<PAGE>
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
Date of Report: March 25, 1998
MATRIX CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 0-21231 84-1233716
(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification
Number)
1380 Lawrence Street, Suite 1410
Denver, Colorado 80204
(Address of principal executive offices)
(303) 595-9898
(Registrant's telephone number, including area code)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press Release.
99.2 Agreement and Plan of Merger dated as of March 25, 1998, among
Fidelity National Financial, Inc., MCC Merger, Inc. and Matrix
Capital 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.
MATRIX CAPITAL CORPORATION
Dated: April 8, 1998 /s/ David W. Kloos
-------------------------------
David W. Kloos
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
99.1 Press Release.
99.2 Agreement and Plan of Merger dated as of March 25, 1998, among
Fidelity National Financial, Inc., MCC Merger, Inc. and Matrix
Capital Corporation.
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1
EXHIBIT 99.1
Contacts: Frank P. Willey Guy A. Gibson
President President
Fidelity National Financial, Inc. Matrix Capital Corporation
(805) 898-7160 (303) 595-9898
or or
Allen D. Meadows David W. Kloos
Executive Vice President Executive Vice President
Chief Financial Officer Chief Financial Officer
Fidelity National Financial, Inc. Matrix Capital Corporation
(805) 898-7161 (303) 595-9898
FOR IMMEDIATE RELEASE
FIDELITY NATIONAL FINANCIAL, INC. AND MATRIX CAPITAL CORPORATION
ANNOUNCE SIGNING OF AGREEMENT TO MERGE MATRIX CAPITAL
WITH WHOLLY-OWNED SUBSIDIARY OF FIDELITY NATIONAL FINANCIAL
Irvine, Calif., March 25, 1998 -- Fidelity National Financial, Inc. (NYSE:
FNF), a leading provider of title insurance and real estate services and Matrix
Capital Corporation (NASDAQ: MTXC), today announced that they have signed an
agreement to merge Matrix with a newly-formed subsidiary of Fidelity National
Financial, Inc. The merger is subject to due diligence, regulatory approvals and
other customary conditions and requires approval of the merger by the
shareholders of Matrix and approval of the issuance of Fidelity common stock in
connection with the merger by the shareholders of Fidelity.
Matrix, through its subsidiaries, focuses on mortgage merchant banking by
purchasing and selling residential mortgage loans and servicing rights; offering
brokerage, consulting, and analytical services to other financial services
companies and financial institutions; originating and servicing residential
mortgage portfolios and providing real estate management and disposition
services. Matrix also provides trust administration and broker-dealer services.
Matrix is structured to provide these services through a unique combination of a
mortgage banking firm, a mortgage servicing
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2
-more-
FIDELITY NATIONAL FINANCIAL, INC. AND MATRIX CAPITAL CORPORATION ANNOUNCE
SIGNING OF AGREEMENT TO MERGE MATRIX CAPITAL WITH WHOLLY- OWNED SUBSIDIARY OF
FIDELITY NATIONAL FINANCIAL
Page 2-2-2-2
brokerage and consulting firm, a federally chartered banking institution, a real
estate and disposition firm, a trust company and a securities broker-dealer.
Under the terms of the definitive agreement, each share of Matrix stock
will be converted into the right to receive .80 shares of Fidelity National
Financial common stock without interest, together with cash in lieu of any
fractional share. The exchange ratio has been collared between $35.00 and $28.75
per Fidelity share. The market value is to be determined based on the average
closing price of Fidelity National Financial common stock during the 20 day
trading period ending on the third business day immediately prior to the last of
the stockholders' meetings held to approve the transaction (the "Average Stock
Price"). Below $28.75 Fidelity National Financial may make up the difference in
additional shares at its option and above $35.00 the exchange ratio would be
adjusted to a number equal to $28.00 plus fifty percent of the amount by which
the Average Stock Price exceeds $35.00 divided by the Average Stock Price. It is
intended that the merger be treated as a reorganization pursuant to Section
368(a)(l) of the Internal Revenue Code and be accounted for as a "pooling of
interests" under generally accepted accounting principles.
William P. Foley II, Chairman and CEO of Fidelity National Financial, Inc.
said, "The merger of Matrix with Fidelity continues our course and commitment to
become a specialty finance company. The unique structure of Matrix and its
diversified financial services and products will create revenue enhancing
relationships between the companies. We also expect to realize significant
synergies in the cross-selling of our title, escrow and real estate products and
services, operational cost savings, and enhancement of deposit based spread
income."
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3
-more-
FIDELITY NATIONAL FINANCIAL, INC. AND MATRIX CAPITAL CORPORATION ANNOUNCE
SIGNING OF AGREEMENT TO MERGE MATRIX CAPITAL WITH WHOLLY- OWNED SUBSIDIARY OF
FIDELITY NATIONAL FINANCIAL
Page 3-3-3-3
Guy A. Gibson, President and CEO of Matrix Capital stated, "We are very
excited to become a part of the Fidelity Companies as a result of the merger. We
anticipate substantial improvement in our overall mortgage market perspective by
sharing knowledge, information and business opportunities through an expanded
base of operations complementary to our existing business."
Frank P. Willey, President of Fidelity National Financial added, "The
compliment of Matrix's operations with Fidelity and the recently acquired
Granite Financial, Inc. will create a unique business platform capitalizing on
the effective utilization and deployment of low cost deposits to generate
historically favorable returns."
Headquartered in Irvine, California, Fidelity National Financial, Inc. is
one of the largest national underwriters. Fidelity National Financial is engaged
in the business of issuing title insurance and performing other title-related
services in 49 states, the District of Columbia, Puerto Rico, the Bahamas and
the Virgin Islands through its principal underwriting subsidiaries: Fidelity
National Title Insurance Company, Fidelity National Title Insurance Company of
New York, Fidelity National Title Insurance Company of Tennessee, Nations Title
Insurance of New York Inc., and National Title Insurance of New York Inc.
"Safe Harbor" Statements under the Private Securities Litigation Reform
Act of 1995: Statements which are not historical facts contained in this release
are forward looking statements that involve risks and uncertainties, and results
could vary materially from the descriptions contained herein and other risks as
may be detailed in the Company's Securities and Exchange Commission filings.
# # #
<PAGE>
1
EXHIBIT 99.2
AGREEMENT AND PLAN OF MERGER
dated as of
March 25, 1998
among
FIDELITY NATIONAL FINANCIAL, INC.,
MCC MERGER, INC.
and
MATRIX CAPITAL CORPORATION
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2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
THE MERGER
1.1 The Merger......................................................... 2
1.2 Closing............................................................ 2
1.3 Effective Time of the Merger....................................... 2
1.4 Effects of the Merger.............................................. 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS
2.1 Conversion of Shares............................................... 2
2.2 Surrender and Payment.............................................. 3
2.3 Fractional Shares.................................................. 4
2.4 Stock Options and Warrants......................................... 5
ARTICLE III
THE SURVIVING CORPORATION
3.1 Articles of Incorporation.......................................... 5
3.2 Bylaws............................................................. 5
3.3 Directors.......................................................... 5
3.4 Parent Board....................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company...................... 6
(a) Organization, Standing and Corporate Power.................. 6
(b) Subsidiaries................................................ 6
(c) Capital Structure........................................... 7
(d) Authority; Noncontravention................................. 8
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities................................................. 9
(f) Licenses, Approvals, etc.................................... 9
(g) Environmental Compliance.................................... 9
(h) Absence of Certain Changes or Events........................ 10
(i) Litigation.................................................. 11
(j) Regulatory Matters; Compliance with Laws.................... 11
(k) Absence of Changes in Stock or Benefit Plans................ 12
(l) ERISA Compliance............................................ 12
(m) Taxes....................................................... 14
(n) Contracts; Debt Instruments................................. 15
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3
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
(o) Insurance................................................... 16
(p) Interests of Officers and Directors......................... 16
(q) Approval by Board........................................... 16
(r) Brokers..................................................... 16
(s) Pooling of Interests........................................ 16
(t) Disclosure.................................................. 17
4.2 Representations and Warranties of Parent and Merger Subsidiary..... 17
(a) Organization, Standing and Corporate Power................ 17
(b) Authority; Noncontravention............................... 17
(c) SEC Documents; Financial Statements; No Undisclosed
Liabilities............................................... 18
(d) Brokers................................................... 18
(e) Insurance................................................. 19
(f) Interests of Officers and Directors....................... 19
(g) Licenses, Approvals, etc.................................. 19
(h) Pooling of Interests...................................... 19
(i) Disclosure................................................ 19
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of Business................................................ 19
5.2 Affiliate Agreements............................................... 21
5.3 Access to Information.............................................. 22
5.4 No Solicitation.................................................... 22
5.5 Pooling of Interests; Tax Treatment................................ 23
5.6 Confidentiality.................................................... 23
ARTICLE VI
COVENANTS OF PARENT
6.1 Confidentiality.................................................... 23
6.2 Obligations of Merger Subsidiary................................... 24
6.3 Employee Benefit Plans............................................. 24
6.4 Indemnification and Insurance...................................... 24
6.5 Stock Exchange Listing............................................. 25
6.6 Publication of Combined Financial Results.......................... 26
6.7 Registration Relating to Company Options........................... 26
6.8 Access to Information.............................................. 26
6.9 Pooling of Interests; Tax Treatment................................ 26
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4
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
7.1 Regulatory Applications; Reasonable Efforts; Notification.......... 26
7.2 Stockholder Meeting; Proxy Material................................ 28
7.3 Press Releases..................................................... 29
7.4 Securities Reports................................................. 29
7.5 Stockholder Approvals.............................................. 29
7.6 Due Diligence...................................................... 29
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party........................ 30
8.2 Conditions to the Obligations of Parent and Merger Subsidiary...... 30
8.3 Conditions to the Obligations of the Company....................... 32
ARTICLE IX
TERMINATION
9.1 Termination........................................................ 33
9.2 Effect of Termination.............................................. 34
ARTICLE X
MISCELLANEOUS
10.1 Notices............................................................ 34
10.2 Survival of Representations and Warranties......................... 35
10.3 Amendments; No Waivers............................................. 35
10.4 Fees and Expenses.................................................. 36
10.5 Successors and Assigns; Parties in Interest........................ 36
10.6 Severability....................................................... 37
10.7 Governing Law...................................................... 37
10.8 Entire Agreement................................................... 37
10.9 Counterparts; Effectiveness; Interpretation........................ 37
10.10 Effect of Disclosure Schedule...................................... 37
10.11 Arbitration........................................................ 37
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<PAGE>
5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is entered into as of
March 25, 1998, among MATRIX CAPITAL CORPORATION, a Colorado corporation (the
"Company"), FIDELITY NATIONAL FINANCIAL, INC., a Delaware corporation
("Parent"), and MCC MERGER, INC., a Colorado corporation and a wholly-owned
subsidiary of Parent ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have approved the merger of Merger Subsidiary into the Company
as set forth below (the "Merger"), upon the terms and subject to the conditions
set forth in this Agreement and the Colorado Business Corporation Act (the
"CBCA"), whereby each issued and outstanding share of common stock, par value
$.0001 per share, of the Company (the "Shares") (excluding shares owned,
directly or indirectly, by the Company or any subsidiary of the Company or by
Parent, Merger Subsidiary or any other subsidiary of Parent) shall be converted
into the Merger Consideration (as defined herein);
WHEREAS, the Board of Directors of the Company has unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the stockholders
of the Company, (ii) determined that the consideration to be paid in the Merger
is fair to and in the best interests of the stockholders of the Company, (iii)
approved this Agreement and the transactions contemplated hereby, including the
Merger, and (iv) resolved to recommend approval and adoption of this Agreement,
the Merger and the other transactions contemplated hereby by such stockholders;
WHEREAS, the Board of Directors of Parent has (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
fair to and in the best interests of the stockholders of the Parent, (ii)
approved this Agreement and the transactions contemplated hereby, including the
Merger, and (iii) resolved to recommend approval of the issuance of the Parent
Common Stock (as defined herein) in connection with the Merger by the Parent's
stockholders;
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, certain stockholders of the Company have entered into
agreements with Parent in the form attached hereto as Exhibit A (the
"Stockholder Agreements");
WHEREAS, it is intended that the Merger be (i) treated as a tax-free
reorganization pursuant to the provisions of Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) accounted for as a
"pooling of interests" for accounting purposes; and
WHEREAS, Parent, Merger Subsidiary and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
<PAGE>
6
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the CBCA, Merger Subsidiary shall be
merged with and into the Company at the Effective Time (as defined herein). At
the Effective Time, (i) the separate corporate existence of Merger Subsidiary
shall cease, and (ii) the Company shall continue as the surviving corporation as
a direct wholly-owned subsidiary of Parent (Merger Subsidiary and the Company
are sometimes hereinafter referred to as "Constituent Corporations" and, as the
context requires, the Company, after giving effect to the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation").
