable laws, rules and regulations relating to the
payment and withholding of taxes (including, without limitation,
withholding of taxes pursuant to Sections 1441 and 1442 of the
Code or similar provisions under any foreign laws and withholding
with respect to employee wages) and have, within the time and
manner prescribed by law, withheld and paid over to the proper
Governmental or Regulatory Authority all amounts required to be
withheld and paid over under all applicable laws. No federal,
state, local or foreign audits or other administrative
proceedings or court proceedings ("Audits") exist or have been
initiated with regard to any taxes or tax returns of the Company
or any of its Subsidiaries, and none of the Company or any of its
Subsidiaries has received any notice that such an Audit is
<PAGE>
pending or threatened with respect to any taxes due from or with
respect to the Company or any of its Subsidiaries or any tax
return filed by or with respect to the Company or any of its
Subsidiaries. The tax returns of the Company and its
Subsidiaries for the taxable periods ending before April 30, 1993
have been examined by the appropriate Governmental or Regulatory
Authority (or the applicable statute of limitations for the
assessment of taxes for such periods has expired). None of the
Company or any of its Subsidiaries is a party to, is bound by, or
has any obligation under, any tax sharing agreement, tax
indemnification agreement or similar contract or arrangement.
The Company is not and since November 1991 has not been
a United States real property holding company as defined in
Section 897(c)(2) of the Code. Neither the Company nor any
Subsidiary is a party to any agreement, plan, contract or
arrangement that could result in the payment of any amount of
compensation the deduction of which would be prohibited pursuant
to Section 162(m) of the Code.
The Company and its Subsidiaries have previously
delivered or made available to the Parent complete and accurate
copies of each of (i) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a
Governmental or Regulatory Authority relating to the United
States federal, state, local or foreign taxes due from or with
respect to the Company and its Subsidiaries, (ii) the United
States federal income tax returns, and those state, local and
foreign income tax returns filed by the Company and its
Subsidiaries and (iii) any closing agreements entered into by the
Company or any of its Subsidiaries with any taxing authority in
each case existing on the date hereof. The Company will deliver
to Parent all materials with respect to the foregoing for all
matters arising after the date hereof.
(b) Neither the Company nor any of its Subsidiaries
has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from
qualifying as a tax-free reorganization within the meaning of
Section 368(a) of the Code.
(c) As used in this Section 3.12 and in Section 4.12,
(i) "taxes" shall include all federal, state, local and foreign
income, franchise, property, sales, use, excise and other taxes,
including obligations for withholding taxes from payments due or
made to any other person and any interest, penalties or additions
to tax and (ii) "tax return" shall mean any return, report,
information return or other document (including any related or
supporting information) with respect to taxes.
<PAGE>
3.13 Employee Benefit Plans; ERISA. (a) Except as
described in the Recent Company SEC Reports or as would not have
a material adverse effect on the Company and its Subsidiaries
taken as a whole, (i) all Company Employee Benefit Plans are in
compliance with all applicable requirements of law, including
ERISA and the Code, and (ii) neither the Company nor any of its
Subsidiaries nor any ERISA Affiliate has any liabilities or
obligations with respect to any such Company Employee Benefit
Plans, whether accrued, contingent or otherwise, nor to the
knowledge of the Company are any such liabilities or obligations
expected to be incurred. Except as described in the Company SEC
Reports or as described in Section 3.13 of the Company Disclosure
Letter, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute
an event under any Company Employee Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect
to any employee. The only severance agreements or severance
policies applicable to the Company or any of its Subsidiaries are
the agreements and policies specifically referred to in Section
3.13 of the Company Disclosure Letter.
(b) With respect to each of its Plans, the Company has
heretofore delivered to Parent true and complete copies of each
of the following documents, as applicable: (i) a copy of the
Plan; (ii) a copy of the most recent annual report; (iii) a copy
of the most recent actuarial report; (iv) a copy of the most
recent Summary Plan Description; (v) a copy of the trust or other
funding agreement; and (vi) the most recent determination letter
received from the Internal Revenue Service with respect to each
Plan that is intended to be qualified under section 401 of the
Code.
(c) No liability under Title IV of ERISA has been
incurred by the Company or any ERISA Affiliate within the past
six years that has not been satisfied in full. To the knowledge
of the Company, no condition exists that presents a material risk
to the Company, any of the Subsidiaries or any ERISA Affiliate of
incurring a liability under such Title. The Pension Benefit
Guaranty Corporation established under ERISA ("PBGC") has not
instituted proceedings to terminate any of the Plans and no
condition exists that presents a material risk that such
proceedings will be instituted. With respect to each of the
Plans that is subject to Title IV of ERISA, the present value of
accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent
actuarial report prepared by such plan's actuary with respect to
such plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such plan allocable to such
<PAGE>
accrued benefits. None of the Plans or any trust established
thereunder has incurred any "accumulated funding deficiency" (as
defined in section 302 of ERISA and section 412 of the Code),
whether or not waived, as of the last day of the most recent
fiscal year of each of the Plans ended prior to the date of this
Agreement. None of the Plans is a "multiemployer plan," as such
term is defined in section 3(37) of ERISA. Each of the Plans
that is intended to be "qualified" within the meaning of section
401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under section 501(a) of the
Code. Except as set forth in Section 3.13(c) of the Company
Disclosure Letter, no Plan provides benefits, including without
limitation death or medical benefits (whether or not insured),
with respect to current or former employees after retirement or
other termination of service (other than coverage mandated by
applicable law or benefits, the full cost of which is borne by
the current or former employee). There are no pending or
threatened claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving
any such Plan (other than routine claims for benefits).
(d) As used herein:
(i) "Company Employee Benefit Plan" means any Plan
entered into, established, maintained, sponsored,
contributed to or required to be contributed to by the
Company, any of its Subsidiaries or ERISA Affiliates for the
benefit of the current or former employees or directors of
the Company or any of its Subsidiaries and existing on the
date of this Agreement or at any time subsequent thereto and
on or prior to the Effective Time and, in the case of a Plan
which is subject to Part 3 of Title I of the Employee
Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA"), Section 412 of
the Code or Title IV of ERISA, at any time during the five-
year period preceding the date of this Agreement;
(ii) "Plan" means any employment, bonus, incentive
compensation, deferred compensation, pension, profit
sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, medical, accident,
disability, workmen's compensation or other insurance,
severance, separation, termination, change of control or
other benefit plan, agreement, practice, policy, program or
arrangement of any kind, whether written or oral, including,
but not limited to any "employee benefit plan" within the
meaning of Section 3(3) of ERISA; and
<PAGE>
(iii) "ERISA Affiliate" means, with respect to any
person, any person in the same controlled group as such
person (within the meaning of Section 414(b) and (c) of the
Code).
3.14 Labor Matters. Except as disclosed in the Recent
Company SEC Reports or in Section 3.14 of the Company Disclosure
Letter, there are no material controversies pending or, to the
knowledge of the Company, threatened between the Company or any
of its Subsidiaries and any representatives of its employees,
except as would not, individually or in the aggregate, have a
material adverse effect on the Company and its Subsidiaries taken
as a whole, and, to the knowledge of the Company, there are no
material organizational efforts presently being made involving
any of the now unorganized employees of the Company or any of its
Subsidiaries. Since April 30, 1994, there has been no work
stoppage, strike or other concerted action by employees of the
Company or any of its Subsidiaries except as have not,
individually or in the aggregate, had a material adverse effect
on the Company and its Subsidiaries taken as a whole.
3.15 Environmental Matters. (a) Each of the Company
and its Subsidiaries has obtained all licenses, permits,
authorizations, approvals and consents from Governmental or
Regulatory Authorities which are required under any applicable
Environmental Law in respect of its business or operations
("Environmental Permits"), except for such failures to have
Environmental Permits which, individually or in the aggregate,
are not reasonably expected to have a material adverse effect on
the Company and its Subsidiaries taken as a whole. Each of such
Environmental Permits is in full force and effect and each of the
Company and its Subsidiaries is in compliance with the terms and
conditions of all such Environmental Permits and with any
applicable Environmental Law, except for such failures to be in
compliance which, individually or in the aggregate, are not
reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(b) There is no Environmental Claim pending or to the
knowledge of the Company threatened against the Company or any of
its Subsidiaries or to the knowledge of the Company, against any
person or entity 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 that is
reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
(c) Except as set forth in Section 3.15 of the Company
Disclosure Letter, to the knowledge of the Company, there are no
past or present actions, activities, circumstances, conditions,
events or incidents, including, without limitation, the release,
<PAGE>
threatened release or presence of any Hazardous Material which
could form the basis of any Environmental Claim against the
Company or any of its Subsidiaries, or to the knowledge of the
Company, against any person or entity 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, except for such liabilities which, individually or in the
aggregate, are not reasonably expected to have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
(d) To the knowledge of the Company, no site or
facility now or previously owned, operated or leased by the
Company or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List promulgated pursuant to
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and the rules and regulations
thereunder ("CERCLA").
(e) No Liens have arisen under or pursuant to any
Environmental Law on any site or facility owned, operated or
leased by the Company or any of its Subsidiaries, other than any
such real property not individually or in the aggregate material
to the Company and its Subsidiaries taken as a whole, and no
action of any Governmental or Regulatory Authority has been taken
or, to the knowledge of the Company, is in process which could
subject any of such properties to such Liens.
(f) The Company has delivered or otherwise made
available for inspection to the Parent true, complete and correct
copies and results of any material reports, studies, analyses,
tests or monitoring possessed or initiated by the Company or any
of its Subsidiaries pertaining to Hazardous Materials in, on,
beneath or adjacent to any property currently or formerly owned,
operated or leased by the Company or any of its Subsidiaries, or
regarding the Company's or any of its Subsidiaries' compliance
with applicable Environmental Laws.
(g) As used herein:
(i) "Environmental Claim" means any claim, action,
cause of action, investigation or notice (written or oral)
by any person or entity alleging potential liability
(including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or
resulting from (a) the presence, or release or threatened
release, of any Hazardous Materials at any location, whether
or not owned or operated by the Company or any of its
Subsidiaries, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
<PAGE>
(ii) "Environmental Law" means any law or order of any
Governmental or Regulatory Authority relating to the
regulation or protection of human health, safety or the
environment or to emissions, discharges, releases or
threatened releases of Hazardous Material, pollutants,
contaminants, chemicals or industrial, toxic or hazardous
substances or wastes into the environment; and
(iii) "Hazardous Material" means (A) any petroleum or
petroleum products, flammable materials, radioactive
materials, friable asbestos, urea formaldehyde foam
insulation and transformers or other equipment that contain
dielectric fluid containing regulated levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other
materials or substances which are now or hereafter become
defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants" or words of similar
import under any Environmental Law; and (C) any other
chemical or other material or substance, exposure to which
is now or hereafter prohibited, limited or regulated by any
Governmental or Regulatory Authority under any Environmental
Law.
3.16 Intellectual Property Rights. (a) The Company
and its Subsidiaries own or have the right to use, all
Intellectual Property individually or in the aggregate material
to the conduct of the businesses of the Company and its
Subsidiaries taken as a whole. To the knowledge of the Company,
neither the Company nor any Subsidiary of the Company is in
default (or with the giving of notice or lapse of time or both,
would be in default) under any license to use such Intellectual
Property, such Intellectual Property is not being infringed by
any third party, and neither the Company nor any Subsidiary of
the Company is infringing any intellectual property of any third
party, except for such defaults and infringements which,
individually or in the aggregate, are not having and are not
reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole. For purposes of
this Agreement, "Intellectual Property" means patents and patent
rights, trademarks and trademark rights, trade names and trade
name rights, service marks and service mark rights, service names
and service name rights, copyrights and copyright rights and
other proprietary intellectual property rights and all pending
applications for and registrations of any of the foregoing that
the Company or its Subsidiaries (or as applicable the Parent and
its Subsidiaries) own, license or otherwise have the right to
use. An accurate schedule of all Intellectual Property is set
forth in Section 3.16 of the Company Disclosure Letter.
<PAGE>
(b) Either the Company or one of its Subsidiaries
currently is listed in the records of the appropriate United
States, state or foreign agency as the sole owner of record for
each application and registration included in the Intellectual
Property, except for any such failure which, individually or in
the aggregate, is not reasonably expected to have a material
adverse effect on the Company and its Subsidiaries taken as a
whole.
(c) The Company and its Subsidiaries, with respect to
all Intellectual Property owned thereby, have taken or caused to
be taken all reasonable steps to obtain and retain valid and
enforceable Intellectual Property rights therein, including the
submission of all necessary filings in accordance with the legal
and administrative requirements of the appropriate jurisdictions.
No application or registration listed in Section 3.16 of the
Company Disclosure Schedule is the subject of any pending,
existing or, to the Company's knowledge, threatened, opposition,
interference, cancellation proceeding or other legal or
governmental proceeding before any registration authority in any
jurisdiction.
(d) The consummation of the transaction contemplated
hereby will not result in the loss or impairment of the Company's
or any of its Subsidiaries' right to own or use any of the
material Intellectual Property nor will it require the consent of
any Governmental or Regulatory Authority or third party except
for any such loss, improvement or non-consent which, individually
or in the aggregate, is not reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken
as a whole.
3.17 Vote Required. Assuming the accuracy of the
representation and warranty contained in Section 4.18, the
affirmative vote of the holders of record of at least two-thirds
of the outstanding shares of Company Common Stock with respect to
the adoption and approval of this Agreement is the only vote of
the holders of any class or series of the capital stock of the
Company required to adopt this Agreement and approve the Merger
and the other transactions contemplated hereby.
3.18 Opinion of Financial Advisor. The Company has
received the oral opinion of each of Goldman, Sachs & Co. and The
Beacon Group to the effect that, the consideration to be received
in the Merger by the stockholders of the Company is fair from a
financial point of view to the stockholders of the Company.
3.19 Company Rights Agreement. As of the date hereof
and after giving effect to the execution and delivery of this
Agreement, each Company Right is represented by the certificate
representing the associated share of Company Common Stock and is
<PAGE>
not exercisable or transferable apart from the associated share
of Company Common Stock, and the Company has (i) taken all
necessary actions so that the execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby will not result in a "Distribution Date" or a "Triggering
Event" (as defined in the Company Rights Agreement) and
(ii) authorized an amendment to the Company Rights Agreement to
render it inapplicable to this Agreement, the Merger and the
other transactions contemplated hereby, which shall be executed
as promptly as practical after the date hereof.
3.20 Ownership of Parent Common Stock. Neither the
Company nor any of its Subsidiaries or other affiliates
beneficially owns any shares of Parent Common Stock.
3.21 Sections 3-602 and 3-702 of the MGCL Not
Applicable. The Company has taken all necessary actions so that
the provisions of Sections 3-602 and 3-702 of the MGCL will not,
before the termination of this Agreement, apply to this
Agreement, the Merger or the other transactions contemplated
hereby.