1.2 Closing. The closing of the Merger (the "Closing") shall take place as
soon as practicable, but in any case on or prior to the third business day after
which all of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement (the "Closing Date"). At the time of
the Closing, the Company and Merger Subsidiary will file a certificate of merger
with the Secretary of State of the State of Colorado (the "Certificate of
Merger") and make all other filings or recordings required by the CBCA in
connection with the Merger.
1.3 Effective Time of the Merger. The Merger shall, subject to the CBCA,
become effective as of such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Colorado or at such later time as is
specified in the Certificate of Merger (the "Effective Time").
1.4 Effects of the Merger. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all of the restrictions, disabilities, duties and
liabilities of the Company and Merger Subsidiary, all as provided under the
CBCA.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS
2.1 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any Shares or any shares of
capital stock of Merger Subsidiary:
(a) each Share owned by the Company or owned by Parent, Merger
Subsidiary or any subsidiary of any of the Company, Parent or Merger Subsidiary
immediately prior to the Effective Time shall be canceled, and no payment shall
be made with respect thereto;
(b) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving Corporation
and such shares shall constitute the only outstanding shares of capital stock of
the Surviving Corporation; and
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<PAGE>
7
(c) each Share outstanding immediately prior to the Effective Time
shall, except as otherwise provided in Section 2.1(a), be converted into the
right to receive 0.8 of a share (the "Exchange Ratio") of Parent's common stock,
par value $.0001 per share (the "Parent Common Stock"), without interest,
together with cash in lieu of any fractional share of Parent Common Stock as
provided in Section 2.3 below (the "Merger Consideration"); provided, however,
that the Exchange Ratio shall be subject to adjustment as follows:
(i) If the Average Parent Stock Price (as defined in Section
9.1(vi) below) is less than $28.75 (the "Minimum Price"), Parent may elect to
either (1) terminate this Agreement as provided in Section 9.1(vi) below, or (2)
increase the Exchange Ratio to a number (rounded to the nearest 1/1000) equal to
$23.00 divided by the Average Parent Stock Price; and
(ii) If the Average Parent Stock Price is more than $35.00 (the
"Maximum Price"), the Exchange Ratio shall be recalculated to equal a number
(rounded to the nearest 1/1000) equal to a fraction, the numerator of which is
the sum of $28.00 plus fifty percent (50%) of the amount by which the Average
Parent Stock Price exceeds the Maximum Price, and the denominator of which is
the Average Parent Stock Price.
In the event, prior to the Effective Time, of any recapitalization of
either Parent or the Company through a subdivision of its outstanding shares
into a greater number of shares, or a combination of its outstanding shares into
a lesser number of shares, or any reorganization, reclassification or other
change in its outstanding shares into the same or a different number of shares
of other classes, or a declaration of or dividend on its outstanding shares
payable in shares of its capital stock (a "Capital Change"), then (a) the
Exchange Ratio shall be appropriately adjusted so as to maintain after such
Capital Change the relative proportionate interests in the number of shares of
Parent Common Stock (assuming consummation of the Merger) which the holders of
Shares and the holders of shares of Parent Common Stock had immediately prior to
such Capital Change, (b) the Minimum Price shall be adjusted to that amount
which, when multiplied by the Exchange Ratio (as adjusted for such Capital
Change), is equal to $23.00, and (c) the Maximum Price shall be adjusted to that
amount which, when multiplied by the Exchange Ratio (as adjusted for such
Capital Change), is equal to $28.00.
2.2 Surrender and Payment.
(a) Prior to the Effective Time, Parent shall appoint a bank or trust
company reasonably acceptable to the Company (the "Exchange Agent") for the
purpose of exchanging certificates representing Shares for the Merger
Consideration. Parent will make available to the Exchange Agent the Merger
Consideration to be paid in respect of the Shares (the "Exchange Fund").
Promptly after the Effective Time, Parent will send, or will cause the Exchange
Agent to send, to each holder of Shares at the Effective Time a letter of
transmittal, in a form reasonably acceptable to the Company, for use in such
exchange (which shall specify that the delivery shall be effected, and risk of
loss and title shall pass, only upon proper delivery of the certificates
representing Shares to the Exchange Agent). The Exchange Agent shall, pursuant
to irrevocable instructions, make the payments provided in this Section 2.2. The
Exchange Fund shall not be used for any other purpose, except as provided in
this Agreement.
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<PAGE>
8
(b) Each holder of Shares that have been converted into the Merger
Consideration, upon surrender to the Exchange Agent of a certificate or
certificates representing such Shares, together with a properly completed letter
of transmittal covering such Shares and other customary documentation, will be
entitled to receive the Merger Consideration payable in respect of such Shares.
As of the Effective Time, all such Shares shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate previously representing any such Shares shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration upon surrender of the certificates representing such Shares, as
contemplated hereby.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
this Agreement, "person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or any agency or instrumentality thereof.
(d) After the Effective Time, there shall be no further registration
of transfers of Shares. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article II.
(e) Any portion of the Exchange Fund made available to the Exchange
Agent pursuant to this Agreement that remains unclaimed by the holders of Shares
six months after the Effective Time shall be returned to Parent, upon Parent's
demand, and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section 2.2 prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of such holder's Shares. Notwithstanding the foregoing, Parent shall not
be liable to any holder of Shares for any amount paid to a public official
pursuant to and in accordance with the requirements of applicable abandoned
property, escheat or similar laws.
(f) No dividends or other distributions declared or made after the
Effective Time with respect to the Parent Common Stock for which the record date
is after the Effective Time shall be paid to the holder of any certificate
formerly representing Shares until the holder of such certificate is surrendered
to the Exchange Agent as provided herein. Following surrender of any such
certificate, there shall be paid to the holder of record 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 with a record date after the Effective Time theretofore paid
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 after the Effective Time but a payment date subsequent to surrender
payable with respect to such whole shares of Parent Common Stock.
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9
2.3 Fractional Shares. No fractional shares of Parent Common Stock will be
issued in connection with the Merger. In lieu of any fractional share of Parent
Common Stock to which the holder of any Share would otherwise be entitled to
receive, such holder shall be entitled to receive an amount of cash equal to the
value of such fractional shares of Parent Common Stock, which shall be based
upon the closing sale price of the Parent Common Stock on the Closing Date as
reported on the New York Stock Exchange (the "NYSE"). The fractional interests
of each holder of Shares will be aggregated so that no holder of Shares will
receive cash in an amount equal to or greater than the value of one whole share
of Parent Common Stock. Parent shall provide sufficient funds to the Exchange
Agent to make the payments contemplated by this Section 2.3.
2.4 Stock Options and Warrants.
(a) At the Effective Time, each Company Option (defined below) shall
be assumed by the Parent and shall thereafter be deemed to constitute an option
to purchase, on the same terms and conditions as were applicable under such
Company Option (taking into account any accelerated vesting as a result of the
Merger), the same Merger Consideration as the holder of such Company Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such Company Option in full immediately prior to the Effective Time
and been the holder of the Shares issuable upon exercise of such Company Option,
at an exercise price per share calculated by dividing the aggregate exercise
price for the Shares otherwise purchasable pursuant to such Company Option by
the number of full shares of Parent Common Stock deemed purchasable pursuant to
such option; provided, however, that in the case of any Company Option to which
Section 421 of the Code applies by reason of its qualification as an "incentive
stock option" the exercise price and the number of shares purchasable pursuant
to such option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. "Company Option"
means any option granted, whether or not exercisable, and not exercised or
expired, to a current or former employee, director or independent contractor of
the Company or any of its subsidiaries or any predecessor thereof to purchase
Shares pursuant to the Company's Amended and Restated Employee Stock Option
Plan, as amended (the "Option Plan").
(b) At the Effective Time, each Company Warrant (defined below) shall
be assumed by the Parent in accordance with the respective provisions of each
such Company Warrant and shall thereafter be deemed to constitute a warrant to
purchase, on the same terms and conditions as were applicable under such Company
Warrant, the same Merger Consideration as the holder of such Company Warrant
would have been entitled to receive pursuant to the Merger had such holder
exercised such Company Warrant in full immediately prior to the Effective Time
and been the holder of the Shares issuable upon exercise of such Company
Warrant, at an exercise price to be determined in accordance with the respective
provisions of each such Company Warrant. "Company Warrant" means any warrant
granted, whether or not exercisable, and not exercised or expired, to purchase
Shares, including, without limitation, warrants to purchase up to 75,000 Shares
issued by the Company to Piper Jaffray Inc. and Keefe, Bruyette & Woods, Inc.
-5-
<PAGE>
10
ARTICLE III
THE SURVIVING CORPORATION
3.1 Articles of Incorporation. The Articles of Incorporation of the
Company in effect at the Effective Time shall be the Articles of Incorporation
of the Surviving Corporation until amended in accordance with applicable law.
3.2 Bylaws. The bylaws of the Company in effect at the Effective Time
shall be the bylaws of the Surviving Corporation until amended in accordance
with applicable law.
3.3 Directors. Upon the Effective Time, the Board of Directors of the
Surviving Corporation shall consist of five (5) members, and the initial
directors of the Surviving Corporation shall, until successors are duly elected
and qualified in accordance with applicable law, include two (2) persons
designated by the Company and three (3) persons designated by Parent.
3.4 Parent Board. Promptly following the Effective Time, Parent shall
cause to be elected or appointed Guy A. Gibson, as the Company's designee, to
the Parent's Board of Directors.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company represents
and warrants to Parent and Merger Subsidiary, subject to the exceptions and
qualifications set forth in the disclosure schedule ("Disclosure Schedule")
delivered by the Company to Parent and Merger Subsidiary within ten (10)
business days after the date of this Agreement (the "Disclosure Period"), as
follows (whenever the representations or warranties of the Company are qualified
by the knowledge of the Company, knowledge shall mean knowledge of the executive
officers of the Company):
(a) Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado and has the requisite corporate power and authority to
carry on its business as now being conducted. The Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) could not reasonably be expected to (i) have a material adverse
effect on the value, condition (financial or otherwise), prospects, business, or
results of operations of the Company and its subsidiaries taken as a whole, (ii)
impair the ability of any party hereto to perform its obligations under this
Agreement or (iii) prevent or materially delay consummation of any of the
transactions contemplated by this Agreement (a "Material Adverse Effect"). The
Company will deliver to Parent with the Disclosure Schedule complete and correct
copies of its Articles of Incorporation and bylaws, and the joint venture,
partnership and other governing agreements and documents ("Joint Venture
Documents") of any such partnership, joint venture or similar business or entity
in which the Company, directly or indirectly, has any ownership interests other
than the subsidiaries listed below (the "Joint Ventures") in each case as
amended to the date of
-6-
<PAGE>
11
this Agreement. The Company is duly registered as a unitary thrift holding
company under the Home Owners' Loan Act as amended ("HOLA"), supervised by the
Office of Thrift Supervision ("OTS").
(b) Subsidiaries. Section 4.1(b) of the Disclosure Schedule lists each
subsidiary of the Company, its form of organization, its jurisdiction of
incorporation or formation, if applicable, and the holders of the outstanding
capital stock or other equity interests of such subsidiary. Each of the
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated and has
the requisite corporate power and authority to carry on its business as now
being conducted. Each of the subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed (individually or in the aggregate) could not reasonably
be expected to have a Material Adverse Effect. The Company will deliver to
Parent with the Disclosure Schedule complete and correct copies of the charter
documents of each of its subsidiaries. Section 4.1(b) of the Disclosure Schedule
also lists all Joint Venture Documents to which any of the Company's
subsidiaries is a party or otherwise governing any such subsidiary. All the
outstanding shares of capital stock or other ownership interests of each such
subsidiary of the Company have been validly issued and are fully paid and
nonassessable and all such shares or ownership interests indicated as being
owned by the Company or any of its subsidiaries are owned by the Company, by
another subsidiary of the Company or by the Company and another such subsidiary,
free and clear of all Liens (as defined in Section 4.1(i) below) and free of any
other limitation or restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock or equity interests), except as
disclosed in the Company SEC Documents. Except for the capital stock of its
subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other equity interest in any person. For purposes of this Agreement, a
"subsidiary" of any person means another person in which such first person,
directly or indirectly, owns 50% or more of the equity interests or has the
right, through ownership of equity, contractually or otherwise, to elect at
least a majority of its Board of Directors or other governing body. Matrix
Capital Bank, a federal savings bank ("Matrix Bank"), is a "qualified thrift
lender" under HOLA, is a member of the Savings Association Insurance Fund
("SAIF"), its deposits are insured by the Federal Deposit Insurance Corporation
("FDIC") to the applicable limits of the SAIF, and is a member in good standing
of the Federal Home Loan Bank of Dallas.
(c) Capital Structure. The authorized capital stock of the Company
consists of 50,000,000 Shares and 5,000,000 shares of Preferred Stock, par value
$.0001 per share. As of March 13, 1998, (i) 6,703,880 Shares were issued and
outstanding, (ii) no Shares were held by the Company or by any of the Company's
subsidiaries, (iii) 525,000 Shares were reserved for issuance upon the exercise
of Company Options pursuant to the Option Plan, of which Company Options to
Purchase 330,150 Shares were outstanding, (iv) 75,000 Shares were reserved
issuance pursuant to the Company Warrants, and (v) no shares of Preferred Stock
were issued, reserved for issuance or outstanding. Except as set forth above, no
shares of capital stock or other equity or voting securities of the Company are
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of the Company are, and all Shares which may be issued pursuant to the
Company Options or the Company Warrants will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are not any bonds, debentures, notes or other indebtedness or
securities of the Company having the right to vote (or convertible into, or
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12
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote. Except as set forth above in Section
4.1(c) of the Disclosure Schedule, there are not any securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its subsidiaries is a party or by
which any of them is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other equity or voting securities of the Company or
of any of its subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. Section 4.1(c) of the
Disclosure Schedule also sets forth a true and correct list of the Company
Options which are outstanding as of the date hereof, which list sets forth, for
each holder of a Company Option, the number of Shares subject thereto, the
exercise price and the expiration date thereof. There are no outstanding rights,
commitments, agreements, arrangements or undertakings of any kind obligating the
Company or any of its subsidiaries to repurchase, redeem or otherwise acquire or
dispose of any shares of capital stock or other equity or voting securities of
the Company or any of its subsidiaries or any securities of the type described
in the two immediately preceding sentences.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, subject to the
Company Stockholder Approval (as defined below) required in connection with the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The Merger requires the approval by the affirmative vote of the
holders of a majority of the outstanding Shares (the "Company Stockholder
Approval"), which approval is the only vote of the holders of any class or
series of the capital stock of the Company necessary to approve the Merger and
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, except for the Company
Stockholder Approval in connection with the consummation of the Merger. This
Agreement has been duly executed and delivered by the Company and, assuming this
Agreement constitutes a valid and binding agreement of Parent and Merger
Subsidiary, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation, modification or acceleration of any
obligation or to a loss of a material benefit under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any of its
subsidiaries under, (i) the Articles of Incorporation or bylaws of the Company
or the comparable charter or organizational documents of any of its
subsidiaries, (ii) except as disclosed in Section 4.1(d) of the Disclosure
Schedule, any loan or credit agreement, note, bond, mortgage, indenture, lien,
lease or any other contract, agreement, instrument, permit, commitment,
concession, franchise or license applicable to the Company or any of its
subsidiaries or their respective properties or assets, except for conflicts,
violations, or defaults individually or in the aggregate which would not have a
Material Adverse Effect, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its subsidiaries or their respective properties or assets. No consent, approval,
franchise, order, license, permit, waiver or authorization of, or registration,
declaration or filing with or exemption, notice, application, or
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13
certification by or to (collectively, "Consents") any federal, state or local
government or any arbitrable panel or any court, tribunal, administrative or
regulatory agency or commission or other governmental authority, department,
bureau, commission or agency, domestic or foreign (a "Governmental Entity"), is
required by or with respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the required consents listed on Section 4.1(d) of the
Disclosure Schedule, (ii) the filing of the Certificate of Merger in accordance
with the CBCA and similar documents with the relevant authorities of other
states in which the Company is qualified to do business, (iii) the filing of a
premerger notification and report form by the Company under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv)
compliance with any applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the "Exchange Act"), (v)
filings and approvals of applications with and by the OTS, and (vi) such other
Consents as to which the failure to obtain or make, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
As of the date hereof, the Company is not aware of any reason why any applicable
regulatory approvals will not be received without the imposition of any
condition, restriction or term that would impose a burden upon the Company or
the Parent or have a Material Adverse Effect, it being understood that the
foregoing is not intended to apply to any such reason which relates to the
Parent or the nature of Parent's business..
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities.
The Company has timely filed all reports, schedules, forms, statements, exhibits
and other documents required to be filed by the Company with the SEC under or
pursuant to the Exchange Act or the Securities Act, since the Company's initial
public offering in October 1996 (the "Company SEC Documents"). True and correct
copies of each of the Company SEC Documents have been or will be provided or
made available to Parent prior to the end of the Disclosure Period. As of their
respective dates, or as subsequently amended prior to the delivery of the
Disclosure Schedule, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, applicable to such Company SEC Documents, and none of the Company SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company SEC Documents include all contracts and other
documents which are required by the Securities Act or the Exchange Act to be
filed as exhibits thereto. The financial statements of the Company included in
the Company SEC Documents comply in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis throughout the
periods involved ("GAAP") (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the Company SEC Documents, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise), except for liabilities and obligations
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
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<PAGE>
14
(f) Licenses, Approvals, etc. Each of the Company and its subsidiaries
possesses or has been granted all registrations, filings, applications,
certifications, notices, consents, licenses, permits, approvals, certificates,
franchises, orders, qualifications, authorizations and waivers of any
Governmental Entity (federal, state and local) necessary to entitle it to
conduct its business in the manner in which it is presently being conducted (the
"Licenses"), except for Licenses as to which the failure to possess,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as described in Section 4.1(f) of the Disclosure Schedule, no Action (as
defined herein) is pending or, to the knowledge of the Company, threatened
seeking the revocation or limitation of any of the Licenses.
(g) Environmental Compliance.