3.22 Accounting Matters. To the knowledge of the
Company, neither the Company nor any of its affiliates has taken
or agreed or failed to take any action that (without giving
effect to any action taken or agreed to be taken by Parent or any
of its affiliates) would disqualify the treatment of the business
combination to be effected by the Merger as a pooling of
interests for accounting purposes. The Company has received
written advice from KPMG Peat Marwick (addressed to both the
Company and Parent) that, with respect to the Company, the Merger
will qualify as a pooling of interests transaction under
Opinion 16 of the Accounting Principles Board.
3.23 Insurance. Section 3.23 of the Company
Disclosure Letter sets forth a complete and accurate list of all
primary, excess and umbrella policies, bonds and other forms of
insurance currently owned or held by or on behalf of and/or
providing insurance coverage to the Company and each of its
Subsidiaries and their respective businesses, properties and
assets (or its directors, officers, salespersons, agents or
employees). All such policies are in full force and effect.
Neither the Company nor any of its Subsidiaries has received
notice of default under any such policy, and has not received
written notice of any pending or threatened termination or
cancellation, coverage limitation or reduction, or material
premium increase with respect to any such policy the failure of
which to maintain, has a material adverse effect on the Company
and its Subsidiaries taken as a whole. Section 3.23 of the
Company Disclosure Letter sets forth a complete and accurate
summary of all of the self-insurance coverage provided by the
<PAGE>
Company and its Subsidiaries and except as set forth in such
Section 3.23 of the Company Disclosure Letter, no letters of
credit have been posted.
3.24 Records. (a) The respective corporate record
books of the Company and each of its Subsidiaries contain
accurate and complete records of all material meetings and
accurately reflect all other actions taken by the stockholders,
Board of Directors and all material committees of the Board of
Directors of the Company and its Subsidiaries. Complete and
accurate copies of all such record books have been made available
by the Company to Parent.
(b) The books, records and work papers of the Company
and its Subsidiaries are complete and correct, have been
maintained in all material respects in accordance with applicable
federal, foreign, state and local laws and regulations and good
business practices.
3.25 Mortgage Banking Licenses and Qualifications.
The Company (to the extent applicable) and each of its
Subsidiaries engaged in the business of originating or servicing
loans (i) is qualified (A) by the Federal Housing Administration
("FHA") as a mortgagee and servicer for Mortgage Loans which
satisfy all applicable rules and requirements to be insured by
FHA and which are insured by FHA ("FHA Loans"), (B) by The
Veteran's Administration ("VA") as a lender and servicer for
Mortgage Loans which satisfy all applicable rules and regulations
to be guaranteed by the VA and which are guaranteed by the VA
("VA Loans"), (C) by the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC")
as a seller/servicer of first mortgages to FNMA and FHLMC and (D)
by the Government National Mortgage Association ("GNMA") as an
authorized issuer and servicer of GNMA-guaranteed mortgage-backed
securities; and (ii) has all other certifications,
authorizations, franchises, licenses, permits and other approvals
(together with the items set forth in clause (i) above, the
"Licenses") necessary to conduct its current mortgage banking
business, and is in good standing under all applicable federal,
state and local laws and regulations thereunder as a mortgage
lender and servicer. Section 3.25 of the Company Disclosure
Letter sets forth a true and complete list of all Licenses. The
Company and each of its Subsidiaries has complied with all such
Licenses, and to the knowledge of the Company there is no
threatened suspension, cancellation or invalidation of, or
penalties (including fines or refunds) under, any such Licenses.
3.26 Loan Portfolio. The Company has previously
delivered to Parent a tape (magnetic media) which sets forth the
following information, as of September 30, 1996 with respect to
each Mortgage Loan in the Mortgage Servicing Portfolio as of such
<PAGE>
date (other than those loans set forth in Section 3.26 of the
Company Disclosure Letter): (a) the loan number of each such
Mortgage Loan, (b) the unpaid principal balance of each such
Mortgage Loan, (c) the payment status of each such Mortgage Loan,
(d) the monthly principal and interest payment for each such
Mortgage Loan, (e) the monthly escrow payment for each such
Mortgage Loan, (f) the interest rate of each such Mortgage Loan,
and whether such rate is adjustable, and (g) the state in which
the property securing each such Mortgage Loan is located. All
information contained in such tape is true and correct as of such
date in all material respects. To the knowledge of the Company,
each Mortgage Loan is (i) evidenced by a note with such terms as
are customary in the business, (ii) duly secured by a mortgage or
deed of trust with such terms as are customary in the business
and which grants the holder thereof a first priority lien on the
subject property (including any improvements thereon), each such
mortgage or deed of trust constituting a security interest that
has been duly perfected and maintained (or is in the process of
perfection in due course) as a first lien subject only to taxes
and assessments not yet delinquent as evidenced by a lender's
title insurance policy, and is in full force and effect and (iii)
accompanied by a hazard insurance policy (and a flood insurance
policy where required under the terms of the Flood Disaster
Protection Act) covering improvements on the premises subject to
such mortgage or deed of trust, with a loss payee clause in favor
of the Company or a Subsidiary of the Company or an assignee of
the Company or such Subsidiary, such insurance policy covering
such risks as are customarily insured against in accordance with
industry practice and which are required to be insured against
pursuant to Investor requirements.
For the purposes of this Agreement:
"Investor" means any Person who owns a Mortgage Loan,
or the servicing rights or master servicing rights to a Mortgage
Loan, subserviced, serviced or master serviced by the Company or
any Subsidiary of the Company pursuant to a Mortgage Servicing
Agreement.
"Mortgage Loan" means any closed 1-4 family residential
mortgage (including all Warehouse Loans), whether or not such
mortgage is included in a securitized portfolio, in the Mortgage
Servicing Portfolio, as evidenced by notes duly secured by
mortgages or deeds of trust.
"Mortgage Servicing Agreements" means all contracts or
arrangements (written or oral) between the Company or any of its
Subsidiaries and an Investor pursuant to which the Company or any
of its Subsidiaries subservices, services or master services
mortgage loans for such Investor.
<PAGE>
"Mortgage Servicing Portfolio" means the portfolio of
mortgage loans subserviced, serviced or master serviced by the
Company or any of its Subsidiaries pursuant to Mortgage Servicing
Agreements, together with all Warehouse Loans.
"Warehouse Loans" means Mortgage Loans owned by the
Company or one of its Subsidiaries and held for sale.
3.27 Loan Documents. The Loan Documents were in
compliance with applicable Regulations upon origination of the
underlying Mortgage Loan and are complete in all material
respects. All insertions in any Loan Documents were correct when
made. All required adjustments for those Mortgage Loans that are
adjustable rate Mortgage Loans have been timely and properly made
in accordance with the underlying Loan Documents and all such
adjustments are recorded accurately and completely in the Loan
Documents.
For the purposes of this Agreement:
"Agency" means FHA, VA, GNMA, FNMA, FHLMC or a state
agency.
"Insurer" means a Person who insures or guarantees all
or any portion of the risk of loss upon borrower default on any
of the Mortgage Loans, including, without limitation, the FHA,
the VA and any private mortgage insurer, and providers of life,
hazard, disability, title or other insurance with respect to any
of the Mortgage Loans or the property securing a Mortgage Loan.
"Loan Documents" means the credit and closing packages,
custodial documents, escrow documents, and all other documents:
(i) in the possession of the Company or its Subsidiaries
specifically pertaining to a Mortgage Loan, (ii) reasonably
necessary for prudent servicing of a Mortgage Loan or (iii)
necessary to establish the eligibility of the Mortgage Loan for
insurance by an Insurer or sale to an Investor; in each case as
required by applicable Regulations.
"Regulations" means (i) federal, state and local laws,
rules and regulations with respect to the origination, insuring,
purchase, sale, pooling, servicing, subservicing, master
servicing or filing of claims in connection with a Mortgage Loan,
(ii) the responsibilities and obligations set forth in any
agreement between the Company or any of its Subsidiaries and an
Investor or Insurer (including, without limitation, any Mortgage
Servicing Agreement and selling and servicing guides), (iii) the
laws, rules, regulations, guidelines, handbooks and other
requirements of (A) an Investor, (B) an Agency, (C) an Insurer,
(D) a public housing program or (E) an Investor program with
respect to the origination, insuring, purchase, sale, pooling,
<PAGE>
servicing, subservicing, master servicing or filing of claims in
connection with a Mortgage Loan, and (iv) the terms and
provisions of the Loan Documents.
3.28 No Recourse. Except as set forth in Section 3.28
of the Company Disclosure Letter and except with respect to
delinquent Mortgage Loans with respect to which the VA has
notified the Company or one of its Subsidiaries that it intends
to exercise its option to pay the amount guaranteed by the VA and
relinquish all rights in the collateral securing such Mortgage
Loan to the Company or one of its Subsidiaries ("VA No-Bids"),
neither the Company nor any of its Subsidiaries is a party to:
(i) any agreement or arrangement with (or otherwise obligated to)
any Person, including an Investor or Insurer, to repurchase from
any such Person (or effect any substitution with respect to) any
Mortgage Loan, mortgaged property serviced for others, mortgage
loan sold by the Company or any of its Subsidiaries with
servicing released ("Servicing Released Loans") or mortgage loan
the servicing rights with respect to which were sold on a bulk or
flow basis by the Company or any of its Subsidiaries ("Servicing
Sale Loan") or (ii) any agreement, arrangement or understanding
to reimburse, indemnify, effect a substitution, "make whole" or
hold harmless any Person or otherwise assume any liability with
respect to any Loss suffered or incurred as a result of any
default under or the foreclosure or sale of any Mortgage Loan,
mortgaged property serviced for others, Servicing Released Loans
or Servicing Sale Loans, except with respect to any of the
Mortgage Loans, mortgaged property serviced for others, Servicing
Released Loans or Servicing Sale Loans, described in clause (i)
or (ii) above, insofar as (A) such obligation to repurchase,
reimburse, indemnify, substitute, "make whole," hold harmless or
otherwise assume liability is (x) based upon a breach by the
Company or any of its Subsidiaries of a contractual
representation, warranty or undertaking, or the misfeasance or
malfeasance of the Company or any such Subsidiary, and not (y)
based solely upon the default under or foreclosure or sale of any
such Mortgage Loan, mortgaged property, Servicing Released Loan
or Servicing Sale Loan without regard to the occurrence of any
such breach, misfeasance or malfeasance or (B) the Company or any
such Subsidiary incurs expenses such as legal fees in excess of
the reimbursement limits, if any, set forth in the applicable
Mortgage Servicing Agreement.
For purposes of this Agreement:
"Loss" means any liability, loss, cost, damage,
penalty, fine, obligation or expense of any kind whatsoever
(including, without limitation, reasonable attorneys',
accountants', consultants' or experts' fees and disbursements).
<PAGE>
3.29 Mortgage Servicing Agreements. Section 3.29 of
the Company Disclosure Letter contains a list of the investors
and all Mortgage Servicing Agreements to which the Company or
any of its Subsidiaries is a party as of the date hereof.
The Mortgage Servicing Agreements and the Regulations set
forth all the terms and conditions of the Company and any of its
Subsidiaries' rights against and obligations to the Agencies and
Investors and, except as set forth in Section 3.29 of the Company
Disclosure Letter, there are no written or oral agreements that
modify or amend any such Mortgage Servicing Agreement in any
material respect. All of the Mortgage Servicing Agreements are
valid and binding obligations of the Company or the applicable
Subsidiary of the Company and, to the knowledge of the Company,
all of the other parties thereto, are in full force and effect,
and are enforceable in accordance with their terms, except as
enforcement thereof may be limited by general principles of
equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors,
rights and remedies generally. Except as set forth in Section
3.29 of the Company Disclosure Letter, there is no default or
breach under, or dispute regarding the material terms of, or to
the knowledge of the Company, claim of default or breach by any
party under any such Mortgage Servicing Agreement, and, to the
knowledge of the Company, no event has occurred which with the
passage of time or the giving of notice or both would constitute
a default or breach by any party under any such Mortgage
Servicing Agreement or would permit termination, modification or
acceleration of any such Mortgage Servicing Agreement.
3.30 Compliance with Mortgage Banking Regulations.
(a) Except as disclosed in Section 3.30 of the Company
Disclosure Letter, the Company and each of its Subsidiaries
engaged in the business of originating or servicing loans and,
with respect to each Mortgage Loan, and, to the knowledge of the
Company, each prior servicer and originator of any such loan, has
been and is (including, without limitation, with respect to (i)
the ownership and operation of its properties and (ii) the
documentation, underwriting, origination, purchase, assumption,
modification, sale, pooling and servicing of Mortgage Loans by
the Company and such Subsidiaries and such prior servicers and
originators) in compliance with all Regulations, orders, writs,
decrees, injunctions and other requirements of any court or
Governmental Entities applicable to it, its properties and assets
and its conduct of business (including, without limitation, (x)
the rules, regulations and requirements of FHA, VA, FNMA, the
United States Department of Housing and Urban Development
("HUD"), FHLMC and GNMA, (y) any applicable local, state or
federal law or ordinance, and any regulations or orders issued
thereunder, governing or pertaining to fair housing or unlawful
discrimination in residential lending (including without
<PAGE>
limitation anti-redlining, equal credit opportunity, and fair
credit reporting), truth-in-lending, real estate settlement
procedures, adjustable rate mortgages, adjustable rate mortgage
disclosures or consumer credit (including, without limitation,
the federal Consumer Credit Protection Act, the federal Truth-in-
Lending Act and Regulation Z thereunder, the federal Real Estate
Settlement Procedures Act of 1974 and Regulation X thereunder,
and the federal Equal Credit Opportunity Act and Regulation B
thereunder) or with respect to the Flood Disaster Protection Act
and (z) all applicable usury and interest limitations laws).
Without limiting the generality of the foregoing, except as set
forth in Section 3.30(a) of the Company Disclosure Letter, each
of the Company and each such Subsidiary of the Company has been
and is in compliance in all material respects with all servicer
and other requirements of the FHA, VA, FNMA, FHLMC, GNMA,
Investors and any Insurer (including, without limitation, any
applicable net worth requirements) which are applicable to it,
and all applicable underwriting standards of such Agencies,
Investors or Insurers, and each correspondent or broker from whom
the Company or a Subsidiary of the Company has purchased FHA
Loans or VA Loans had all FHA and VA approvals necessary to
enable it to take applications and close FHA Loans and/or VA
Loans.