(i) For purposes of this Section 4.1(g), (A) "Hazardous
Substance" means any pollutant, contaminant, hazardous or toxic substance or
waste, solid waste, petroleum or any fraction thereof, or any other chemical,
substance or material listed or identified in or regulated by or under any
Environmental Law; (B) "Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251
et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Safe Drinking Water Act, 42
U.S.C. Section 300f et seq., the Emergency Planning and Community Right to Know
Act, 42 U.S.C. Section 11001 et seq., the Occupational Safety and Health Act, 29
U.S.C. Section 651 et seq., the Oil Pollution Act, 33 U.S.C. Section 2701 et
seq., in each case as amended from time to time and all regulations promulgated
thereunder, and any other statute, law, regulation, ordinance, bylaw, rule,
judgment, order, decree or directive of any Governmental Entity dealing with the
pollution or protection of natural resources or the indoor or ambient
environment or with the protection of human health or safety; and (C) "RCRA
Hazardous Waste" means a solid waste that is listed or classified as a hazardous
waste, as that term is defined in or pursuant to the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.
(ii) Except as set forth on Section 4.1(g) of the Disclosure
Schedule: (A) there are no claims pending against the Company or any of its
subsidiaries, or any of their respective predecessors (the "Company Interests")
relating to or arising out of a Hazardous Substance nor are any such claims, to
the Company's knowledge, threatened against Company Interests, nor has the
Company or any of its subsidiaries received any notice, alleging or warning that
any Real Estate or any real property previously operated by any Company
Interests is, has been or may be in violation of or in noncompliance with any
Environmental Law; (B) to the Company's knowledge, no Hazardous Substances are
now present in amounts, concentrations or conditions requiring removal,
remediation or any other response, action or corrective action under, or forming
the basis of a claim pursuant to, any Environmental Law, in, on, from or under
the Real Estate or any real property previously owned or operated by any Company
Interests; (C) the Real Estate is not being and has not been during the period
of time they have been leased by any Company Interests used in connection with
the business of manufacturing, storing or transporting Hazardous Substances, and
no RCRA Hazardous Wastes are being or have been during the period of time
operated by any Company Interests treated, stored or disposed of there in
violation of any Environmental Law; and (D) there neither are nor have been
during the period of time they have been operated by any Company Interests any
underground storage tanks, lagoons or other
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15
containment facilities of any kind which contain or contained any Hazardous
Substances on the Real Estate.
(iii) The Company will make available to the Parent prior to the
end of the Disclosure Period true and correct copies of any and all written
communications received by the Company from any Governmental Entities relating
in whole or in part to the existence of Hazardous Substances at any Real Estate
or any real property previously owned or operated by any Company Interests or
the compliance of the owners, operators or lessees thereof with respect to any
Environmental Law.
(h) Absence of Certain Changes or Events. Except as contemplated by
this Agreement or disclosed in Section 4.1(h) of the Disclosure Schedule, since
December 31, 1997, the Company and its subsidiaries have conducted their
business only in the ordinary course consistent with past practice, and there
has not been (i) any event, occurrence or development which, individually or in
the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of the Company's capital stock or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding shares
of capital stock or other securities of the Company or any of its subsidiaries,
(iii) any adjustment, split, combination or reclassification of any of its
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (A) any granting by the Company or any of its subsidiaries
to any current or former director, officer or employee of the Company or any of
its subsidiaries of any increase of more than $50,000 in compensation or
benefits, except for grants to employees who are not officers or directors in
the ordinary course of business consistent with past practice, (B) any granting
by the Company or any of its subsidiaries to any such director, officer or
employee of any increase in severance or termination pay (including the
acceleration in the vesting of Shares (or other property) or the provision of
any tax gross-up), or (C) any entry by the Company or any of its subsidiaries
into any employment, deferred compensation, severance or termination agreement
or arrangement with or for the benefit of any such current or former director,
officer or employee, (v) any damage, destruction or loss, whether or not covered
by insurance, that has had or could have a Material Adverse Effect, (vi) any
change in accounting methods, principles or practices by the Company or any of
its subsidiaries, (vii) any amendment, waiver or modification of any material
term of any outstanding security of the Company or any of its subsidiaries,
(viii) any incurrence, assumption or guarantee by the Company or any of its
subsidiaries of any material indebtedness for borrowed money or other material
obligations, other than in the ordinary course of business consistent with past
practice, (ix) any creation or assumption by the Company or any of its
subsidiaries of any Lien on any asset, other than in the ordinary course of
business consistent with past practice, (x) any making of any lease, loan,
advance or capital contributions to or investment in any person other than in
the ordinary course of business consistent with past practice and other than
investments in cash equivalents made in the ordinary course of business
consistent with past practice, (xi) other than as disclosed in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 (the "Company
Form 10-K"), any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its subsidiaries relating to its assets
or business on behalf of the
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<PAGE>
16
Company or any of its subsidiaries of more than $500,000 for any transaction or
$1,000,000 for any series of transactions, (xii) other than as disclosed in the
Company Form 10-K, any acquisition or disposition of any assets or any merger or
consolidation with any person on behalf of the Company or any of its
subsidiaries, (xiii) any relinquishment by the Company or any of its
subsidiaries of any contract or other right, in either case, material to the
Company and its subsidiaries taken as a whole, other than transactions and
commitments in the ordinary course of business consistent with past practice, or
(xiv) any agreement, commitment, arrangement or undertaking by the Company or
any of its subsidiaries to perform any action described in clauses (i) through
(xiii).
(i) Litigation. Except as disclosed in the Company SEC Documents or
Section 4.1(i) of the Disclosure Schedule, there are no Actions or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which, if determined adversely, would have a Material
Adverse Effect.
(j) Regulatory Matters; Compliance with Laws. Neither the Company nor
any of its subsidiaries or properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, or extraordinary supervisory letter
from, any Governmental Entity charged with the supervision or regulation of
financial institutions or issuers of securities or engaged in the insurance of
deposits (including, without limitation, the OTS and the FDIC) or the
supervision or regulation of it or any of its subsidiaries (collectively, the
"Regulatory Authorities"). The conduct by the Company and each of its
subsidiaries of its business is and has been in compliance with all applicable
federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, and judgments, orders or decrees, except for violations or failures to so
comply, if any, that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect or to give rise to material fines or
other material civil penalties or any criminal liabilities.
(k) Absence of Changes in Stock or Benefit Plans. Except as disclosed
in Section 4.1(k) of the Disclosure Schedule or as required under this
Agreement, since January 1, 1996, there has not been (i) any acceleration,
amendment or change of the period of exercisability or vesting of any Company
Options under the Option Plan (including any discretionary acceleration of the
exercise periods or vesting by the Company's Board of Directors or any committee
thereof or any other persons administering the Option Plan) or authorization of
cash payments in exchange for any Company Options under the Option Plan, (ii)
any adoption or material amendment by the Company or any of its subsidiaries of
any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, stock appreciation right, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, worker's
compensation, disability, supplementary unemployment benefits, or other plan,
arrangement or understanding (whether or not legally binding) or any employment
agreement providing compensation or benefits to any current or former employee,
officer, director or independent contractor of the Company or any of its
subsidiaries or any beneficiary thereof or entered into, maintained or
contributed to, as the case may be, by the Company or any of its subsidiaries
(collectively, "Benefit Plans"), or (iii) any adoption of, or amendment to, or
change in employee participation or coverage under, any Benefit Plans which
would increase materially the expense of maintaining such Benefit Plans above
the level of the expense incurred in respect thereof for the fiscal year ended
on December 31, 1996.
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17
(l) ERISA Compliance.
(i) Section 4.1(l) of the Disclosure Schedule contains a list of
all "employee pension benefit plans" (defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), "employee welfare
benefit plans" (defined in Section 3(l) of ERISA) and all other Benefit Plans.
With respect to each Benefit Plan, the Company will deliver or make available to
Parent prior to the end of the Disclosure Period a true, correct and complete
copy of: (A) each writing constituting a part of such Benefit Plan, including
without limitation all plan documents, benefit schedules, trust agreements, and
insurance contracts and other funding vehicles; (B) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (C) the current
summary plan description, if any; (D) the most recent annual financial report,
if any; and (E) the most recent determination letter from the United States
Internal Revenue Service, if any.
(ii) Section 4.1(l) of the Disclosure Schedule identifies each
Benefit Plan that is intended to be a "qualified plan" within the meaning of
Section 401(a) of the Code ("Qualified Plans"). The Internal Revenue Service has
issued a favorable determination letter with respect to each Qualified Plan that
has not been revoked, and there are no existing circumstances nor any events
that have occurred that could adversely affect the qualified status of any
Qualified Plan or the related trust.
(iii) Except as set forth in the Disclosure Schedule, the Company
and its subsidiaries have complied, and are now in compliance, in all material
respects with all provisions of ERISA, the Code, and all laws and regulations
applicable to the Benefit Plans. Except as set forth in Section 4.1(l) of the
Disclosure Schedule, no prohibited transaction has occurred with respect to any
Benefit Plan. All contributions required to be made to any Benefit Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies
funding any Benefit Plan, for any period through the date hereof have been
timely made or paid in full or, to the extent not required to be made or paid on
or before the date hereof, have been fully reflected in the Company SEC
Documents.
(iv) No Benefit Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. None of the Company, its subsidiaries
and their respective ERISA Affiliates (as defined below) has at any time since
September 2, 1974, contributed to or been obligated to contribute to any
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA or any
plan with two or more contributing sponsors at least two of whom are not under
common control, within the meaning of Section 4063 of ERISA. There does not now
exist, nor do any circumstances exist that could result in, any Controlled Group
Liability (as defined below) that would be a liability of the Company or any of
its subsidiaries following the Closing. "ERISA Affiliate" means, with respect to
any entity, trade or business, any other entity, trade or business that is a
member of a group described in Section 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA that includes the first entity, trade or business,
or that is a member of the same "controlled group" as the first entity, trade or
business pursuant to Section 4001(a)(14) of ERISA. "Controlled Group Liability"
means any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of
ERISA, (iii) Sections 412 and 4971 of the Code, (iv) the continuation coverage
requirements of Section 601 et seq. of ERISA and Section 4980B of the Code, and
(v) corresponding or similar
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<PAGE>
18
provisions of foreign laws or regulations, other than such liabilities that
arise solely out of, or relate solely to, the Benefit Plans.