(b) Except as set forth in Section 3.30(b) of the
Company Disclosure Letter, the Company and each Subsidiary of the
Company, as the case may be, has timely filed, or will have
timely filed by the Effective Time, all reports required to be
filed by any Agency, Investor or Insurer or by any federal, state
or municipal law, regulation or ordinance. Except as set forth
in Section 3.30(b) of the Company Disclosure Letter, neither the
Company nor any Subsidiary of the Company has done or failed to
do, or has caused to be done or omitted to be done, any act, the
effect of which would operate to invalidate or materially impair
(i) any approvals of the FHA, VA, FNMA, FHLMC, GNMA, HUD or any
Investor, (ii) any FHA insurance or commitment of the FHA to
insure, (iii) any VA guarantee or commitment of the VA to
guarantee, (iv) any private mortgage insurance or commitment of
any private mortgage insurer to insure, (v) any title insurance
policy, (vi) any hazard insurance policy, (vii) any flood
insurance policy required by the National Flood Insurance Act of
1968, as amended, (viii) any fidelity bond, direct surety bond,
or errors and omissions insurance policy required by HUD, GNMA,
FNMA, FHA, FHLMC, VA or private mortgage insurers, (ix) any
surety or guaranty agreement or (x) any guaranty issued by GNMA
to the Company or any Subsidiary of the Company respecting
mortgage-backed securities issued or serviced by the Company or
any Subsidiary of the Company and other like guaranties.
(c) Except as set forth in Section 3.30(c) of the
Company Disclosure Letter, since January 1, 1994, no Agency,
<PAGE>
Investor or Insurer has (y) to the knowledge of the Company,
claimed that the Company or any Subsidiary of the Company has
violated or not complied with the applicable underwriting
standards with respect to mortgage loans sold by the Company or
any Subsidiary of the Company to an Investor or (z) imposed
restrictions on the activities (including commitment authority)
of the Company or any Subsidiary of the Company. To the
knowledge of the Company, as of the date of this Agreement, there
exist no facts or circumstances which would entitle an Investor
or other Person to demand repurchase of a Mortgage Loan,
Servicing Released Loan or Servicing Sale Loan or which would
entitle an Insurer to demand indemnification from the Company or
any Subsidiary of the Company, to cancel any mortgage insurance
held for any such Subsidiary's benefit or to reduce any mortgage
insurance benefits payable to the Company or any such Subsidiary,
or would lead GNMA to require a letter of credit from the Company
or any Subsidiary of the Company.
3.31 Custodial Accounts. Each of the Company and its
Subsidiaries so required has full power and authority to maintain
escrow accounts ("Custodial Accounts") for certain of the
Mortgage Loans, has established Custodial Accounts for all escrow
deposits relating to the Mortgage Loans, and is the lawful
fiduciary of all Custodial Accounts related to the Mortgage
Loans. Such Custodial Accounts comply in all material respects
with (i) all applicable Regulations (including without limitation
Regulations governing the appropriate identification of such
accounts and the calculation of the amount of the monthly
payments for deposit into Custodial Accounts that mortgagors are
required to make) and (ii) any terms of the Mortgage Loans (and
Mortgage Servicing Agreements) relating thereto, and all such
Custodial Accounts have been maintained in all material respects
in accordance with usual and customary industry practice.
3.32 Inquiries. Section 3.32 of the Company
Disclosure Letter contains a true and correct list of all of the
audits, investigations, complaints and inquiries of the Company
or any of its Subsidiaries by any Agency, Investor or private
mortgage insurer or HUD commenced since January 1, 1994, the
result of which audits and investigations claimed a material
failure to comply with applicable Regulations and resulted in (i)
a repurchase of Mortgage Loans or related mortgage properties by
the Company or any Subsidiary of the Company, (ii)
indemnification by the Company or any Subsidiary of the Company
in connection with Mortgage Loans or related mortgage properties,
(iii) rescission of an insurance or guaranty contract or
agreement or (iv) payment of a penalty to an Agency, HUD, an
Investor or Insurer. Except for customary ongoing quality
control reviews, no such audit or investigation is pending or, to
the knowledge of the Company, threatened. The Company has made
available to Parent copies of all written reports, letters and
<PAGE>
materials received or sent by the Company or a Subsidiary of the
Company in connection with such audits, investigations,
complaints and inquiries.
3.33 Advances. Except as set forth in Section 3.33
of the Company Disclosure Letter, there are no pooling,
participation, servicing or other agreements to which the Company
or any of its Subsidiaries is a party which obligate it to make
advances with respect to defaulted or delinquent Mortgage Loans,
other than as provided in GNMA, FNMA, FHLMC or other pooling and
servicing agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
4.01 Organization and Qualification. Each of Parent
and its Subsidiaries (including Sub) is a corporation duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has full corporate
power and authority to conduct its business as and to the extent
now conducted and to own, use and lease its assets and
properties, except for such failures to be so incorporated,
existing and in good standing or to have such power and authority
which, individually or in the aggregate, are not having and are
not reasonably expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole. Sub was formed
solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated
hereby. Each of Parent and its Subsidiaries is duly qualified,
licensed or admitted to do business and is in good standing in
each jurisdiction in which the ownership, use or leasing of its
assets and properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary,
except for such failures to be so qualified, licensed or admitted
and in good standing which, individually or in the aggregate, are
not having and are not reasonably expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
Except as set forth in Section 4.01 of the Parent Disclosure
Letter, as of the date hereof, all of Parent's Significant
Subsidiaries are wholly-owned, directly or indirectly, by Parent.
Parent has previously delivered or made available to the Company
correct and complete copies of the certificate or articles of
incorporation and bylaws (or other comparable charter documents)
of Parent and its Significant Subsidiaries as of the date hereof.
<PAGE>
4.02 Capital Stock. (a) Prior to Parent
Stockholders' Meeting, the authorized capital stock of Parent
consists solely of 300,000,000 shares of Parent Common Stock and
10,000,000 shares of preferred stock, par value $1.00 per share
("Parent Preferred Stock"). As of November 7, 1996, 128,624,074
shares of Parent Common Stock were issued and outstanding,
141,000 shares were held in the treasury of Parent and 31,155,094
shares were reserved for issuance pursuant to Parent's 1992 Stock
Option Plan and 1993 Stock Option Plan. Since such date, except
as set forth in Section 4.02 of the letter dated the date hereof
and delivered by Parent and Sub to the Company concurrently with
the execution and delivery of this Agreement (the "Parent
Disclosure Letter"), there has been no change in the number of
issued and outstanding shares of Parent Common Stock or shares of
Parent Common Stock held in treasury or reserved for issuance
since such date other than upon the exercise of stock options or
the conversion of convertible debt outstanding as of the date
hereof, or as otherwise issued after the date hereof by Parent
not in violation of this Agreement. As of the date hereof, no
shares of Parent Preferred Stock are issued and outstanding. All
of the issued and outstanding shares of Parent Common Stock are,
and all shares reserved for issuance will be, upon issuance in
accordance with the terms specified in the instruments or
agreements pursuant to which they are issuable, duly authorized,
validly issued, fully paid and nonassessable. Except pursuant to
this Agreement and except as set forth in Section 4.02 of the
Parent Disclosure Letter, as of the date hereof there are no
outstanding Options obligating Parent or any of its Subsidiaries
to issue or sell any shares of capital stock of Parent or to
grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in Section 4.02 of the Parent
Disclosure Letter, as of the date hereof, all of the outstanding
shares of capital stock of each Significant Subsidiary of Parent
are duly authorized, validly issued, fully paid and nonassessable
and are owned, beneficially and of record, by Parent or a
Subsidiary wholly owned, directly or indirectly, by Parent, free
and clear of any Liens. Except as disclosed in Section 4.02 of
the Parent Disclosure Letter, as of the date hereof, there are no
(i) outstanding Options obligating Parent or any of its
Significant Subsidiaries to issue or sell any shares of capital
stock of any Subsidiary of Parent or to grant, extend or enter
into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in
favor of any person other than Parent or a Significant Subsidiary
wholly owned, directly or indirectly, by Parent with respect to
the voting of or the right to participate in dividends or other
earnings on any capital stock of any Significant Subsidiary of
Parent.
<PAGE>
(c) Except as disclosed in Section 4.02 of the Parent
Disclosure Letter, as of the date hereof, there are no
outstanding contractual obligations of Parent or any Significant
Subsidiary of Parent to repurchase, redeem or otherwise acquire
any shares of Parent Common Stock or any capital stock of any
Subsidiary of Parent or to provide funds to, or make any
investment (in the form of a loan, capital contribution or
otherwise) in, any Significant Subsidiary of Parent or any other
person.
4.03 Authority Relative to this Agreement. Each of
Parent and Sub has full corporate power and authority to enter
into this Agreement and to perform its obligations hereunder
(subject to, in the case of consummation of the Merger, the
issuance of Parent Common Stock and the increase in the Board of
Directors of Parent in connection therewith, obtaining the Parent
Stockholders' Approval, if required) and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Parent and Sub and the
consummation by each of Parent and Sub of the transactions
contemplated hereby have been duly and validly approved by its
Board of Directors and by Parent in its capacity as the sole
stockholder of Sub; and no other corporate proceedings on the
part of either of Parent or Sub or their stockholders are
necessary to authorize the execution, delivery and performance of
this Agreement by Parent and Sub and the consummation by Parent
and Sub of the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of
Parent and Sub and constitutes a legal, valid and binding
obligation of each of Parent and Sub enforceable against each of
Parent and Sub in accordance with its terms (subject to, in the
case of consummation of the Merger, and the issuance of Parent
Common Stock and the increase in the Board of Directors of Parent
in connection therewith, obtaining the Parent Stockholders'
Approval, if required), except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
4.04 Non-Contravention; Approvals and Consents. (a)
The execution and delivery of this Agreement by each of Parent
and Sub do not, and the performance by each of Parent and Sub of
its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result
in a violation or breach of, constitute (with or without notice
or lapse of time or both) a default under, result in or give to
any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or
<PAGE>
properties of Parent or any of its Significant Subsidiaries
under, any of the terms, conditions or provisions of (i) the
certificates or articles of incorporation or bylaws (or other
comparable charter documents) of Parent or any of its Significant
Subsidiaries, or (ii) except as disclosed in Section 4.04 of the
Parent Disclosure Letter, (x) subject to the obtaining of the
Parent Stockholders' Approval and taking of the actions described
in paragraph (b) of this Section any laws or orders of any
Governmental or Regulatory Authority applicable to Parent or any
of its Subsidiaries or any of their respective assets or
properties, or (y) any Contracts to which Parent or any of its
Subsidiaries is a party or by which Parent or any of its
Subsidiaries or any of their respective assets or properties is
bound, excluding from the foregoing clauses (x) and (y)
conflicts, violations, breaches, defaults, terminations,
modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, are not reasonably
expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or on the ability of Parent and Sub
to consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger
notification report by Parent under the HSR Act, (ii) for the
filing of the Proxy Statement and Registration Statement with the
SEC pursuant to the Exchange Act and the Securities Act, the
declaration of the effectiveness of the Registration Statement by
the SEC and filings with various state securities authorities
that are required in connection with the transactions
contemplated by this Agreement, (iii) for the filing of the
Articles of Merger and other appropriate merger documents
required by the MGCL with the Department and appropriate
documents with the relevant authorities of other states in which
the Constituent Corporations are qualified to do business and
(iv) as disclosed in Section 4.04 of the Parent Disclosure
Letter, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the
terms, conditions or provisions of any law or order of any
Governmental or Regulatory Authority or any Contract to which
Parent or any of its Subsidiaries is a party or by which Parent
or any of its Subsidiaries or any of their respective assets or
properties is bound for the execution and delivery of this
Agreement by each of Parent and Sub, the performance by each of
Parent and Sub of its obligations hereunder or the consummation
of the transactions contemplated hereby, other than such
consents, approvals, actions, filings and notices which the
failure to make or obtain, as the case may be, individually or in
the aggregate, are not reasonably expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole or
on the ability of Parent and Sub to consummate the transactions
contemplated by this Agreement.
<PAGE>
4.05 SEC Reports and Financial Statements. Parent
delivered to the Company prior to the execution of this Agreement
a true and complete copy of each form, report, schedule,
registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements
thereto) filed by Parent or any of its Subsidiaries with the SEC
since January 1, 1994 (as such documents have since the time of
their filing been amended or supplemented, the "Parent SEC
Reports"), which are all the documents (other than preliminary
material) that Parent and its Subsidiaries were required to file
or did file with the SEC since such date. As of their respective
dates, the Parent SEC Reports (i) complied as to form in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and (ii) did not contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim
consolidated financial statements (including, in each case, the
notes, if any, thereto) included in the Parent SEC Reports (the
"Parent Financial Statements") complied as to form in all
material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated
therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit
adjustments (which are not expected to be, individually or in the
aggregate, materially adverse to Parent and its Subsidiaries
taken as a whole)) the consolidated financial position of Parent
and its consolidated subsidiaries as at the respective dates
thereof and the consolidated results of their operations and cash
flows for the respective periods then ended. Except as set forth
in Section 4.05 of the Parent Disclosure Letter, each Significant
Subsidiary of Parent is treated as a consolidated subsidiary of
Parent in the Parent Financial Statements for all periods covered
thereby.
4.06 Absence of Certain Changes or Events. Except as
disclosed in the Recent Parent SEC Reports filed prior to the
date of this Agreement, (a) since June 30, 1996 there has not
been any change, event or development having, or that is
reasonably expected to have, individually or in the aggregate, a
material adverse effect on Parent and its Subsidiaries taken as a
whole.
4.07 Absence of Undisclosed Liabilities. Except for
matters reflected or reserved against in the balance sheet for
<PAGE>
the period ended June 30, 1996 or in the Recent Parent SEC
Reports included in the Parent Financial Statements or as
disclosed in Section 4.07 of the Parent Disclosure Letter,
neither Parent nor any of its Subsidiaries had at such date, or
has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature that would be
required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of Parent and its
consolidated subsidiaries (including the notes thereto), except
liabilities or obligations (i) which were incurred in the
ordinary course of business consistent with past practice or (ii)
which have not been, and are not reasonably expected to be,
individually or in the aggregate, materially adverse to Parent
and its Subsidiaries taken as a whole.
4.08 Legal Proceedings. Except as disclosed in the
Recent Parent SEC Reports or in Section 4.08 of the Parent
Disclosure Letter, (i) there are no actions, suits, arbitrations
or proceedings pending or, to the knowledge of Parent, threatened
against, relating to or affecting, nor to the knowledge of Parent
are there any Governmental or Regulatory Authority investigations
or audits pending or threatened against, relating to or
affecting, Parent or any of its Subsidiaries or any of their
respective assets and properties which, individually or in the
aggregate, are reasonably expected to have a material adverse
effect on Parent and its Subsidiaries taken as a whole or on the
ability of Parent and Sub to consummate the transactions
contemplated by this Agreement, and (ii) neither Parent nor any
of its Subsidiaries is subject to any order of any Governmental
or Regulatory Authority which, individually or in the aggregate,
is having or is reasonably expected to have a material adverse
effect on Parent and its Subsidiaries taken as a whole or on the
ability of Parent and Sub to consummate the transactions
contemplated by this Agreement.
4.09 Information Supplied. The registration statement
on Form S-4 to be filed with the SEC by Parent in connection with
the issuance of shares of Parent Common Stock in the Merger or
pursuant to Section 6.09, as amended or supplemented from time to
time (as so amended and supplemented, the "Registration
Statement"), and any other documents to be filed by Parent with
the SEC or any other Governmental or Regulatory Authority in
connection with the Merger and the other transactions
contemplated hereby will (in the case of the Registration
Statement and any such other documents filed with the SEC under
the Securities Act or the Exchange Act) comply as to form in all
material respects with the requirements of the Exchange Act and
the Securities Act, respectively, and will not, on the date of
its filing or, in the case of the Registration Statement, at the
time it becomes effective under the Securities Act, at the date
<PAGE>
the Proxy Statement is mailed to stockholders of the Company and
of Parent and at the times of the Stockholders' Meetings, 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 are made, not misleading, except that no
representation is made by Parent or Sub with respect to
information supplied in writing by or on behalf of the Company
expressly for inclusion therein and information incorporated by
reference therein from documents filed by the Company or any of
its Subsidiaries with the SEC.
4.10 Compliance with Laws and Orders. Parent and its
Subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental and Regulatory
Authorities necessary for the lawful conduct of their respective
businesses (the "Parent Permits"), except for failures to hold
such permits, licenses, variances, exemptions, orders and
approvals which, individually or in the aggregate, are not having
and are not reasonably expected to have a material adverse effect
on Parent and its Subsidiaries taken as a whole. Parent and its
Subsidiaries are in compliance with the terms of the Parent
Permits, except failures so to comply which, individually or in
the aggregate, are not having and are not reasonably expected to
have a material adverse effect on Parent and its Subsidiaries
taken as a whole. Except as disclosed in the Recent Parent SEC
Reports, Parent and its Subsidiaries are not in violation of or
default under any law or order of any Governmental or Regulatory
Authority, except for such violations or defaults which,
individually or in the aggregate, are not having and are not
reasonably expected to have a material adverse effect on Parent
and its Subsidiaries taken as a whole.
4.11 Compliance with Agreements; Certain Agreements.
Except as disclosed in the Recent Parent SEC Reports, neither
Parent nor any of its Subsidiaries nor, to the knowledge of
Parent, any other party thereto is in breach or violation of, or
in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or
lapse of time or both, is reasonably expected to result in a
default under, (i) the certificates or articles of incorporation
or bylaws (or other comparable charter documents) of Parent or
any of its Significant Subsidiaries or (ii) any Contract to which
Parent or any of its Subsidiaries is a party or by which Parent
or any of its Subsidiaries or any of their respective assets or
properties is bound, except in the case of clause (ii) for
breaches, violations and defaults which, individually or in the
aggregate, are not having and are not reasonably expected to have
a material adverse effect on Parent and its Subsidiaries taken as
a whole.
<PAGE>
4.12 Taxes. (a) Except as disclosed in Section 4.12 of
the Parent Disclosure Letter, each of Parent and its Subsidiaries
has filed or caused to be filed with the appropriate Governmental
or Regulatory Authority all tax returns required to be filed by
it, or requests for extensions to file such tax returns have been
timely filed or granted and have not expired, and all such tax
returns are true, complete and accurate in all respects, except
to the extent that such failures to file, have extensions granted
that remain in effect or be complete and accurate in all
respects, as applicable, individually or in the aggregate, would
not have a material adverse effect on Parent and its Subsidiaries
taken as a whole. Parent and each of its Subsidiaries has paid
(or Parent has paid on its behalf) all taxes shown as due on such
tax returns or otherwise due or claimed to be due by any
Governmental or Regulatory Authority. The most recent financial
statements contained in the Parent SEC Reports reflect an
adequate reserve for all taxes payable by Parent and its
Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements, and no
deficiencies for any taxes have been proposed, asserted or
assessed against Parent or any of its Subsidiaries that are not
adequately reserved for, except for inadequately reserved taxes
and inadequately reserved deficiencies that would not,
individually or in the aggregate, have a material adverse effect
on Parent and its Subsidiaries taken as a whole. No requests for
waivers or comparable consents with respect to the time to assess
any taxes against Parent or any of its Subsidiaries have been
granted or are pending, except for requests with respect to such
taxes that have been adequately reserved for in the most recent
financial statements contained in the Parent SEC Reports, or, to
the extent not adequately reserved, the assessment of which would
not, individually or in the aggregate, have a material adverse
effect on Parent and its Subsidiaries taken as a whole. Parent
and its Subsidiaries have complied in all respects with all
applicable laws, rules and regulations relating to the payment
and withholding of taxes (including, without limitation,
withholding of taxes pursuant to Sections 1441 and 1442 of the
Code or similar provisions under any foreign laws and withholding
with respect to employee wages) and have, within the time and
manner prescribed by law, withheld and paid over to the proper
Governmental or Regulatory Authority all amounts required to be
withheld and paid over under all applicable laws.
(b) Neither Parent nor any of its Subsidiaries has
taken any action or has any knowledge of any fact or circumstance
that is reasonably likely to prevent the Merger from qualifying
as a tax-free reorganization within the meaning of Section 368(a)
of the Code.
4.13 Employee Benefit Plans; ERISA. (a) Except as
described in the Recent Parent SEC Reports or as would not have a
<PAGE>
material adverse effect on Parent and its Subsidiaries taken as a
whole, (i) all Parent Employee Benefit Plans are in compliance
with all applicable requirements of law, including ERISA and the
Code, and (ii) neither Parent nor any of its Subsidiaries nor any
Parent ERISA Affiliate has any liabilities or obligations with
respect to any such Parent Employee Benefit Plans, whether
accrued, contingent or otherwise, nor to the knowledge of Parent
are any such liabilities or obligations expected to be incurred.
The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon
the occurrence of any additional or subsequent events) constitute
an event under any Parent Employee Benefit Plan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect
to any employee.
(b) No liability under Title IV of ERISA has been
incurred by Parent or any Parent ERISA Affiliate within the past
six years that has not been satisfied in full. To the knowledge
of Parent, no condition exists that presents a material risk to
Parent, any of the Subsidiaries or any Parent ERISA Affiliate of
incurring a liability under such Title. The PBGC has not
instituted proceedings to terminate any of the Plans and no
condition exists that presents a material risk that such
proceedings will be instituted. With respect to each of the
Plans that is subject to Title IV of ERISA, the present value of
accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent
actuarial report prepared by such plan's actuary with respect to
such plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such plan allocable to such
accrued benefits by an amount which would have, or could
reasonably be expected to have, a material adverse effect on
Parent and its Subsidiaries taken as a whole. None of the Plans
or any trust established thereunder has incurred any "accumulated
funding deficiency" (as defined in section 302 of ERISA and
section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of each of the Plans ended
prior to the date of this Agreement. No withdrawal by Parent or
any Parent ERISA Affiliate from any Parent Employee Benefit Plan
that is a "multiemployer plan," as such term is defined in
section 3(37) of ERISA, would result in a withdrawal liability
having a material adverse effect on Parent and its Subsidiaries
taken as a whole. Each of the Plans that is intended to be
"qualified" within the meaning of section 401(a) of the Code is
so qualified and the trusts maintained thereunder are exempt from
taxation under section 501(a) of the Code. No liability under
any Plan which provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect
to current or former employees after retirement or other
<PAGE>
termination of service (other than coverage mandated by
applicable law or benefits, the full cost of which is borne by
the current or former employee) would, or would reasonably be
likely to, have a material adverse effect on Parent and its
Subsidiaries taken as a whole. There are no pending or
threatened claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving
any such Plan (other than routine claims for benefits).
(c) As used herein "Parent Employee Benefit Plan"
means any Plan entered into, established, maintained, sponsored,
contributed to or required to be contributed to by Parent or any
of its Subsidiaries or ERISA Affiliates for the benefit of the
current or former employees or directors of Parent or any of its
Subsidiaries and existing on the date of this Agreement or at any
time subsequent thereto and on or prior to the Effective Time
and, in the case of a Plan which is subject to Part 3 of Title I
of ERISA, Section 412 of the Code or Title IV of ERISA, at any
time during the five-year period preceding the date of this
Agreement.
4.14 Labor Matters. Except as disclosed in the Recent
Parent SEC Reports or in Section 4.14 of the Parent Disclosure
Letter, there are no material controversies pending or, to the
knowledge of Parent, threatened between Parent or any of its
Subsidiaries and any representatives of its employees, except as
would not, individually or in the aggregate, have a material
adverse effect on Parent and its Subsidiaries taken as a whole,
and, to the knowledge of Parent, there are no material
organizational efforts presently being made involving any of the
now unorganized employees of Parent or any of its Subsidiaries.
Since January 1, 1994, there has been no work stoppage, strike or
other concerted action by employees of Parent or any of its
Subsidiaries except as have not, individually or in the
aggregate, had a material adverse effect on Parent and its
Subsidiaries taken as a whole.
4.15 Environmental Matters. (a) Each of Parent and
its Subsidiaries has obtained all Environmental Permits which are
required under any applicable Environmental Law in respect of its
business or operations, except for such failures to have
Environmental Permits which, individually or in the aggregate,
are not reasonably expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole. Each of such
Environmental Permits is in full force and effect and each of
Parent and its Subsidiaries is in compliance with the terms and
conditions of all such Environmental Permits and with any
applicable Environmental Law, except for such failures to be in
compliance which, individually or in the aggregate, are not
reasonably expected to have a material adverse effect on Parent
and its Subsidiaries taken as a whole.
<PAGE>
(b) There is no Environmental Claim pending or to the
knowledge of Parent threatened against Parent or any of its
Subsidiaries or to the knowledge of Parent, against any person or
entity whose liability for any Environmental Claim Parent or any
of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law that is reasonably expected
to have a material adverse effect on Parent and its Subsidiaries
taken as a whole.
(c) Except as set forth in Section 4.15 of the Parent
Disclosure Letter, to the knowledge of Parent, there are no past
or present actions, activities, circumstances, conditions, events
or incidents, including, without limitation, the release,
threatened release or presence of any Hazardous Material which
could form the basis of any Environmental Claim against Parent or
any of its Subsidiaries, or to the knowledge of Parent, against
any person or entity whose liability for any Environmental Claim
Parent or any of its Subsidiaries has or may have retained or
assumed either contractually or by operation of law, except for
such liabilities which, individually or in the aggregate, are not
reasonably expected to have a material adverse effect on Parent
and its Subsidiaries taken as a whole.
(d) To the knowledge of Parent, no site or facility
now or previously owned, operated or leased by Parent or any of
its Subsidiaries is listed or proposed for listing on the
National Priorities List promulgated pursuant to CERCLA.
(e) No Liens have arisen under or pursuant to any
Environmental Law on any site or facility owned, operated or
leased by Parent or any of its Subsidiaries, other than any such
real property not individually or in the aggregate material to
Parent and its Subsidiaries taken as a whole, and no action of
any Governmental or Regulatory Authority has been taken or, to
the knowledge of Parent, is in process which could subject any of
such properties to such Liens.
(f) Prior to Closing, Parent shall have made available
for inspection to the Company true, complete and correct copies
and results of any material reports, studies, analyses, tests or
monitoring possessed or initiated by Parent or any of its
Subsidiaries pertaining to Hazardous Materials in, on, beneath or
adjacent to any property currently or formerly owned, operated or
leased by Parent or any of its Subsidiaries, or regarding
Parent's or any of its Subsidiaries' compliance with applicable
Environmental Laws.
4.16 Intellectual Property Rights. (a) Parent and its
Subsidiaries own or have the right to use, all Intellectual
Property individually or in the aggregate material to the conduct
of the businesses of Parent and its Subsidiaries as currently
<PAGE>
conducted taken as a whole. To the knowledge of Parent, neither
Parent nor any Subsidiary of Parent is in default (or with the
giving of notice or lapse of time or both, would be in default)
under any license to use such Intellectual Property, such
Intellectual Property is not being infringed by any third party,
and neither Parent nor any Subsidiary of Parent is infringing any
intellectual property of any third party, except for such
defaults and infringements which, individually or in the
aggregate, are not having and are not reasonably expected to have
a material adverse effect on Parent and its Subsidiaries taken as
a whole.
(b) Either Parent or one of its Subsidiaries currently
is listed in the records of the appropriate United States, state
or foreign agency as the sole owner of record for each
application and registration included in the Intellectual
Property, except for any such failure which, individually or in
the aggregate, is not reasonably expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
(c) Parent and its Subsidiaries, with respect to all
Intellectual Property owned thereby, have taken or caused to be
taken all reasonable steps to obtain and retain valid and
enforceable Intellectual Property rights therein, including the
submission of all necessary filings in accordance with the legal
and administrative requirements of the appropriate jurisdictions,
except where the failure to do so is not reasonably expected to
have a material adverse effect on Parent and its Subsidiaries
taken as a whole.
(d) The consummation of the transaction contemplated
hereby will not result in the loss or impairment of Parent's or
any of its Subsidiaries' right to own or use any of the material
Intellectual Property nor will it require the consent of any
Governmental or Regulatory Authority or third party except for
any such loss, impairment or non-consent which, individually or
in the aggregate, is not reasonably expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
4.17 Opinion of Financial Advisor. Parent has
received the oral opinion of Lehman Brothers Inc., dated the date
hereof, to the effect that, from a financial point of view, the
consideration to be paid by Parent in the Merger is fair to
Parent.
4.18 Ownership of Company Common Stock. Neither
Parent nor any of its Subsidiaries owns any shares of Company
Common Stock. No other affiliates of Parent beneficially own in
the aggregate more than 1 percent of the shares of Company Common
Stock.
<PAGE>
4.19 Accounting Matters. (a) To the knowledge of
Parent, neither Parent nor any of its affiliates has taken or
agreed or failed to take any action that (without giving effect
to any action taken or agreed to be taken by the Company or any
of its affiliates) would disqualify the treatment of the business
combination to be effected by the Merger as a pooling of
interests for accounting purposes.
(b) Parent (i) believes, based on discussions with the
SEC (as and to the extent previously disclosed to the Company),
that with respect to Parent, the SEC currently would not object
to accounting for the Merger as a pooling of interests
transaction and (ii) has received written advice from Deloitte &
Touche LLP (addressed to both Parent and the Company) that, with
respect to Parent, the Merger will qualify as a pooling of
interests transaction under Opinion 16 of the Accounting
Principles Board.