(v) Except as set forth in the Company SEC Documents or in Section
4.1(l) of the Disclosure Schedule, neither the Company nor any of its
subsidiaries has any liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents thereof, except for
health continuation coverage as required by Section 4980B of the Code or Part 6
of Title I of ERISA and at no expense to the Company and its subsidiaries.
(vi) Except as set forth in Section 4.1(l) of the Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting
(other than automatic acceleration under the Option Plan) or delivery of, or
increase the amount or value of, any payment or benefit to any employee of the
Company or any of its subsidiaries. Without limiting the generality of the
foregoing, no amount paid or payable by the Company or any of its subsidiaries
in connection with the transactions contemplated hereby (either solely as a
result thereof or as a result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the meaning of Section 280G
of the Code.
(vii) No labor organization or group of employees of the Company
or any of its subsidiaries has made a pending demand for recognition or
certification, and there are no representation or certification proceedings or
petitions seeking a representation proceeding presently pending or threatened to
be brought or filed, with the National Labor Relations Board or any other labor
relations tribunal or authority. There are no organizing activities, strikes,
work stoppages, slowdowns, lockouts, material arbitrations or material
grievances, or other material labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company or any of its subsidiaries.
(viii) There are no pending or, to the Company's knowledge,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits or arbitrations which have been asserted or instituted against the
Benefit Plans, any fiduciaries thereof with respect to their duties to the
Benefit Plans or the assets of any of the trusts under any of the Benefit Plans
which could reasonably be expected to result in any material liability of the
Company or any of its subsidiaries to the Pension Benefit Guaranty Corporation,
the Department of Treasury, the Department of Labor or any multiemployer Benefit
Plan.
(m) Taxes. For purposes of this Agreement, (A) the term "Returns"
shall mean all returns, declarations, reports, statements, and other documents
required to be filed with respect to federal, state, local and foreign Taxes (as
defined below) or for information purposes, and the term "Return" means any one
of the foregoing Returns, and (B) the term "Taxes" shall mean all federal,
state, local and foreign net income, gross income, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties, or other taxes, together with any
interest and any penalties, additions to tax, or additional amounts with respect
thereto, and the term "Tax" means any one of the foregoing Taxes.
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(i) Except as set forth in Section 4.1(m)(i) of the Disclosure
Schedule, the Company and its subsidiaries have duly prepared and filed federal,
state, local and foreign Returns which were required to be filed by or in
respect of the Company and its subsidiaries, or any of their properties, income
and/or operations. As of the time they were filed, such Returns accurately
reflected the material facts regarding the income, business, assets, operations,
activities, status of the entity or whose behalf the Return was filed, and any
other information required to be shown thereon. No extension of time within
which the Company or any of its subsidiaries may file any Return is currently in
force.
(ii) Except as disclosed in Section 4.1(m)(ii) of the Disclosure
Schedule, with respect to all amounts in respect of Taxes imposed on the Company
or any of its subsidiaries or for which the Company or any of its subsidiaries
is or could be liable, whether to taxing authorities or to other Persons, all
amounts required to be paid by or on behalf of the Company or any of its
subsidiaries to taxing authorities or others have been paid.
(iii) Except as disclosed in Section 4.1(m)(iii) of the Disclosure
Schedule, there is no review or audit by any taxing authority of any Tax
liability of the Company or any of its subsidiaries currently in progress.
Except as disclosed in Section 4.1(m)(iii) of the Disclosure Schedule, the
Company and its subsidiaries have not received any written notice of any pending
or threatened audit by the Internal Revenue Service or any state, local or
foreign agency of any Returns or Tax liability of the Company or any of its
subsidiaries for any period. The Company and its subsidiaries currently have no
unpaid deficiencies assessed by the Internal Revenue Service or any state, local
or foreign taxing authority arising out of any examination of any of the Returns
of the Company or any of its subsidiaries nor, to the knowledge of the Company,
is there reason to believe that any material deficiency will be assessed.
(iv) No agreements are in force or are currently being negotiated
by or on behalf of the Company or any of its subsidiaries for any waiver or for
the extension of any statute of limitations governing the time of assessments or
collection of any Tax. No closing agreements or compromises concerning Taxes of
the Company or any subsidiaries are currently pending.
(v) The Company and its subsidiaries have withheld from each
payment made to any of their respective officers, directors and employees, the
amount of all applicable Taxes, including, but not limited to, income tax,
social security contributions, unemployment contributions, backup withholding
and other deductions required to be withheld therefrom by any Tax law and have
paid the same to the proper Taxing authorities within the time required under
any applicable Tax law.
(vi) There are no Liens for Taxes, whether imposed by any federal,
state, local or foreign taxing authority, outstanding against any assets owned
by the Company or its subsidiaries, except for Liens for Taxes that are not yet
due and payable. None of the assets owned by the Company or its subsidiaries is
property that is required to be treated as being owned by any other person
pursuant to the safe harbor lease provisions of former Section 168(f)(8) of the
Code. None of the assets owned by the Company or its subsidiaries directly or
indirectly secures any debt, the interest on which is tax-exempt under Section
103(a) of the Code. None of the assets owned by the Company or its subsidiaries
is "tax-exempt use property" within the meaning of Section 168(h)
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of the Code. None of Company or any of its subsidiaries is a person other than a
United States person within the meaning of the Code.
(vii) Except as set forth in Section 4.1(m)(vii) of the Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
agreement, contract, or arrangement that, individually or collectively, could
give rise to the payment of any amount (whether in cash or property, including
Shares or other equity interests) that would not be deductible pursuant to the
terms of Sections 162(a)(1), 162(m), 162(n) or 280G of the Code.
(n) Contracts; Debt Instruments.
(i) Except as otherwise disclosed in Section 4.1(n)(i) of the
Disclosure Schedule or otherwise disclosed to Parent during the Disclosure
Period, neither the Company nor any of its subsidiaries is a party to or subject
to:
(A) any collective bargaining or other agreements
with labor unions, trade unions, employee representatives, work
committees, guilds or associations representing employees of the Company
and its subsidiaries;
(B) any employment, consulting, severance,
termination, or indemnification agreement, contract or arrangement,
including any oral agreement, contract or arrangement which requires the
payment of over $100,000, with any current or former officer,
consultant, director or employee;
(C) except as imposed by applicable regulators, any
agreement, contract, policy, License, document, instrument, arrangement
or commitment that materially limits the freedom of the Company or any
of its subsidiaries to compete in any line of business or with any
person or in any geographic area or which would so materially limit the
freedom of the Company or any of its subsidiaries after the Effective
Time, or by virtue of the transaction contemplated by this Agreement,
Parent, Merger Subsidiary or any of their subsidiaries after the
Effective Time; or
(D) any agreement or contract relating to any
outstanding commitment for capital expenditures, or any partially or
fully executory agreement or contract relating to the acquisition or
disposition of rights or assets other than those entered into in the
ordinary course consistent with past practices.
(ii) None of the Company, its subsidiaries and, to the knowledge
of the Company, none of the other parties to any of the contracts and agreements
identified in Section 4.1(n)(i) of the Disclosure Schedule or otherwise
disclosed in the Company SEC Documents is in default under or has terminated any
such contract or agreement, or in any way expressed to the Company an intent to
materially reduce or terminate the amount of its business with the Company or
any of its subsidiaries in the future.
(o) Insurance. The Company and its subsidiaries are covered by valid
and currently effective insurance policies issued in favor of the Company that
are customary for companies of similar size and financial condition which
conduct similar businesses. All such policies are in full force and effect, all
premiums due thereon have been paid and the Company has
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complied with the provisions of such policies. The Company has not received any
written notice from or on behalf of any insurance carrier issuing policies or
binders relating to or covering the Company and its subsidiaries that there will
be a cancellation or non-renewal of existing policies or binders, or material
modification of any of the methods of doing business, will be required.
(p) Interests of Officers and Directors. Except as required to be
disclosed, and actually disclosed, or as disclosed in Section 4.1(p) of the
Disclosure Schedule, in the Company SEC Documents, neither any of the Company's
or any of its subsidiaries' officers or directors, nor any member of their
respective immediate families or any entity with respect to which any such
person is an affiliate, has any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the business of the Company or
its subsidiaries, or any other business relationship with the Company or any of
its subsidiaries.
(q) Approval by Board. The Board of Directors of the Company has duly
authorized and approved the execution and delivery of this Agreement by the
Company and the transactions contemplated hereby prior to the execution by the
Company of this Agreement.
(r) Brokers. No broker, investment banker, financial advisor or other
person, other than Piper Jaffray Inc., the fees and expenses of which will be
paid by the Company (and copies of whose engagement letters and a calculation of
the fees that would be due thereunder will have been provided to Parent prior to
the end of the Disclosure Period), is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its subsidiaries. No such engagement letters
obligate the Company to continue to use their services or pay fees or expenses
in connection with any future transaction.
(s) Pooling of Interests. The Company has no reason to believe that
the Merger will not qualify as, and has not taken or agreed to take any action,
or omitted or agreed to omit to take any action, which would disqualify the
Merger as, a "pooling of interests" for accounting purposes.
(t) Disclosure. The representations and warranties of the Company
contained in this Agreement are true and correct in all material respects and do
not omit any material fact necessary to make the statements contained therein,
in light of the circumstances under which they were made, not misleading. There
is no fact known to the Company which has not been disclosed to Parent in the
Disclosure Schedule and the Company SEC Documents, taken as a whole, which has
had, or would reasonably be expected to have, a Material Adverse Effect.
4.2 Representations and Warranties of Parent and Merger Subsidiary. Parent
and Merger Subsidiary represent and warrant to the Company subject to the
exceptions and qualifications set forth in the disclosure schedule to be
delivered by the Parent to the Company prior to the end of the Disclosure Period
(the "Parent Disclosure Schedule"):
(a) Organization, Standing and Corporate Power. Each of Parent and
Merger Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its respective state of incorporation and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of the Parent and its subsidiaries is duly qualified or
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licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) could not reasonably be expected to have a material adverse effect on
the value, condition (financial or otherwise), prospects, business, or results
of operations of the Parent and its subsidiaries as a whole, (ii) impair the
ability of any party hereto to perform its obligations under this Agreement or
(iii) prevent or materially delay consummation of any of he transactions
contemplated by this Agreement (a "Parent Material Adverse Effect"). Parent will
deliver to the Company with the Parent Disclosure Schedule complete and correct
copies of its Certificate of Incorporation and By-laws, as amended to the date
of this Agreement.