4.20 Vote Required. The affirmative vote of at least
a majority of the votes cast by the holders of record of shares
of Parent Common Stock represented in person or by proxy at a
meeting in which a quorum of stockholders is present with respect
to the approval of the issuance of Parent Common Stock in
connection with the Merger and the increase in the size of the
Board of Directors of Parent in connection with Section 6.11 is
the only vote of the holders of any class or series of the
capital stock of Parent that may be required to approve such
issuance.
ARTICLE V
COVENANTS
5.01 Covenants of the Company and Parent. At all
times from and after the date hereof until the Effective Time,
the Company and Parent each covenants and agrees as to itself and
its Subsidiaries that (except as disclosed in Section 5.01 of the
Company Disclosure Letter or the Parent Disclosure Letter, as
applicable, or as expressly contemplated or permitted by this
Agreement, or to the extent that Parent shall otherwise
previously consent in writing):
(a) Ordinary Course. The Company and its Subsidiaries
shall conduct their businesses only in, and the Company and its
Subsidiaries, shall not take any action except in the ordinary
course consistent with past practice.
(b) Without limiting the generality of paragraph (a)
of this Section, (i) the Company and its Subsidiaries shall use
all commercially reasonable efforts to preserve intact in all
<PAGE>
material respects their present business organizations and
reputation, to keep available the services of their key officers
and employees, to maintain their assets and properties in good
working order and condition, ordinary wear and tear excepted, to
maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently
in effect, to preserve their relationships with significant
customers and suppliers and others having significant business
dealings with them and to comply in all material respects with
all laws and orders of all Governmental or Regulatory Authorities
applicable to them, and (ii) the Company shall, and shall not
permit any of its Subsidiaries to, except as otherwise expressly
provided for in this Agreement:
(A) amend or propose to amend its certificate or
articles of incorporation or bylaws (or other comparable
corporate charter documents);
(B) (w) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital
stock, except that the Company may continue the declaration
and payment of regular quarterly cash dividends (including
increases consistent with past practice) on Company Common
Stock, with usual record and payment dates for such
dividends in accordance with past dividend practice, and
except for the declaration and payment of dividends by a
wholly-owned Subsidiary solely to its parent corporation,
(x) split, combine, reclassify or take similar action with
respect to any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital
stock, (y) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such liquidation
or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (z) directly or
indirectly redeem, repurchase or otherwise acquire any
shares of its capital stock or any Option with respect
thereto;
(C) issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital
stock or any Option with respect thereto (other than (w) the
issuance of Company Common Stock or stock appreciation or
similar rights, as the case may be, pursuant to Company
Option Plans or Company Employee Benefit Plans, in each case
outstanding on the date of this Agreement and in accordance
with their present terms, (x) the issuance of options
pursuant to Company Option Plans in accordance with their
present terms and only in connection with the hiring of new
employees, and the issuance of shares of Company Common
Stock upon exercise of such options, (y) the issuance by a
<PAGE>
wholly-owned Subsidiary of its capital stock to its parent
corporation and (z) the issuance of Company Rights and
reservation of Company Series A Preferred Stock pursuant to
the Company Rights Agreement in accordance with the terms
thereof) or modify or amend any right of any holder of
outstanding shares of capital stock or Options with respect
thereto;
(D) acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner) any
business or any corporation, partnership, association or
other business organization or division thereof or otherwise
acquire or agree to acquire any assets other than in the
ordinary course of its business consistent with past
practice;
(E) other than dispositions in the ordinary course of
its business consistent with past practice, sell, lease,
grant any security interest in or otherwise dispose of or
encumber any of its assets or properties;
(F) except to the extent required by applicable law,
(x) permit any material change in (A) any pricing,
marketing, purchasing, investment, accounting, financial
reporting, inventory, credit, allowance or tax practice or
policy or (B) any method of calculating any bad debt,
contingency or other reserve for accounting, financial
reporting or tax purposes or (y) make any material tax
election or settle or compromise any material income tax
liability with any Governmental or Regulatory Authority;
(G) (x) incur (which shall not be deemed to include
entering into credit agreements, lines of credit or similar
arrangements until borrowings are made under such
arrangements) any indebtedness for borrowed money or
guarantee any such indebtedness other than in the ordinary
course of its business consistent with past practice, or (y)
voluntarily purchase, cancel, prepay or otherwise provide
for a complete or partial discharge in advance of a
scheduled repayment date with respect to, or waive any right
under, any indebtedness for borrowed money other than in the
ordinary course of its business consistent with past
practice;
(H) enter into, adopt, amend in any material respect
(except as may be required by applicable law) or terminate
any Company Employee Benefit Plan or other agreement,
arrangement, plan or policy between the Company or one of
its Subsidiaries and one or more of its directors, officers
or employees, or, except for normal increases in the
<PAGE>
ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase
in benefits or compensation expense to the Company and its
Subsidiaries taken as a whole, increase in any manner the
compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or
arrangement in effect as of the date hereof;
(I) enter into any Contract or amend or modify any
existing Contract, or engage in any new transaction outside
the ordinary course of business consistent with past
practice or not on an arm's length basis, with any affiliate
of such party or any of its Subsidiaries;
(J) make any capital expenditures or commitments for
additions to plant, property or equipment constituting
capital assets except in the ordinary course of business
consistent with past practice;
(K) make any change in the lines of business in which
it participates or is engaged; or
(L) enter into any Contract, commitment or arrangement
to do or engage in any of the foregoing.
(c) Parent shall, and shall not permit any of its
Subsidiaries to, except as otherwise expressly provided for in
this Agreement, announce, enter into or commit to enter into any
transaction, which entry into, commitment or announcement would
reasonably be expected to cause a significant delay of the date
of the mailing of the Proxy Statement or of the scheduled date of
either of the Stockholders' Meetings.
(d) Advice of Changes. Each party shall confer on a
regular and frequent basis with the other with respect to its
business and operations and other matters relevant to the Merger,
and shall promptly advise the other, orally and in writing, of
any change or event, including, without limitation, any
complaint, investigation or hearing by any Governmental or
Regulatory Authority (or communication indicating the same may be
contemplated) or the institution or threat of litigation, having,
or which, is reasonably expected to have a material adverse
effect on the Company or Parent, as the case may be, and its
Subsidiaries taken as a whole or on the ability of the Company or
Parent, as the case may be, to consummate the transactions
contemplated hereby; provided that no party shall be required to
make any disclosure to the extent such disclosure would
constitute a violation of any applicable law.
(e) Notice and Cure. Each of Parent and the Company
will notify the other of, and will use all commercially
<PAGE>
reasonable efforts to cure before the Closing, any event,
transaction or circumstance, as soon as practical after it
becomes known to such party, that causes or will cause any
covenant or agreement of Parent or the Company under this
Agreement to be breached or that renders or will render untrue
any representation or warranty of Parent or the Company contained
in this Agreement. Each of Parent and the Company also will
notify the other in writing of, and will use all commercially
reasonable efforts to cure, before the Closing, any violation or
breach, as soon as practical after it becomes known to such
party, of any representation, warranty, covenant or agreement
made by Parent or the Company. No notice given pursuant to this
paragraph shall have any effect on the representations,
warranties, covenants or agreements contained in this Agreement
for purposes of determining satisfaction of any condition
contained herein.
(f) Fulfillment of Conditions. Subject to the terms
and conditions of this Agreement, each of Parent and the Company
will take or cause to be taken all commercially reasonable steps
necessary or desirable and proceed diligently and in good faith
to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the
transactions contemplated by this Agreement, and neither Parent
nor the Company will, nor will it permit any of its Subsidiaries
to, take or fail to take any action that could be reasonably
expected to result in the nonfulfillment of any such condition.
In addition, Parent will use commercially reasonable efforts to
cause the conditions set forth in Section 7.02(g) and the Company
will use commercially reasonable efforts to cause the conditions
set forth in Section 7.02(h) to be satisfied promptly after the
date hereof, and in any event no later than the date of the
mailing of the Proxy Statement.
5.02 No Solicitations. Prior to the Effective Time,
the Company agrees (a) that neither it nor any of its affiliates
or Subsidiaries shall, and it shall cause its Representatives not
to, initiate, solicit or encourage (including by way of
furnishing information), directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its stockholders)
with respect to a merger, consolidation or other business
combination including the Company or any of its Significant
Subsidiaries or any acquisition or similar transaction
(including, without limitation, a tender or exchange offer)
involving the purchase of (i) all or any significant portion of
the assets of the Company and its Subsidiaries taken as a whole,
(ii) 15% or more of the outstanding shares of Company Common
Stock or (iii) 15% of the outstanding shares of the capital stock
of any Significant Subsidiary of the Company (any such proposal
or offer being hereinafter referred to as an "Alternative
<PAGE>
Proposal"), or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions
with, any person or group relating to an Alternative Proposal
(excluding the transactions contemplated by this Agreement), or
otherwise facilitate any effort or attempt to make or implement
an Alternative Proposal; (b) that it will immediately cease and
cause to be terminated any existing activities, discussions or
negotiations with any parties with respect to any of the
foregoing, and it will take the necessary steps to inform such
parties of its obligations under this Section; and (c) that it
will notify Parent immediately if any such inquiries, proposals
or offers are received by, any such information is requested
from, or any such negotiations or discussions are sought to be
initiated or continued with, it or any of such persons; provided,
however, that nothing contained in this Section 5.02 shall
prohibit the Board of Directors of the Company from (i)
furnishing information to (but only pursuant to a confidentiality
agreement in customary form and having terms and conditions
substantially comparable to the Confidentiality Agreement) or
entering into discussions or negotiations with any person or
group that makes an unsolicited bona fide Alternative Proposal,
if, and only to the extent that, (A) the Board of Directors of
the Company, based upon the written opinion of outside counsel (a
copy of which shall be provided promptly to Parent), determines
in good faith that such action is required for the Board of
Directors to comply with its fiduciary duties to stockholders
imposed by law, (B) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or
group, the Company provides written notice to Parent to the
effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or group, and (C)
the Company keeps Parent informed of the status and all material
information including the identity of such person or group with
respect to any such discussions or negotiations to the extent
such disclosure would not constitute a violation of any
applicable law; and (ii) to the extent required, complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal.
5.03 Company Rights Agreement. The Board of Directors
of the Company shall take all further action (in addition to that
referred to in Section 3.19) reasonably requested in writing by
Parent (including redeeming the Company Rights immediately prior
to the Effective Time or amending the Company Rights Agreement)
in order to render the Company Rights inapplicable to this
Agreement, the Merger and the other transactions contemplated
hereby. Prior to the Effective Time, without the prior written
consent of Parent, the Company will not take any action to amend
the Company Rights Agreement or to redeem the Company Rights.
<PAGE>
5.04 Conduct of Business of Sub. Prior to the
Effective Time, except as may be required by applicable law and
subject to the other provisions of this Agreement, Parent shall
cause Sub to (a) perform its obligations under this Agreement in
accordance with its terms, (b) not incur directly or indirectly
any liabilities or obligations other than those incurred in
connection with the Merger and the other transactions
contemplated hereby, (c) not engage directly or indirectly in any
business or activities of any type or kind and not enter into any
agreements or arrangements with any person, or be subject to or
bound by any obligation or undertaking, which is not contemplated
by this Agreement and (d) not create, grant or suffer to exist
any Lien upon its properties or assets which would attach to any
properties or assets of the Surviving Corporation after the
Effective Time.
5.05 Third Party Standstill Agreements. During the
period from the date of this Agreement through the Effective
Time, neither the Company nor any of its Subsidiaries shall
terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party.
During such period, the Company shall enforce, to the fullest
extent permitted under applicable law, the provisions of any such
agreement, including, but not limited to, by obtaining
injunctions to prevent any breaches of such agreements and to
enforce specifically the terms and provisions thereof in any
court having jurisdiction.
5.06 Purchases of Common Stock of the Other Party.
During the period from the date hereof through the Effective
Time, neither Parent nor any of its Subsidiaries or other
affiliates will purchase any shares of Company Common Stock, and
neither the Company nor any of its Subsidiaries or other
affiliates will purchase any shares of Parent Common Stock.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information; Confidentiality. (a) Each
of the Company and Parent shall, and shall cause each of its
Subsidiaries to, throughout the period from the date hereof to
the Effective Time, (i) provide the other party and its
Representatives with full access, upon reasonable prior notice
and during normal business hours, to all officers, employees,
agents and accountants of the Company or Parent, as the case may
be, and its Subsidiaries and their respective assets, properties,
books and records, but only to the extent that such access does
not unreasonably interfere with the business and operations of
the Company or Parent, as the case may be, and its Subsidiaries,
<PAGE>
and (ii) furnish promptly to such persons (x) a copy of each
report, statement, schedule and other document filed or received
by the Company or Parent, as the case may be, or any of its
Subsidiaries pursuant to the requirements of federal or state
securities laws and each material report, statement, schedule and
other document filed with any other Governmental or Regulatory
Authority, and (y) all other information and data (including,
without limitation, copies of Contracts, Company Employee Benefit
Plans or Parent Employee Benefit Plans, as the case may be, and
other books and records) concerning the business and operations
of the Company or Parent, as the case may be, and its
Subsidiaries as the other party or any of such other persons
reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or
warranty contained in this Agreement or any condition to the
obligations of the parties hereto. Any such information or
material obtained pursuant to this Section 6.01 that constitutes
"Evaluation Material" (as such term is defined in the letter
agreement dated as of July 9, 1996 between the Company and Parent
(the "Confidentiality Agreement")) shall be governed by the terms
of the Confidentiality Agreement.
(b) Each party will hold, and will use its best
efforts to cause its Representatives to hold, in strict
confidence, unless (i) compelled to disclose by judicial or
administrative process or by other requirements of applicable
laws of Governmental or Regulatory Authorities (including,
without limitation, in connection with obtaining the necessary
approvals of this Agreement or the transactions contemplated
hereby of Governmental or Regulatory Authorities), or (ii)
disclosed in an action or proceeding brought by a party hereto in
pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other
party and its Subsidiaries furnished to it by such other party or
its Representatives in connection with this Agreement or the
transactions contemplated hereby, except to the extent that such
documents or information are not included in the term Evaluation
Material pursuant to the third paragraph of the Confidentiality
Agreement. In the event that this Agreement is terminated
without the transactions contemplated hereby having been
consummated, upon the request of the Company or Parent, as the
case may be, the other party will, and will cause its
Representatives to, promptly redeliver or cause to be redelivered
all copies of documents and information furnished by the Company
or Parent, as the case may be, or its Representatives to such
party and its Representatives in connection with this Agreement
or the transactions contemplated hereby and destroy or cause to
be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings related thereto or based thereon
prepared by the Company or Parent, as the case may be, or its
Representatives.