(b) Authority; Noncontravention. Parent and Merger Subsidiary have all
requisite corporate power and authority to enter into this Agreement and,
subject to the Parent Stockholder Approval (as defined below), to consummate the
transactions contemplated by this Agreement. The approval by the affirmative
vote of the holders of a majority of the shares of Parent Common Stock
represented and voting on a proposal to approve the issuance of shares of Parent
Common Stock in the Merger (provided that the total vote cast on such proposal
represents over 50% of the shares entitled to vote), as required by the New York
Stock Exchange, is required to complete the Merger (the "Parent Stockholder
Approval"). The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Parent and Merger Subsidiary. This
Agreement has been duly executed and delivered by Parent and Merger Subsidiary
and, assuming this Agreement constitutes a valid and binding agreement of the
Company, constitutes a valid and binding obligation of such party, enforceable
against such party in accordance with its terms. The execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or to a loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or bylaws of Parent or Merger Subsidiary, (ii)
except as disclosed in Section 4.2(b) of the Parent's Disclosure Schedule, any
loan or credit agreement, note, bond, mortgage, indenture, lease or any other
contract, agreement, instrument, permit, concession, franchise or license
applicable to Parent or Merger Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Merger Subsidiary or any
other subsidiary of Parent or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights, losses or Liens that individually or in the aggregate would not impair
the ability of Parent and Merger Subsidiary to perform their respective
obligations under this Agreement or prevent the consummation of any of the
transactions contemplated by this Agreement (a "Parent Material Adverse
Effect"). Other than those Consents referred to in the Disclosure Schedule on
the part of the Company, no Consent of any Governmental Entity is required by or
with respect to Parent, Merger Subsidiary or any other subsidiary of Parent in
connection with the execution and delivery of this Agreement or the consummation
by Parent or Merger Subsidiary, as the case may be, of any of the transactions
contemplated by this Agreement, except for (i) the consents disclosed in Section
4.2(b) of the Parent Disclosure Schedule, (ii) the filing of the Certificate of
Merger in accordance with the CBCA and similar documents with the relevant
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authorities of other states in which the Company is qualified to do business,
(iii) the filing of a premerger notification and report form under the HSR Act,
(iv) filings and approvals of applications with and by the OTS, (v) compliance
with applicable requirements of the Exchange Act and the Securities Act, and
applicable state blue sky laws, with respect to the Registration Statement and
the Prospectus/Proxy Statement, and (vi) such other Consents as to which the
failure to obtain or make, individually or in the aggregate, could not
reasonably be expected to have a Parent Material Adverse Effect.
(c) SEC Documents; Financial Statements; No Undisclosed Liabilities.
Parent has provided or made available to the Company true and correct copies of
all reports, schedules, forms, statements, exhibits and other documents filed
with the SEC by Parent under or pursuant to the Exchange Act since January 1,
1996 (the "Parent SEC Documents"), all of which were timely filed with the SEC.
As of their respective dates, or as subsequently amended prior to the date of
this Agreement, the Parent SEC Documents complied in all material respects with
the requirements of the Exchange Act applicable to such Parent SEC Documents,
and none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Parent SEC
Documents include all contracts and other documents which are required by the
Securities Act or the Exchange Act to be filed as exhibits thereto. The
financial statements of the Company included in the Parent SEC Documents comply
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except as may be indicated in the notes
thereto) and fairly present the consolidated financial position of the Parent
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the Parent SEC Documents, neither the Parent nor any of
its subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise), except for liabilities and
obligations which, individually or in the aggregate, could not reasonably be
expected to have a Parent Material Adverse Effect.
(d) Brokers. No broker, investment banker, financial advisor or other
person, other than NationsBanc Montgomery Securities LLC, the fees and expenses
of which will be paid by the Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Parent or any of its subsidiaries.
(e) Insurance. The Parent and its subsidiaries are covered by valid
and currently effective insurance policies issued in favor of the Parent that
are customary for companies of similar size and financial condition which
conduct similar businesses. All such policies are in full force and effect, all
premiums due thereon have been paid and the Parent has complied with the
provisions of such policies with respect to which the failure to comply with
would result in a cancellation of such policies. The Parent has not received any
written notice from or on behalf of any insurance carrier issuing policies or
binders relating to or covering the Parent and its subsidiaries that there will
be a cancellation or non-renewal of existing policies or binders, or material
modification of any of the methods of doing business, will be required.
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(f) Interests of Officers and Directors. Except as required to be
disclosed, and actually disclosed, in the Parent SEC Documents, neither any of
the Parent's or any of its subsidiaries' officers or directors, nor any member
of their respective immediate families or any entity with respect to which any
such person is an affiliate, has any material interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of the
Parent or its subsidiaries, or any other business relationship with the Parent
or any of its subsidiaries.
(g) Licenses, Approvals, etc. Each of the Parent and its subsidiaries
possesses or has been granted all Licenses, except for Licenses as to which the
failure to possess, individually or in the aggregate, would not have a Parent
Material Adverse Effect. Except as described in Section 4.2(g) of the Parent
Disclosure Schedule, no Action (as defined herein) is pending or, to the
knowledge of the Company, threatened seeking the revocation or limitation of any
of the Licenses.
(h) Pooling of Interests. Parent has no reason to believe that the
Merger will not qualify as, and has not taken or agreed to take any action, or
omitted or agreed to omit to take any action, which would disqualify the Merger
as, a "pooling of interests" for accounting purposes.
(i) Disclosure. The representations and warranties of the Parent
contained in this Agreement are true and correct in all material respects, and
do not omit any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. There is no fact known to the Parent which has not been disclosed to
the Company in the Parent Disclosure Schedule and the Parent SEC Documents,
taken as a whole, which has had, or would reasonably be expected to have, a
Parent Material Adverse Effect.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
5.1 Conduct of Business. During the period from the date of this Agreement
to the Effective Time, the Company shall, and shall cause its subsidiaries to,
carry on their businesses in the ordinary course of business in substantially
the same manner as heretofore conducted and, to the extent consistent therewith,
use all reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees (as a group) and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, except as
contemplated by this Agreement the Company shall not, and shall not permit any
of its subsidiaries to, without the prior written approval of Parent (which
approval will not be unreasonably withheld):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock, other than dividends and distributions by any direct or indirect
wholly-owned subsidiary of the Company to its parent; (ii) adjust, split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (iii) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any of its
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subsidiaries or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options, including Company Options, to acquire,
any such shares, voting securities or convertible securities (other than the
issuance of Shares upon the exercise of Company Options or upon the exercise or
conversion of Company Warrants outstanding as of the date hereof in each case in
accordance with the terms and provisions thereof);
(c) except for the Company's proposed name change to "Matrix Bancorp,"
amend its Articles of Incorporation, bylaws or other comparable charter or
organizational documents;
(d) amend, modify or waive any provision of any material contract or
agreement to which the Company or any of the Company's subsidiaries is a party,
including, without limitation, any such agreements identified in the Disclosure
Schedule;
(e) mortgage or otherwise encumber or subject to any Lien or sell,
lease, license, transfer or otherwise dispose of any material properties or
assets, except in the ordinary course of business consistent with past practice
or pursuant to existing contracts or commitments;
(f) amend, modify or waive any material term of any outstanding
security of the Company or its subsidiaries;
(g) incur, assume, guarantee or become obligated with respect to any
indebtedness (as defined in Section 4.1(q) hereof), other than drawings on
existing revolving credit facilities listed in Section 4.1(q) of the Disclosure
Schedule, in the ordinary course of business, consistent with past practice and
in accordance with the terms thereof, or incur, assume, guarantee or become
obligated with respect to any other material obligations other than in the
ordinary course of business and consistent with past practice;
(h) except for the Company's proposed acquisition of The Leader
Mortgage Company and the leasehold improvements to the Company's facilities,
make or agree to make any new capital expenditures or acquisitions of assets or
property or other acquisitions or commitments in excess of $50,000 individually
or $200,000 in the aggregate or otherwise acquire or agree to acquire any
material assets or property;
(i) make any material tax election or take any material tax position
(unless required by law) or change its fiscal year or accounting methods,
policies or practices (except as required by changes in GAAP) or settle or
compromise any material income tax liability;
(j) enter into any, or commit to enter into, any lease, loan, advance
or capital contributions to or investment in any person other than in the
ordinary course of business consistent with past practice;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or
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satisfaction thereof, in the ordinary course of business consistent with past
practice and in accordance with their terms or the settlement or other
disposition of litigation matters by a payment or payments not exceeding
$25,000, or release or waive any material rights or claims, or waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its subsidiaries is a party;
(l) (i) grant to any current or former director, officer or employee
of the Company or any of its subsidiaries any material increase in compensation
or benefits, except for employees who are not officers or directors in the
ordinary course of business consistent with past practice, (ii) grant to any
such director, officer, or employee any increase in severance or termination pay
(including the acceleration in the exercisability of Company Options or in the
vesting of Shares (or other property) except for automatic acceleration in
accordance with the terms of the Option Plan), or (iii) enter into any
employment, deferred compensation, severance or termination agreement or
arrangement with or for the benefit of any such current or former director,
officer, or employee;
(m) (i) take or agree or commit to take any action that would make any
representation or warranty of the Company hereunder inaccurate in any material
respect at, or as of any time prior to, the Effective Time or (ii) omit or agree
or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time; or
(n) authorize any of, or commit or agree to take any of, the
foregoing actions.
5.2 Affiliate Agreements. The Company shall obtain and deliver to Parent
as promptly as practicable after (and shall use its reasonable best efforts to
obtain and deliver within five days after) the date hereof a signed
representation letter substantially in the form of Exhibit B hereto from each
executive officer and director of the Company and each stockholder of the
Company who may reasonably be deemed an "affiliate" of the Company within the
meaning of such term as used in Rule 145 under the Securities Act and for
purposes of qualifying for pooling of interests accounting treatment for the
Merger, and shall obtain and deliver to Parent a signed representation letter
substantially in the form of Exhibit B from any person who becomes an executive
officer or director of the Company or any stockholder who becomes such an
"affiliate" after the date hereof as promptly as practicable after (and shall
use its reasonable best efforts to obtain and deliver within five days after)
such person achieves such status. Parent shall use its best reasonable efforts
to obtain and deliver to the Company as promptly as practicable after (and shall
use its reasonable best efforts to obtain and deliver within five days after)
the date hereof a signed representation letter substantially in the form of
Exhibit C hereto from each executive officer and director of Parent and each
stockholder of Parent who may reasonably be deemed an "affiliate" of parent
within the meaning of such term as used in Rule 145 under the Securities Act and
for purposes of qualifying for pooling of interests accounting treatment for the
Merger. Parent may place appropriate legends on the stock certificates of
affiliates of the Company and Parent and shall obtain and deliver to the Company
a signed representation letter substantially in the form of Exhibit C from any
person who becomes an executive officer or director of Parent or any stockholder
who becomes such an "affiliate" after the date hereof as promptly as practicable
after (and shall use its reasonable best efforts to obtain and deliver within
five days after) such person achieve such status.