<PAGE>
6.02 Preparation of Registration Statement and Proxy
Statement. The Company and Parent shall prepare and file with
the SEC as soon as reasonably practicable after the date hereof
but, in any event no later than December 31, 1996, the Proxy
Statement and Parent shall prepare and file with the SEC as soon
as reasonably practicable after such date, the Registration
Statement, in which the Proxy Statement will be included as the
prospectus. Parent and the Company shall use their best efforts
to have the Registration Statement declared effective by the SEC
as promptly as practicable after such filing. Parent shall also
take any action (other than qualifying as a foreign corporation
or taking any action which would subject it to service of process
in any jurisdiction where Parent is not now so qualified or
subject) required to be taken under applicable state blue sky or
securities laws in connection with the issuance of Parent Common
Stock in connection with the Merger. If at any time prior to the
Effective Time any event shall occur that should be set forth in
an amendment of or a supplement to the Registration Statement,
Parent shall prepare and file with the SEC such amendment or
supplement as soon thereafter as is reasonably practicable.
Parent, Sub and the Company shall cooperate with each other in
the preparation of the Registration Statement and the Proxy
Statement and any amendment or supplement thereto, and each shall
notify the other of the receipt of any comments of the SEC with
respect to the Registration Statement or the Proxy Statement and
of any requests by the SEC for any amendment or supplement
thereto or for additional information, and shall provide to the
other promptly copies of all correspondence between Parent or the
Company, as the case may be, or any of its Representatives with
respect to the Registration Statement or the Proxy Statement.
Parent shall give the Company and its counsel the opportunity to
review the Registration Statement and all responses to requests
for additional information by and replies to comments of the SEC
before their being filed with, or sent to, the SEC. Each of the
Company, Parent and Sub agrees to use its best efforts, after
consultation with the other parties hereto, to respond promptly
to all such comments of and requests by the SEC and to cause (x)
the Registration Statement to be declared effective by the SEC at
the earliest practicable time and to be kept effective as long as
is necessary to consummate the Merger, and (y) the Proxy
Statement to be mailed to the holders of Company Common Stock and
Parent Common Stock entitled to vote at the meetings of the
stockholders of the Company and Parent at the earliest
practicable time.
6.03 Approval of Stockholders. (a) The Company shall,
through its Board of Directors, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Company
Stockholders' Meeting" and, together with the Parent
Stockholders' Meeting, the "Stockholders' Meetings") for the
purpose of voting on the adoption of this Agreement (the "Company
<PAGE>
Stockholders' Approval") as soon as reasonably practicable after
the date hereof. Subject to the exercise of fiduciary
obligations under applicable law as advised in writing by outside
counsel (a copy of which will be provided promptly to Parent),
the Company shall, through its Board of Directors, include in the
Proxy Statement the recommendation of the Board of Directors of
the Company that the stockholders of the Company adopt this
Agreement, and shall use its best efforts to obtain such
adoption. At such meeting, Parent shall, and shall cause its
Subsidiaries to, cause all shares of Company Common Stock then
owned by Parent or any such Subsidiary to be voted in favor of
the adoption of this Agreement.
(b) Parent shall, through its Board of Directors, duly
call, give notice of, convene and hold a meeting of its
stockholders (the "Parent Stockholders' Meeting") for the purpose
of voting on the issuance of Parent Common Stock in the Merger
(the "Parent Stockholders' Approval"). Parent shall, through its
Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of Parent that the
stockholders of Parent approve such issuances of Parent Common
Stock, and shall use its best efforts to obtain such approval.
At the Parent Stockholders' Meeting, Parent may seek such other
action by its stockholders as set forth in connection with the
execution of this agreement a letter of even date herewith
delivered to the Company.
(c) Parent and the Company shall coordinate and
cooperate with respect to the timing of the Stockholders'
Meetings and shall use their best efforts to cause the
Stockholders' Meetings to be held on the same day and as soon as
practicable after the date hereof.
6.04 Company Affiliates. At least thirty (30) days
prior to the Closing Date the Company shall deliver a letter to
Parent identifying all persons who, at the time of the Company
Stockholders' Meeting, may, in the Company's reasonable judgment,
be deemed to be "affiliates" (as such term is used in Rule 145
under the Securities Act) of the Company ("Company Affiliates").
The Company shall use its best efforts to cause each Company
Affiliate to deliver to Parent on or prior to the Closing Date a
written agreement substantially in the form and to the effect of
Exhibit A hereto (an "Affiliate Agreement"). Parent shall be
entitled to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock, consistent with the
terms of such Affiliate Agreements.
6.05 Stock Exchange Listing. Parent shall use its
best efforts to cause the shares of Parent Common Stock to be
issued in the Merger and under the Company Option Plans after the
Merger in accordance with this Agreement to be approved for
<PAGE>
listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
6.06 Certain Tax Matters. Each of Parent and the
Company shall not take or fail to take any action which would
cause Parent, the Company or their respective stockholders
(except to the extent that any stockholder of the Company may
receive cash in lieu of fractional shares) to recognize gain or
loss for federal income tax purposes as a result of the exchange
of Parent Common Stock for Company Common Stock in the Merger.
6.07 Regulatory and Other Approvals. (a) Subject to
the terms and conditions of this Agreement and without limiting
the provisions of Sections 6.02 and 6.03, each of the Company and
Parent will proceed diligently and in good faith to, as promptly
as practicable, (a) obtain all consents, approvals or actions of,
make all filings with and give all notices to Governmental or
Regulatory Authorities or any other public or private third
parties required of Parent, the Company or any of their
Subsidiaries to consummate the Merger and the other matters
contemplated hereby, and (b) provide such other information and
communications to such Governmental or Regulatory Authorities or
other public or private third parties as the other party or such
Governmental or Regulatory Authorities or other public or private
third parties may reasonably request in connection therewith. In
addition to and not in limitation of the foregoing, each of the
parties will (x) take promptly all actions necessary to make the
filings required of Parent and the Company or their affiliates
under the HSR Act no later than fifteen business days after the
date hereof, (y) comply at the earliest practicable date with any
request for additional information received by such party or its
affiliates from the Federal Trade Commission (the "FTC") or the
Antitrust Division of the Department of Justice (the "Antitrust
Division") pursuant to the HSR Act, and (z) cooperate with the
other party in connection with such party's filings under the HSR
Act and in connection with resolving any investigation or other
inquiry concerning the Merger or the other matters contemplated
by this Agreement commenced by either the FTC or the Antitrust
Division or state attorneys general.
6.08 Employee Benefit Plans. (a) Parent shall cause
the Company Employee Benefit Plans (other than the Company Option
Plans) in effect at the date of this Agreement to remain in
effect until the first anniversary of the Effective Time or, to
the extent such Company Employee Benefit Plans are not continued,
Parent will maintain until such date benefit plans which are no
less favorable, in the aggregate, to the employees covered by
such Company Employee Benefit Plans. In the case of Company
Employee Benefit Plans which are continued and under which the
employees' interests are based on Company Common Stock, such
interests shall be based on Parent Common Stock in an equitable
<PAGE>
manner; provided, however, that nothing contained herein shall be
construed as requiring the Company or the Surviving Corporation
to continue any specific plan.
(b) Notwithstanding the provisions of Section 6.08(a),
Parent will, and will cause the Surviving Corporation to, honor
without modification the PHH Corporation Corporate Incentive Plan
FY 1997 which terminates on April 30, 1997 provided that the
payments pursuant to such plan are (i) consistent with past
practice, (ii) properly accrued for under generally accepted
accounting principles and (iii) in the aggregate, less than
$10,000,000, and all employee severance plans (or policies) and
employment and severance agreements of the Company or any of its
Subsidiaries in existence on the date hereof as such agreements
shall be in effect in accordance with the terms of this Agreement
at the Effective Time, as such plans and agreements are specified
in Section 6.08 of the Company Disclosure Letter.
6.09 Company Option Plans. At the Effective Time,
each holder of an outstanding option to purchase shares of
Company Common Stock (a "Company Stock Option") under the Company
Option Plans, whether vested or unvested, shall be entitled to
receive in exchange for all of such holder's Company Stock
Options a number of shares of Parent Common Stock equal to the
quotient obtained by dividing (a) the excess, if any, of (i) the
product of (A) the Average Price as of the Company Stockholders'
Meeting, (B) the Conversion Number and (C) the number of shares
of Company Common Stock subject to such Company Stock Options,
over (ii) the aggregate exercise price of such Company Stock
Options less any applicable withholding taxes required by any
Governmental or Regulatory Authority in connection with payment
of the foregoing amount by (b) the Average Price as of the
Company Stockholders' Meeting. The provisions of Section 2.02
shall apply mutatis mutandis with respect to the foregoing. The
Company shall obtain prior to the Closing Date all consents, if
any, required from each holder of Company Stock Options to permit
the exchange contemplated by this Section 6.09.
6.10 Directors' and Officers' Indemnification and
Insurance. (a) The Company, and from and after the Effective
Time Parent and the Surviving Corporation (each, an "Indemnifying
Party"), shall indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or
who becomes prior to the Effective Time, a director or officer of
the Company or any of its Subsidiaries (the "Indemnified
Parties") against (i) all losses, claims, damages, costs and
expenses (including reasonable attorneys' fees), liabilities,
judgments and settlement amounts that are paid or incurred in
connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or
investigative and whether asserted or claimed prior to, at or
<PAGE>
after the Effective Time) that is based in whole or in part on,
or arises in whole or in part out of, the fact that such
Indemnified Party is or was a director or officer of the Company
or any of its Subsidiaries and relates to or arises out of any
action or omission occurring at or prior to the Effective Time
("Indemnified Liabilities"), and (ii) all Indemnified Liabilities
based in whole or in part on, or arising in whole or in part out
of, or pertaining to this Agreement or the transactions
contemplated hereby, in each case to the full extent a
corporation is permitted under applicable law to indemnify its
own directors or officers, as the case may be; provided that no
Indemnifying Party shall be liable for any settlement of any
claim effected without its written consent, which consent shall
not be unreasonably withheld; and provided, further, that no
Indemnifying Party shall be liable for any Indemnified
Liabilities which occur as a result of the gross negligence or
willful misconduct of the Indemnified Party. Without limiting
the foregoing, in the event that any such claim, action, suit,
proceeding or investigation is brought against any Indemnified
Party (whether arising prior to or after the Effective Time), (w)
the Indemnifying Parties will pay expenses in advance of the
final disposition of any such claim, action suit, proceeding or
investigation to each Indemnified Party to the full extent
permitted by applicable law; provided that the person to whom
expenses are advanced provides any undertaking required by
applicable law to repay such advance if it is ultimately
determined that such person is not entitled to indemnification;
(x) the Indemnified Parties shall retain counsel reasonably
satisfactory to the Indemnifying Parties; (y) the Indemnifying
Parties shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties (subject to the final
sentence of this paragraph) promptly as statements therefor are
received; and (z) the Indemnifying Parties shall use all
commercially reasonable efforts to assist in the defense of any
such matter. Any Indemnified Party wishing to claim
indemnification under this Section, upon learning of any such
claim, action, suit, proceeding or investigation, shall notify
the Indemnifying Parties, but the failure so to notify an
Indemnifying Party shall not relieve it from any liability which
it may have under this paragraph except to the extent such
failure materially prejudices such Indemnifying Party. The
Indemnified Parties as a group may retain only one law firm to
represent them with respect to each such matter unless there is,
under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more
Indemnified Parties.
(b) Except to the extent required by law, Parent will
keep in effect and guarantee performance of the provisions for
indemnification of directors or officers contained in the
certificates or articles of incorporation or bylaws (or other
<PAGE>
comparable charter documents) of the Surviving Corporation and
its Subsidiaries (which as of the Effective Time shall be those
maintained by the Company and its Subsidiaries on the date
hereof) in such a manner as would not adversely affect the rights
of any individual who shall have served as a director or officer
of the Company or any of its Subsidiaries prior to the Effective
Time to be indemnified by such corporations in respect of their
serving in such capacities prior to the Effective Time.
(c) Parent and the Surviving Corporation shall, until
the sixth anniversary of the Effective Time, cause to be
maintained in effect, to the extent available, the policies of
directors' and officers' liability insurance maintained by the
Company and its Subsidiaries as of the date hereof (or policies
of at least the same coverage and amounts containing terms that
are no less advantageous to the insured parties) with respect to
claims arising from facts or events that occurred on or prior to
the Effective Time; provided that in no event shall Parent or the
Surviving Corporation be obligated to expend in order to maintain
or procure insurance coverage pursuant to this paragraph any
amount per annum in excess of two hundred percent (200%) of the
aggregate premiums payable by the Company and its Subsidiaries in
1996 (on an annualized basis) for such purpose.
(d) The provisions of this Section are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party and each party entitled to insurance coverage under
paragraph (c) above, respectively, and his or her heirs and legal
representatives, and shall be in addition to any other rights an
Indemnified Party may have under the certificate or articles of
incorporation or bylaws of the Surviving Corporation or any of
its Subsidiaries, under the MGCL or otherwise.
6.11 Appointment of Director. Parent shall use its
best efforts to cause the Board of Directors of Parent to invite
Mr. Robert D. Kunisch to become a member of the Board of
Directors of Parent following the Closing, subject to an increase
in the size of the Board of Directors of Parent.
6.12 Expenses. Except as set forth in Section 8.02,
whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
cost or expense.
6.13 Brokers or Finders. Each of Parent and the
Company 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 broker's or finder's fee
or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement except Goldman,
<PAGE>
Sachs & Co. and the Beacon Group, whose fees and expenses will be
paid by the Company in accordance with the Company's agreements
with such firms which have previously been provided to Parent,
and Lehman Brothers Inc., whose fees and expenses will be paid by
Parent in accordance with Parent's agreement with such firm, and
each of Parent and the Company shall indemnify and hold the other
harmless from and against any and all claims, liabilities or
obligations with respect to any other such fee or commission or
expenses related thereto asserted by any person on the basis of
any act or statement alleged to have been made by such party or
its affiliate.
6.14 Takeover Statutes. If any "fair price",
"moratorium", "control share acquisition" or other form of
antitakeover statute or regulation shall become applicable to the
transactions contemplated hereby, the Company and the members of
the Board of Directors of the Company shall grant such approvals
and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly
as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of such
statute or regulation on the transactions contemplated hereby and
thereby.
6.15 Conveyance Taxes. The Company and Parent shall
cooperate in the preparation, execution and filing of all
returns, questionnaires, applications or other documents
regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions
contemplated by this Agreement that are required or permitted to
be filed on or before the Effective Time. The Company shall pay,
without deduction or withholding from any amount payable to the
holders of Company Common Stock, any such taxes or fees imposed
by any Governmental or Regulatory Authority (and any penalties
and interest with respect to such taxes and fees), which become
payable in connection with the transactions contemplated by this
Agreement, on behalf of the stockholders of the Company.