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5.3 Access to Information. From the date hereof until the Effective Time,
the Company will give Parent, its counsel, financial advisors, auditors and
other authorized representatives full access (during normal business hours and
upon reasonable notice) to the offices, properties, officers, employees,
accountants, auditors, counsel and other representatives, books and records of
the Company and its subsidiaries (including to perform any environmental
studies), will furnish to Parent, its counsel, financial advisors, auditors and
other authorized representatives such financial, operating and property related
data and other information as such persons may reasonably request, and will
instruct the Company's and its subsidiaries' employees, counsel and financial
advisors to cooperate with Parent in its investigation of the business of the
Company and its subsidiaries; provided that no investigation pursuant to this
Section 5.3 shall affect any representation or warranty given by the Company
hereunder.
5.4 No Solicitation. The Company agrees that neither the Company nor any
of its subsidiaries nor any of the respective officers and directors of the
Company or its subsidiaries shall, and the Company shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by the
Company or any of its subsidiaries) not to, initiate, continue, solicit, or
encourage, directly or indirectly, any inquiries or the making of any proposal
or offer (including, without limitation, any proposal or offer to stockholders
of the Company) with respect to a merger, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal")
or, subject to the fiduciary duties of the Board of Directors of the Company
under the CBCA, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal or, enter into any
agreement or understanding with any other person or entity with the intent to
effect any Acquisition Proposal. The Company will take all necessary steps to
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section 5.4. The Company will notify Parent
immediately, orally and in writing (including the names of any party making and
the principal terms of any such proposal), if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with the
Company. Immediately following the execution of this Agreement, the Company will
request each person which has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring the Company or any portion
thereof (the "Confidentiality Agreements") to return all confidential
information heretofore furnished to such person by or on behalf of the Company.
Subject to the fiduciary duties of the Board of Directors of the Company under
the CBCA, the Company will keep Parent fully informed of the status and details
(including amendments or proposed amendments) of any such request, proposal or
inquiry.
5.5 Pooling of Interests; Tax Treatment. The Company shall not take any
action which would disqualify the Merger as a "pooling of interests" for
accounting purposes or as a "reorganization" that would be tax free to the
stockholders of the Company pursuant to Section 368(a) of the Code.
5.6 Confidentiality. Prior to the Effective Time and after any termination
of this Agreement, the Company will hold, and will use its reasonable best
efforts to cause its officers,
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directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning Parent and its subsidiaries furnished to the Company in
connection with the transactions contemplated by this Agreement except to the
extent that such information can be shown to have been (i) previously known on a
nonconfidential basis by the Company, (ii) in the public domain through no fault
of the Company or (iii) later lawfully acquired by the Company from sources
other than Parent; provided that the Company may disclose such information to
its officers, directors, employees, accountants, counsel, consultants, advisors
and agents in connection with the transactions contemplated by this Agreement so
long as such persons have a need to know such information, are informed by the
Company of the confidential nature of such information and are directed by the
Company to treat such information confidentially. The Company's obligation to
hold any such information in confidence shall be satisfied if it exercises the
same care with respect to such information as it would take to preserve the
confidentiality of its own similar information. If this Agreement is terminated,
the Company will, and will use its best efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
deliver to Parent, upon request, or, at the election of the Company, destroy,
all documents and other materials and all copies thereof, obtained by the
Company or on its behalf from Parent in connection with this Agreement that are
subject to such confidentiality.
ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
6.1 Confidentiality. Prior to the Effective Time and after any termination
of this Agreement, Parent will hold, and will use its reasonable best efforts to
cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law, all
confidential documents and information concerning the Company and its
subsidiaries furnished to Parent in connection with the transactions
contemplated by this Agreement except to the extent that such information can be
shown to have been (i) previously known on a nonconfidential basis by Parent,
(ii) in the public domain through no fault of Parent or (iii) later lawfully
acquired by Parent from sources other than the Company; provided that Parent may
disclose such information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such persons have a need to know such
information, are informed by Parent of the confidential nature of such
information and are directed by Parent to treat such information confidentially.
Parent's obligation to hold any such information in confidence shall be
satisfied if it exercises the same care with respect to such information as it
would take to preserve the confidentiality of its own similar information. If
this Agreement is terminated, Parent will, and will use its best efforts to
cause its officers, directors, employees, accountants, counsel, consultants,
advisors and agents to, deliver to the Company, upon request, or, at the
election of Parent, destroy, all documents and other materials and all copies
thereof, obtained by Parent or on its behalf from the Company in connection with
this Agreement that are subject to such confidentiality.
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6.2 Obligations of Merger Subsidiary. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
6.3 Employee Benefit Plans. Subject to the following agreements, from and
after the Effective Time, Parent shall have the right to continue, amend or
terminate any of the Benefit Plans in accordance with the terms thereof and
subject to any limitation arising under applicable law. It is the parties'
current intention that the Company will retain its employee plans in effect for
the benefit of employees of the Company and its subsidiaries subject to any
changes which are deemed necessary or desirable in order for the employee plans
of the Company and Parent to remain qualified under applicable provisions of the
Code. However, nothing in this statement of current intentions or in this
Agreement shall be deemed to confer any rights to persons who are not parties to
this Agreement (such as, but not limited to, employees, former employees or
independent contractors of the Company) to continuation of their current benefit
plans or to any particular forms or types of benefits. The Company, subject to
the provisions of this Agreement, and Parent, each reserve full authority to
amend, terminate, discontinue or otherwise revise their employee plans and/or to
adopt new plans from time to time subject solely to the discretion of their
respective boards of directors.
6.4 Indemnification and Insurance.
(a) From and after the Effective Time, the Parent shall cause the
Company to indemnify, defend and hold harmless each person who is now, or who
becomes, prior to the Effective Time, an officer, director, employee or agent of
the Company (the "Indemnified Parties") against all losses, claims, damages,
costs, expenses (including attorneys' fees), liabilities or judgments or amounts
that are paid in settlement (which settlement shall require the prior written
consent of Parent) of or in connection with any claim, action, suit, proceeding
or investigation (a "Claim") in which an Indemnified Party is, or is threatened
to be made, a party or a witness based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer,
employee or agent of the Company if such Claim pertains to any matter or fact
arising, existing or occurring on or prior to the Effective Time (including,
without limitation, the Merger and other transactions contemplated by this
Agreement), regardless of whether such Claim is asserted or claimed prior to, or
after the Effective Time (the "Indemnified Liabilities") to the fullest extent
permitted by Parent's Certificate of Incorporation and Bylaws and applicable
Delaware law. Any Indemnified Party wishing to claim indemnification under this
Section 6.4(a), upon learning of any Claim, shall notify Parent (but the failure
so to notify Parent shall not relieve it from any liability which Parent may
have under this Section 6.4(a) except to the extent such failure prejudices
Parent) and shall deliver to Parent any undertaking required by Delaware law.
The obligations of Parent described in this Section 6.4(a) shall continue in
full force and effect, without any amendment thereto, for a period of not less
than six years from the Effective Time; provided, however, that all rights to
indemnification in respect of any Claim asserted or made within such period
shall continue until the final disposition of such Claim. The foregoing
indemnification shall not apply to any actions, suits, proceedings, orders or
investigations which at the date hereof are pending or, to the knowledge of the
Company or its directors, threatened unless disclosed on Schedule 6.4(a).
(b) From and after the Effective Time, the directors, officers and
employees of the Company who become directors, officers or employees of Parent,
the Surviving Corporation or any other of the subsidiaries, shall also have
indemnification rights with prospective application.
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The prospective indemnification rights shall consist of such rights to which
directors, officers and employees of Parent or its subsidiaries are entitled
under the provisions of the Certificate of Incorporation, Bylaws or similar
governing documents of Parent, the Surviving Corporation and other subsidiaries,
as in effect from time to time after the Effective Time, as applicable, and
provisions of applicable law as in effect from time to time after the Effective
Time.
(c) The Parent and the Company agree to indemnify and hold harmless
each other, their respective directors, officers and employees and each person,
if any, who controls the respective party, against any and all loss, liability,
claim, damage and expense whatsoever (including, but not limited to, any and all
legal or other expenses reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever) to which they or any of them may become subject under the Securities
Act, the Exchange Act or any other statute or at common law or otherwise or
under the laws of foreign countries, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement (as defined in Section 7.2 below), or Prospectus/Proxy
Statement (as defined in Section 7.2 below) (as from time to time each may be
amended or supplemented) based upon written information furnished by the Company
or the Parent to each other or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance ("D&O Insurance") for a
period of not less than six years after the Effective Time; provided, that the
Parent may substitute therefor policies of substantially similar coverage and
amounts containing terms no less favorable to such former directors or officers;
provided, further, if the existing D&O Insurance expires, is terminated or
canceled during such period, Parent or the Surviving Corporation will use all
reasonable efforts to obtain substantially similar D&O Insurance; provided
further, however, that in no event shall Parent or the Surviving Corporation be
required to pay aggregate premiums for insurance under this Section 6.4(d) in
excess of 175% of the aggregate premiums paid by the Company in 1997 on an
annualized basis for such purpose (in which event Parent or the Surviving
Corporation shall cause to be maintained D&O Insurance which, in Parent's good
faith judgment, provides the maximum coverage available at an annual premium
equal to 175% of the Company's 1997 annualized premiums).
(e) The contractual obligations provided under paragraphs (a), (b),
(c) and (d) of this Section 6.4 are intended to benefit, and be enforceable
directly by, the Indemnified Parties, and shall be binding on all respective
successors of Parent and the Company.
6.5 Stock Exchange Listing. Parent shall use its best efforts to list on
the NYSE, subject to official notice of issuance, the shares of Parent Common
Stock to be issued in the Merger.
6.6 Publication of Combined Financial Results. Parent shall use reasonable
efforts to publish as soon as practicable after the end of its first fiscal
quarter which includes at least 30 days of post-Merger combined operations,
combined sales and net income figures and any other financial Information
necessary as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135 and any related accounting rules.
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6.7 Registration Relating to Company Options. Parent shall register the
shares of Parent Common Stock issuable upon exercise of the Company Options
after the Effective Time in either the Registration Statement or in a
registration statement on Form S-8 to be filed as soon as practicable following
the Effective Time and shall cause the shares of Parent Common Stock issuable
upon exercise thereof from and after the Effective Time, when issued, to be
listed on the NYSE.
6.8 Access to Information. From the date hereof until the Effective Time,
the Parent will give the Company, its counsel, financial advisors, auditors and
other authorized representatives full access (during normal business hours and
upon reasonable notice) to the offices, properties, officers, employees,
accountants, auditors, counsel and other representatives, books and records of
the Parent and its subsidiaries, will furnish to the Company, its counsel,
financial advisors, auditors and other authorized representatives such
financial, operating and property related data and other information as such
persons may reasonably request, and will instruct the Parent's and its
subsidiaries' employees, counsel and financial advisors to cooperate with the
Company in its investigation of the business of the Parent and its subsidiaries;
provided that no investigation pursuant to this Section 6.8 shall affect any
representation or warranty given by the Parent hereunder.
6.9 Pooling of Interests; Tax Treatment. The Parent shall not take any
action which would disqualify the Merger as a "pooling of interests" for
accounting purposes or as a "reorganization" that would be tax free to the
stockholders of the Company pursuant to Section 368(a) of the Code.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
7.1 Regulatory Applications; Reasonable Efforts; Notification.
(a) Each of Parent and the Company and their respective subsidiaries
shall (i) promptly prepare and make or cause to be made all filings required of
such party or any of its subsidiaries and obtain all permits, consents,
approvals, and authorizations of all third parties, Regulatory Authorities and
Governmental Entities necessary to consummate the transactions contemplated by
this Agreement, (ii) comply at the earliest practicable date with any request
for additional information, documents, or other material received by such party
or any of its subsidiaries from any Regulatory Authority or other Governmental
Entity in respect of such filings or such transactions, and (iii) cooperate with
the other party in connection with any such filing, and in connection with
resolving any investigation or other inquiry of any such Regulatory Authority or
other Governmental Entity. Each party shall promptly inform the other party of
any communication with, and any proposed understanding, undertaking, or
agreement with, any Regulatory Authority or Governmental Entity regarding any
such filings or any such transaction. Neither party shall participate in any
meeting, with any Regulatory Authority or Governmental Entity in respect of any
such filings, investigation, or other inquiry without giving the other party
notice of the meeting and, to the extent permitted by such Regulatory Authority
or Governmental Entity, the opportunity to attend and participate.
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(b) Each of the parties agrees to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all other necessary actions or
nonactions, waivers, consents and approvals from Regulatory Authorities or
Governmental Entities and the making of all other necessary registrations and
filings (including other filings with Regulatory Authorities or Governmental
Entities, if any), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the preparation, filing and dissemination of
the Registration Statement and the Prospectus/Proxy Statement and (iv) the
execution and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.
(c) Notwithstanding anything to the contrary in Section 7.1(a) or (b),
(i) neither Parent nor any of its subsidiaries shall be required to divest, or
cause or permit the Company or its subsidiaries or affiliates to divest, any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a material adverse effect on the value, condition (financial or
otherwise), prospects, business or results of operations or prospects of Parent
and its subsidiaries taken as a whole or of the Company and its subsidiaries
taken as a whole, or all such entities taken together, and (ii) neither Parent
nor Merger Subsidiary shall be required to waive any of the conditions to the
Merger set forth in Article VIII.
(d) Each party shall give prompt notice to the other party of (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate in any respect or (ii) the failure by it to comply with or
satisfy in any respect any covenant, condition or agreement to be compiled with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(e) The Company shall give prompt notice to Parent, and Parent or
Merger Subsidiary shall give prompt notice to the Company, of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting it or any of its subsidiaries which, if pending
on the date of this Agreement would have been required to have been disclosed
pursuant to Section 4.1(h), 4.1(i), 4.1(j), 4.1(l) or 4.1(m) or Section 4.2(h)
or which relate to the consummation of the transactions contemplated by this
Agreement.
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7.2 Stockholder Meeting; Proxy Material.
(a) For the purpose (i) of holding meetings of stockholders of Parent
and the Company to approve this Agreement, the Merger and, with respect to
Parent, the issuance of shares of Parent Common Stock in the Merger, and (ii) of
registering under the Securities Act the Parent Common Stock to be issued as
contemplated by this Agreement, the parties hereto shall cooperate in the
preparation of an appropriate registration statement (such registration
statement, together with all and any amendments and supplements thereto, being
herein referred to as the "Registration Statement"), which shall include a
prospectus/joint proxy statement satisfying all applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations thereunder (such
prospectus/joint proxy statement, together with any and all amendments or
supplements thereto, being herein referred to as the "Prospectus/Proxy
Statement"). At the time the Registration Statement becomes effective under the
Securities Act, at the time the Prospectus/Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company and Parent, at
all time subsequent to such mailing (including, without limitation, the time
such stockholders vote upon a proposal to approve and adopt this Agreement and
the Merger), and at the Effective Time, the Registration Statement and the
Prospectus/Proxy Statement, as supplemented or amended, if applicable, will (i)
comply in all material respects with applicable provisions of the Securities Act
and the Exchange Act, and (ii) not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) Parent shall furnish such information concerning Parent and its
subsidiaries as is necessary in order to cause the Prospectus/Proxy Statement,
insofar as it relates to Parent and its subsidiaries and Parent's Common Stock,
to be prepared in accordance with Section 7.2(a). Parent agrees promptly to
advise the Company if at any time prior to the Parent or Company stockholders'
meetings held to consider and vote on the Merger any information provided by
Parent in the Prospectus/Proxy Statement becomes incorrect or incomplete in any
material respect.
(c) The Company shall furnish Parent with such information concerning
the Company and its subsidiaries as is necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to the Company and its
subsidiaries to be prepared in accordance with Section 7.2(a). Parent agrees to
provide the Company with reasonable opportunity to review and comment on the
Prospectus/Proxy Statement. The Company agrees promptly to advise Parent if at
any time prior to the Parent or Company stockholders' meetings any information
provided by the Company in the Prospectus/Proxy Statement becomes incorrect or
incomplete in any material respect, and to provide Parent with the information
needed to correct such inaccuracy or omission.
(d) Parent shall promptly file the Registration Statement with the
SEC. Parent shall use reasonable efforts to cause the Registration Statement to
become effective under the Securities Act at the earliest practicable date. The
Company authorizes Parent to utilize in the Registration Statement the
information concerning the Company provided to Parent for the purpose of
inclusion in the in the Prospectus/Proxy Statement, provided that the Company
and its counsel shall have an opportunity to review the Registration Statement
prior to filing with the SEC and shall otherwise participate in responding to
the comments of the SEC and the process of achieving the effectiveness of the
Registration Statement. Parent shall advise the Company promptly when the
Registration statement has become effective and of any supplements or amendments
thereto, and
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Parent shall furnish the Company with copies of all such documents. Prior to the
Effective Time or the termination of this Agreement, each party shall consult
with the other with respect to any material (other than the Prospectus/Proxy
Statement) that might constitute a "prospectus" relating to the Merger within
the meaning of the Securities Act prior to using or disseminating such
prospectus.
(e) Parent shall use reasonable efforts to cause to be delivered to
the Company a letter relating to the Registration Statement from KPMG Peat
Marwick LLP, Parent's independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become effective
and addressed to the Company, in form and substance reasonably satisfactory to
the Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
(f) The Company shall use reasonable efforts to cause to be delivered
to Parent a letter relating to the Registration Statement from Ernst & Young
LLP, the Company's independent auditors, dated a date within two business days
before the date on which the Registration Statement shall become effective and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
(g) Parent and the Company shall each bear 50% of all SEC filing fees
with respect to the Registration Statement and all printing and mailing costs in
connection with the preparation and mailing of the Prospectus/Proxy Statement to
stockholders of Parent and the Company. Parent and the Company shall bear their
own legal and accounting expenses in connection with the Registration Statement.
7.3 Press Releases. Parent and the Company shall agree with each other as
to the form and substance of any press release related to this Agreement or the
transactions contemplated hereby, and shall consult with each other as to the
form and substance of other public disclosures which may relate to the
transactions contemplated by this Agreement; provided, however, that nothing
contained herein shall prohibit either party, following notification to the
other party and reasonable opportunity to comment, from making any disclosure
which is required by law, regulation or stock exchange requirements.
7.4 Securities Reports. Each of Parent and Company agrees to timely file
all reports required to be filed by it pursuant to the Exchange Act. Each of
Parent and the Company agree to provide to the other party copies of all reports
and other documents filed under the Securities Act or Exchange Act with the SEC
by it between the date hereof and the Effective Time within five days after the
date such reports or other documents are filed with the SEC.
7.5 Stockholder Approvals. Each of Parent and the Company shall call a
meeting of its stockholders for the purpose of voting upon this Agreement and
the Merger, and shall schedule such meeting based on consultation with the other
party.
7.6 Due Diligence.
(a) The Company shall permit Parent to conduct a due diligence
investigation of the Company and its subsidiaries and their respective assets,
liabilities, businesses, books, records and prospects. Parent shall have the
right to terminate this Agreement and its obligations hereunder,
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at any time within ten (10) business days after the date of this Agreement or,
if later, two (2) business days after the receipt by the Parent of the
Disclosure Schedule, and in the manner described in Article IX of this
Agreement, if Parent determines, in its reasonable discretion, that it is not
satisfied with the results of its due diligence investigation.
(b) The Parent shall permit the Company to conduct a due diligence
investigation of the Parent and its subsidiaries and their respective assets,
liabilities, businesses, books, records and prospects. The Company shall have
the right to terminate this Agreement and its obligations hereunder, at any time
within ten (10) business days after the date of this Agreement or, if later, two
(2) business days after the receipt by the Company of the Parent Disclosure
Schedule, and in the manner described in Article IX of this Agreement, if the
Company determines, in its reasonable discretion, that it is not satisfied with
the results of its due diligence investigation.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1 Conditions to the Obligations of