6.16 Pooling of Interests. (a) From and after the
date hereof and until the Effective Time, neither Parent nor the
Company nor any of their respective Subsidiaries or other
affiliates shall take any action, or fail to take any action,
that would disqualify the treatment of the business combination
to be effected by the Merger as a "pooling of interests" for
accounting purposes. Following the Effective Time, Parent shall
use all commercially reasonable efforts to conduct the business
of the Surviving Corporation, and shall cause the Surviving
Corporation to use all commercially reasonable efforts to conduct
its business, in a manner that would not jeopardize the
<PAGE>
characterization of the Merger as a "pooling of interests" for
accounting purposes.
(b) Promptly following the Effective Time, and in any
event within thirty (30) business days following the end of the
first calendar month beginning thereafter, Parent will publish
results covering at least thirty (30) days of post-merger
combined operations of the Company and Parent, in the form of a
quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-
K, 10-Q, or 8-K, or any other public filing or announcement which
includes the combined results of operations including sales and
net income.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect
the Merger is subject to the fulfillment, at or prior to the
Closing, of each of the following conditions:
(a) Stockholder Approval. This Agreement shall have
been adopted by the requisite vote of the stockholders of the
Company under the MGCL. The stockholders of Parent shall have
approved the issuance of Parent Common Stock in the Merger by the
requisite vote under applicable law and under the applicable
regulations of the NYSE, as the case may be.
(b) Registration Statement; State Securities Laws.
The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued and
remain in effect and no proceeding seeking such an order shall be
pending or threatened. Parent shall have received all state
securities or "Blue Sky" permits and other authorizations
necessary to issue the Parent Common Stock pursuant to this
Agreement and under the Company Option Plans after the Merger.
(c) Exchange Listing. The shares of Parent Common
Stock issuable to the Company's stockholders in the Merger and
under the Company Option Plans after the Merger in accordance
with this Agreement shall have been authorized for listing on the
NYSE, upon official notice of issuance.
(d) HSR Act. Any waiting period (and any extension
thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
<PAGE>
(e) No Injunctions or Restraints. No court of
competent jurisdiction or other competent Governmental or
Regulatory Authority shall have enacted, issued, promulgated,
enforced or entered any law or order (whether temporary,
preliminary or permanent) which is then in effect and has the
effect of making illegal or otherwise restricting, preventing or
prohibiting consummation of the Merger or the other transactions
contemplated by this Agreement.
(f) Governmental and Regulatory and Other Consents and
Approvals. Other than the filing provided for by Section 1.03,
all consents, approvals and actions of, filings with and notices
to any Governmental or Regulatory Authority or any other public
or private third parties required of Parent, the Company or any
of their Subsidiaries to consummate the Merger and the other
matters contemplated hereby, the failure of which to be obtained
or taken (i) is reasonably expected to have a material adverse
effect on Parent and its Subsidiaries or the Surviving
Corporation and its Subsidiaries, in each case taken as a whole,
or (ii) will result in a violation of any criminal laws, shall
have been obtained, all in form and substance reasonably
satisfactory to Parent and the Company.
(g) Pooling Letters. Parent and the Company shall
have received letters from Deloitte & Touche LLP and KPMG Peat
Marwick, each dated the date of the Proxy Statement and confirmed
in writing at the Effective Time and addressed to Parent and the
Company, respectively, stating that the Merger will qualify as a
pooling of interests transaction under Opinion 16 of the
Accounting Principles Board.
7.02 Conditions to Obligation of Parent and Sub to
Effect the Merger. The obligation of Parent and Sub to effect
the Merger is further subject to the fulfillment, at or prior to
the Closing, of each of the following additional conditions (all
or any of which may be waived in whole or in part by Parent and
Sub in their sole discretion):
(a) Representations and Warranties. The
representations and warranties made by the Company in this
Agreement shall be true and correct as of the Closing Date as
though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date,
except as affected by the transactions contemplated by this
Agreement and except for such failures of representations or
warranties to be true and correct (without regard to any
materiality qualifiers contained therein) which, individually or
in the aggregate, are not having and are not reasonably expected
to have a material adverse effect on the Company and its
Subsidiaries taken as a whole, and the Company shall have
<PAGE>
delivered to Parent a certificate, dated the Closing Date and
executed in the name and on behalf of the Company by its Chairman
of the Board, President or any Executive or Senior Vice
President, to such effect.
(b) Performance of Obligations. The Company shall
have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to
be so performed or complied with by the Company at or prior to
the Closing, and the Company shall have delivered to Parent a
certificate, dated the Closing Date and executed in the name and
on behalf of the Company by its Chairman of the Board, President
or any Executive or Senior Vice President, to such effect.
(c) Company Rights Agreement. On or prior to the
Closing Date, the Company Rights shall not have become
exercisable or transferable apart from the associated shares of
Company Common Stock, no "Share Acquisition Date" or
"Distribution Date" (as defined in the Company Rights Agreement)
shall have occurred and the Company Rights shall not have become
nonredeemable, in each case other than as a result of actions by
Parent or any of its affiliates.
(d) Tax Opinion. Parent and Sub shall have received
the opinion, based on appropriate representations of the Company
and Parent, of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to Parent, dated on or about the date on which the
Registration Statement (or the last amendment thereto) shall have
become effective, which opinion shall have been confirmed in
writing on and as of the Closing Date, to the effect that:
(i) The Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Sub and Parent will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Parent or
the Company as a result of the Merger;
(iii) No gain or loss will be recognized by the
stockholders of the Company upon the exchange of their
shares of Company Common Stock solely for shares of Parent
Common Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional shares of
Parent Common Stock;
(iv) The aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for shares of
Company Common Stock pursuant to the Merger (including
fractional shares of Parent Common Stock for which cash is
<PAGE>
received) will be the same as the aggregate tax basis of the
shares of Company Common Stock exchanged therefor;
(v) The holding period for shares of Parent Common
Stock received in exchange for shares of Company Common
Stock pursuant to the Merger will include the holding period
of the shares of Company Common Stock exchanged therefor,
provided such shares of Company Common Stock were held as
capital assets by the stockholder at the Effective Time; and
(vi) A stockholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will
recognize gain or loss equal to the difference, if any,
between such stockholder's tax basis in such fractional
share (as described in clause (iv) above) and the amount of
cash received.
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom
LLP may receive and rely upon covenants, agreements,
representations and warranties contained in a certificate of the
Company (the "Company Tax Certificate"), a certificate of Parent
(the "Parent Tax Certificate"), and other appropriate
certificates of Parent, the Company and others.
(e) Proceedings. All proceedings to be taken on the
part of the Company in connection with the transactions
contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to Parent,
and Parent shall have received copies of all such documents and
other evidences as Parent may reasonably request in order to
establish the consummation of such transactions and the taking of
all proceedings in connection therewith.
(f) Average Price. The Average Price with respect to
the Closing Date shall be no less than $50.00 (the "Minimum
Average Price"), subject to adjustment in accordance with Section
2.01(c)(ii).
(g) Bank Consent. Parent shall have received the
required consents from the required banks pursuant to (i)
Parent's 364-Day Competitive Advance and Revolving Credit
Agreement, dated as of October 2, 1996, between Parent, the
Lenders (as defined therein) and The Chase Manhattan Bank, as
administrative agent, (ii) Parent's Five Year Competitive Advance
and Revolving Credit Agreement, dated as of October 2, 1996,
between Parent, the Lenders (as defined therein) and The Chase
Manhattan Bank, as administrative agent, (iii) Parent's guaranty
of the Credit Agreement, dated as of August 28, 1996, by and
among Chartwell Leisure Inc., Chartwell Canada Corp., the Banks
(as defined therein), The Bank of Nova Scotia, as syndication
agent, and The Chase Manhattan Bank, as Administrative Agent and
<PAGE>
(iv) a Guaranty of a Credit Agreement, by and among Wingate
Financial LLC, the Lenders (as defined therein) and the Chase
Manhattan Bank, as Administrative Agent.
(h) Master Credit Agreements. The Company shall have
received the required consents under, or appropriately refinanced
or replaced, the credit agreements listed in paragraph 3 of
Section 3.04 of the Company Disclosure Letter.
7.03 Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger
is further subject to the fulfillment, at or prior to the
Closing, of each of the following additional conditions (all or
any of which may be waived in whole or in part by the Company in
its sole discretion):
(a) Representations and Warranties. The
representations and warranties made by Parent and Sub in this
Agreement shall be true and correct as of the Closing Date as
though made on and as of the Closing Date or, in the case of
representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date,
except as affected by the transactions contemplated by this
Agreement and except for such failures of representations or
warranties to be true and correct (without regard to any
materiality qualifiers contained therein) which, individually or
in the aggregate, are not having and are not reasonably expected
to have a material adverse effect on Parent and its Subsidiaries
taken as a whole, and Parent and Sub shall each have delivered to
the Company a certificate, dated the Closing Date and executed in
the name and on behalf of Parent by its Chairman of the Board,
President or any Executive Vice President and in the name and on
behalf of Sub by its Chairman of the Board, President or any Vice
President, to such effect.
(b) Performance of Obligations. Parent and Sub shall
have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to
be so performed or complied with by Parent or Sub at or prior to
the Closing, and Parent and Sub shall each have delivered to the
Company a certificate, dated the Closing Date and executed in the
name and on behalf of Parent by its Chairman of the Board,
President or any Executive Vice President and in the name and on
behalf of Sub by its Chairman of the Board, President or any Vice
President, to such effect.
(c) Tax Opinion. The Company shall have received the
opinion, based on appropriate representations of the Company and
Parent, of Piper & Marbury L.L.P., special counsel to the
Company, dated on or about the date on which the Registration
Statement (or the last amendment thereto) shall have become
<PAGE>
effective, which opinion shall have been confirmed in writing on
and as of the Closing Date to the effect that:
(i) The Merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the
Company, Sub and Parent will each be a party to such
reorganization within the meaning of Section 368(b) of the
Code;
(ii) No gain or loss will be recognized by Parent or
the Company as a result of the Merger;
(iii) No gain or loss will be recognized by the
stockholders of the Company upon the exchange of their
shares of Company Common Stock solely for shares of Parent
Common Stock pursuant to the Merger, except with respect to
cash, if any, received in lieu of fractional shares of
Parent Common Stock;
(iv) The aggregate tax basis of the shares of Parent
Common Stock received solely in exchange for shares of
Company Common Stock pursuant to the Merger (including
fractional shares of Parent Common Stock for which cash is
received) will be the same as the aggregate tax basis of the
shares of Company Common Stock exchanged therefor;
(v) The holding period for shares of Parent Common
Stock received in exchange for shares of Company Common
Stock pursuant to the Merger will include the holding period
of the shares of Company Common Stock exchanged therefor,
provided such shares of Company Common Stock were held as
capital assets by the stockholder at the Effective Time; and
(vi) A stockholder of the Company who receives cash
in lieu of a fractional share of Parent Common Stock will
recognize gain or loss equal to the difference, if any,
between such stockholder's tax basis in such fractional
share (as described in clause (iv) above) and the amount of
cash received.
In rendering such opinion, Piper & Marbury L.L.P. may receive and
rely upon covenants, agreements, representations and warranties
contained in the Company Tax Certificate, the Parent Tax
Certificate, and other appropriate certificates of Parent, the
Company and others.
(d) Proceedings. All proceedings to be taken on the
part of Parent and Sub in connection with the transactions
contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory in form and substance to the
Company, and the Company shall have received copies of all such
<PAGE>
documents and other evidences as the Company may reasonably
request in order to establish the consummation of such
transactions and the taking of all proceedings in connection
therewith.
(e) Average Price. The Average Price with respect to
the Closing Date shall be no less than the Minimum Average Price,
subject to adjustment in accordance with Section 2.01(c)(ii).
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated,
and the transactions contemplated hereby may be abandoned, at any
time prior to the Effective Time, whether prior to or after the
Company Stockholders' Approval:
(a) By mutual written agreement of the parties hereto
duly authorized by action taken by or on behalf of their
respective Boards of Directors;
(b) By either the Company or Parent upon notification
to the non-terminating party by the terminating party:
(i) at any time after June 16, 1997 if the Merger
shall not have been consummated on or prior to such date and
such failure to consummate the Merger is not caused by a
breach of this Agreement by the terminating party;
(ii) if (A) the Company Stockholders' Approval
(under the MGCL) or (B) Parent Stockholders' Approval (under
applicable law and under the applicable regulations of the
NYSE), as the case may be, shall not be obtained by reason
of the failure to obtain the requisite vote upon a vote held
at a meeting of such stockholders, or any adjournment
thereof, called therefor;
(iii) if there has been a material breach of any
representation, warranty, covenant or agreement on the part
of the non-terminating party set forth in this Agreement,
which breach is not curable or, if curable, has not been
cured within thirty (30) days following receipt by the non-
terminating party of notice of such breach from the
terminating party; or
(iv) if any court of competent jurisdiction or other
competent Governmental or Regulatory Authority shall have
issued an order making illegal or otherwise restricting,
<PAGE>
preventing or prohibiting the Merger and such order shall
have become final and nonappealable;
(c) By the Company if (i) the Board of Directors of
the Company determines in good faith, based upon the written
opinion of outside counsel (a copy of which shall be provided
promptly to Parent), that termination of the Agreement is
required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law by reason of an unsolicited
bona fide Alternative Proposal having been made; provided that
the Company shall have complied with the provisions of clauses
(B) and (C) of Section 5.02 and shall notify Parent at least 48
hours in advance of its intention to terminate this Agreement or
enter into a definitive agreement with respect to such
Alternative Proposal; (ii) if at any time after the Company
Stockholders' Meeting, the Average Price with respect to any date
thereafter shall be less than the Minimum Average Price, subject
to adjustment in accordance with Section 2.01(c)(ii); or (iii)
the Board of Directors of Parent shall have withdrawn or modified
in a manner materially adverse to the Company its approval or
recommendation of this Agreement or the Merger;
(d) By Parent if the Board of Directors of the Company
(or any committee thereof) shall have withdrawn or modified in a
manner materially adverse to Parent its approval or
recommendation of this Agreement or the Merger or shall have
recommended an Alternative Proposal to the stockholders of the
Company; or
(e) By Parent if at any time after the Company
Stockholders' Meeting, the Average Price with respect to any date
thereafter shall be less than the Minimum Average Price, subject
to adjustment in accordance with Section 2.01(c)(ii).
8.02 Effect of Termination. (a) If this Agreement is
validly terminated by either the Company or Parent pursuant to
Section 8.01, this Agreement will forthwith become null and void
and there will be no liability or obligation on the part of
either the Company or Parent (or any of their respective
Representatives or affiliates), except (i) that the provisions of
Sections 6.01(b), 6.12 and 6.13 and this Section 8.02 will
continue to apply following any such termination, (ii) that
nothing contained herein shall relieve any party hereto from
liability for wilful breach of its representations, warranties,
covenants or agreements contained in this Agreement and (iii) as
provided in paragraph (b) below. The effectiveness of any
termination under this Agreement shall be subject to the payments
required to be made pursuant to paragraph (b) below being so
made.
<PAGE>
(b)(i) If this Agreement is terminated by (x) the
Company pursuant to Section 8.01(c)(i) or (y) by Parent pursuant
to Section 8.01(d), then the Company shall pay or cause to be
paid to Parent, by wire transfer of same day funds on the day of
such termination, a termination fee of $50,000,000.
(ii) In the event that (x) this Agreement is
terminated by either party pursuant to Section 8.01(b)(ii)(A) and
(y) prior to such termination any person or group shall have made
an Alternative Proposal, then the Company shall pay or cause to
be paid to Parent, by wire transfer of same day funds upon
receipt of appropriate documentation therefor, Parent's
documented out-of-pocket expenses relating to this Agreement and
the transactions contemplated hereby; provided, however, that
such expenses shall not exceed $2,500,000. In the event that
within one year after the date of such termination the Company
enters into an agreement with the person or group that made such
Alternative Proposal, then the Company will pay to Parent, by
wire transfer of same day funds on the closing date of such
transaction, a termination fee of $50,000,000 (less any amounts
paid pursuant to the foregoing sentence).
(iii) In the event that this Agreement is terminated by
either party pursuant to Section 8.01(b)(ii)(B), then Parent
shall pay or cause to be paid to the Company, by wire transfer of
same day funds upon receipt of appropriate documentation
therefor, the Company's documented out-of-pocket expenses
relating to this Agreement and the transactions contemplated
hereby; provided, however, that such expenses shall not exceed
$2,500,000.
(c) The parties acknowledges that the agreements
contained in this Section 8.02 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, the parties hereto would not enter into this
Agreement; accordingly, if either party fails promptly to pay the
amount due pursuant to this Section 8.02, and in order to obtain
such payment, either party commences a suit which results in a
judgment against the non-paying party for the fee set forth in
this Section 8.02, the non-paying party shall pay to the other
party as the case may be, its cost and expenses (including
reasonable attorney's fees and expenses) in connection with such
suit, together with interest on the amount of the fee at the
prime rate of Citibank N.A. in effect on the date such payment
was required to be made.
8.03 Amendment. This Agreement may be amended,
supplemented or modified by action taken by or on behalf of the
respective Boards of Directors of the parties hereto at any time
prior to the Effective Time, whether prior to or after the
Company Stockholders' Approval shall have been obtained, but
<PAGE>
after such adoption and approval only to the extent permitted by
applicable law. No such amendment, supplement or modification
shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time
any party hereto, by action taken by or on behalf of its Board of
Directors, may to the extent permitted by applicable law
(i) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered
pursuant hereto or (iii) waive compliance with any of the
covenants, agreements or conditions of the other parties hereto
contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by or on
behalf of the party extending the time of performance or waiving
any such inaccuracy or non-compliance. No waiver by any party of
any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the
same or any other term or condition of this Agreement on any
future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties,
Covenants and Agreements. The representations, warranties,
covenants and agreements contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive
the Merger but shall terminate at the Effective Time, except for
the agreements contained in Article I and Article II, in Sections
6.01(b), 6.06, 6.08, 6.09, 6.10, 6.11, 6.12, 6.13, 6.14 and 6.15
and 6.16, this Article IX, the covenants, agreements,
representations and warranties contained in the Company Tax
Certificate and Parent Tax Certificate and the agreements of the
"affiliates" of the Company delivered pursuant to Section 6.04,
which shall survive the Effective Time.
9.02 Notices. All notices, requests and other
communications hereunder must be in writing and will be deemed to
have been duly given only if delivered personally or by facsimile
transmission or mailed (first class postage prepaid) to the
parties at the following addresses or facsimile numbers:
<PAGE>
If to Parent or Sub, to:
HFS INCORPORATED
6 Sylvan Way
Parsippany, New Jersey 07054
Facsimile No.: 201-359-5335
Attn: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Facsimile No.: 212-735-2000
Attn: David Fox, Esq.
If to the Company, to:
PHH CORPORATION
11333 McCormick Road
Hunt Valley, Maryland 21031
Facsimile No.: 410-771-2293
Attn: General Counsel
with a copy to:
Piper & Marbury L.L.P.
Charles Center South
36 South Charles Street
Baltimore, Maryland 21201-3018
Facsimile No.: 410-576-5052
Attn: Larry P. Scriggins, Esq.
and
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Facsimile No.: 212-530-0283
Attn: Lawrence Lederman, Esq.
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section,
be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section,
be deemed given upon receipt, and (iii) if delivered by mail in
the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received
by any other person to whom a copy of such notice, request or
other communication is to be delivered pursuant to this Section).
<PAGE>
Any party from time to time may change its address, facsimile
number or other information for the purpose of notices to that
party by giving notice specifying such change to the other
parties hereto.
9.03 Entire Agreement; Incorporation of Exhibits.
(a) This Agreement supersedes all prior discussions and
agreements among the parties hereto with respect to the subject
matter hereof, other than the Confidentiality Agreement, which
shall survive the execution and delivery of this Agreement in
accordance with its terms, and contains, together with the
Confidentiality Agreement, the sole and entire agreement among
the parties hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter, the Parent
Disclosure Letter and any Exhibit attached to this Agreement and
referred to herein are hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
9.04 Public Announcements. Except as otherwise
required by law or the rules of any applicable securities
exchange or national market system, so long as this Agreement is
in effect, Parent and the Company will not, and will not permit
any of their respective Representatives to, issue or cause the
publication of any press release or make any other public
announcement with respect to the transactions contemplated by
this Agreement without the consent of the other party, which
consent shall not be unreasonably withheld. Parent and the
Company will cooperate with each other in the development and
distribution of all press releases and other public announcements
with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such
releases and announcements as far in advance as practicable.
9.05 No Third Party Beneficiary. The terms and
provisions of this Agreement are intended solely for the benefit
of each party hereto and their respective successors or permitted
assigns, and except as provided in Sections 6.08 and 6.10 (which
are intended to be for the benefit of the persons entitled to
therein, and may be enforced by any of such persons) or as
otherwise expressly provided for herein, it is not the intention
of the parties to confer third-party beneficiary rights upon any
other person.
9.06 No Assignment; Binding Effect. Neither this
Agreement nor any right, interest or obligation hereunder may be
assigned by any party hereto without the prior written consent of
the other parties hereto and any attempt to do so will be void,
except that Sub may assign any or all of its rights, interests
and obligations hereunder to another direct or indirect wholly-
owned Subsidiary of Parent, provided that any such Subsidiary
<PAGE>
agrees in writing to be bound by all of the terms, conditions and
provisions contained herein. Subject to the preceding sentence,
this Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors
and assigns.
9.07 Headings. The headings used in this Agreement
have been inserted for convenience of reference only and do not
define, modify or limit the provisions hereof.
9.08 Invalid Provisions. If any provision of this
Agreement is held to be illegal, invalid or unenforceable under
any present or future law or order, and if the rights or
obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision
will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, and (iii) the
remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom.
9.09 Governing Law. Except to the extent that the
MGCL is mandatorily applicable to the Merger and the rights of
the stockholders of the Constituent Corporations, this Agreement
shall be governed by and construed in accordance with the laws of
the State of New York applicable to a contract executed and
performed in such State, without giving effect to the conflicts
of laws principles thereof.
9.10 Enforcement of Agreement. The parties hereto
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement was not performed in
accordance with its specified terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in
any court of competent jurisdiction, this being in addition to
any other remedy to which they are entitled at law or in equity.
9.11 Certain Definitions. As used in this Agreement:
(a) except as provided in Section 6.04, the term
"affiliate," as applied to any person, shall mean any other
person directly or indirectly controlling, controlled by, or
under common control with, that person; for purposes of this
definition, "control" (including, with correlative meanings, the
terms "controlling," "controlled by" and "under common control
with"), as applied to any person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
<PAGE>
the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own
securities if such person would be the beneficial owner of such
securities under Rule 13d-3 under the Exchange Act, including
securities which such person has the right to acquire (whether
such right is exercisable immediately or only after the passage
of time);
(c) the term "business day" means a day other than
Saturday, Sunday or any day on which banks located in the States
of Maryland and New York are authorized or obligated to close;
(d) the term "knowledge" or any similar formulation of
"knowledge" shall mean, with respect to the Company, the
knowledge of the Company's senior executive officers, and with
respect to Parent, the knowledge of Parent's senior executive
officers;
(e) any reference to any event, change or effect being
"material" or "materially adverse" or having a "material adverse
effect" on or with respect to an entity (or group of entities
taken as a whole) means (i) such event, change or effect is
material or materially adverse, as the case may be, to (A) the
business, properties, assets, liabilities, financial condition or
results of operations of such entity (or of such group of
entities) taken as a whole, (B) the validity or enforceability of
this Agreement, or (C) the ability of the Company, Parent or any
of their Subsidiaries to consummate the transactions contemplated
by this Agreement and (ii) any breach (other than an
insignificant breach) of the representation contained in the
second sentence of Section 3.02, or Section 4.02, as applicable;
(f) the term "person" shall include individuals,
corporations, partnerships, trusts, other entities and groups
(which term shall include a "group" as such term is defined in
Section 13(d)(3) of the Exchange Act);
(g) the "Representatives" of any entity means such
entity's directors, officers, employees, legal, investment
banking and financial advisors, accountants and any other agents
and representatives;
(h) the term "Significant Subsidiaries" means, with
respect to any party, the Subsidiaries of such party which
constitute "significant subsidiaries" under Rule 405 promulgated
by the SEC under the Securities Act;
(i) the term "Subsidiary" means, with respect to any
party, any corporation or other organization, whether
<PAGE>
incorporated or unincorporated, of which more than fifty percent
(50%) of either the equity interests in, or the voting control
of, such corporation or other organization is, directly or
indirectly through Subsidiaries or otherwise, beneficially owned
by such party;
(j) the term "Recent Company SEC Reports" means the
Company SEC Reports set forth in Section 9.11(j) of the Company
Disclosure Letter; and
(k) the term "Recent Parent SEC Reports" means the
Parent SEC Reports set forth in Section 9.11(k) of the Parent
Disclosure Letter.
9.12 Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
<PAGE>
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized
as of the date first above written.
Attest: HFS INCORPORATED
_____________________ By:_______________________________
Secretary Name:
Title:
Attest: MERCURY ACQ. CORP.
_____________________ By:_______________________________
Secretary Name:
Title:
Attest: PHH CORPORATION
_____________________ By:_______________________________
Secretary Name:
Title:
<PAGE>
EXHIBIT A
[Form of Affiliate's Agreement]
[Date]
[Name and address
of Parent]
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be
deemed to be an "affiliate" of _________________________, a
Maryland corporation (the "Company"), as that term is defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act"). Neither my entering into this
agreement, nor anything contained herein, shall be deemed an
admission on my part that I am such an "affiliate".
Pursuant to the terms of the Agreement and Plan of
Merger dated as of ___________, 1996 (the "Merger Agreement"),
among HFS Incorporated, a Delaware corporation ("Parent"), -
Mercury Acq. Corp., a Maryland corporation ("Sub"), and the
Company providing for the merger of Sub with and into the Company
(the "Merger"), and as a result of the Merger, I may receive
shares of Parent's common stock, par value $____ per share (the
"Parent Securities"), in exchange for the shares of common stock,
without par value, of the Company owned by me at the Effective
Time (as defined in the Merger Agreement) of the Merger.
I represent and warrant to Parent that in such event:
A. I shall not make any sale, transfer or other
disposition of the Parent Securities in violation of the Act or
the Rules and Regulations.
B. I have carefully read this letter and the Merger
Agreement and discussed its requirements and other applicable
limitations upon my ability to sell, transfer or otherwise
dispose of Parent Securities, to the extent I felt necessary,
with my counsel or counsel for the Company.
C. I have been advised that the issuance of Parent
Securities to me pursuant to the Merger has been registered with
the Commission under the Act on a Registration Statement on
Form S-4. However, I have also been advised that, since at the
<PAGE>
time the Merger was submitted for a vote of the stockholders of
the Company I may have been deemed to have been an affiliate of
the Company and a distribution by me of Parent Securities has not
been registered under the Act, the Parent Securities must be held
by me indefinitely unless (i) a distribution of Parent Securities
by me has been registered under the Act, (ii) a sale of Parent
Securities by me is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the
Act or (iii) in the opinion of counsel reasonably acceptable to
Parent, some other exemption from registration is available with
respect to a proposed sale, transfer or other disposition of the
Parent Securities by me.
D. I understand that Parent is under no obligation to
register the sale, transfer or other disposition of Parent
Securities by me or on my behalf or to take any other action
necessary in order to make compliance with an exemption from
registration available.
E. I also understand that stop transfer instructions
will be given to Parent's transfer agents with respect to the
Parent Securities.
F. I also understand that unless the transfer by me
of my Parent Securities has been registered under the Act or is a
sale made in conformity with the provisions of Rule 145, Parent
reserves the right to put the following legend on the
certificates issued to my transferee:
"The shares represented by this certificate have
not been registered under the Securities Act of 1933,
as amended, and were acquired from a person who
received such shares in a transaction to which Rule 145
promulgated under such Act applies. The shares have
been acquired by the holder not with a view to, or for
resale in connection with, any distribution thereof
within the meaning of such Act and may not be sold,
pledged or otherwise transferred except in accordance
with an exemption from the registration requirements of
such Act."
I further represent to and covenant with Parent and the
Company that I have not, within the thirty (30) days prior to the
Effective Time (as defined in the Merger Agreement), sold,
transferred or otherwise disposed of any shares of the capital
stock of Parent or the Company held by me and that I will not
sell, transfer or otherwise dispose of any shares of Parent
Securities received by me in the Merger or other shares of the
capital stock of Parent until after such time as results covering
<PAGE>
at least thirty (30) days of combined operations of the Company
and Parent have been published by Parent, in the form of a
quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-
K, 10-Q, or 8-K, or any other public filing or announcement which
includes the combined results of operations. Parent agrees to
publish such results within the period set forth in
Section 6.16(b) of the Merger Agreement.
By its acceptance hereof, Parent agrees, for a period
of two years after the Effective Time, that it will file on a
timely basis all reports required to be filed by it pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended, so
that the public information provisions of Rule 144(c) under the
Act are satisfied and the resale provisions of Rules 145(d)(1)
and (2) under the Act are therefore available to me in the event
I desire to transfer any Parent Securities issued to me in the
Merger.
Very truly yours,
_______________________________
Name:
Accepted this ____ day of
__________, ____, by:
HFS INCORPORATED
By____________________________
Name:
Title:
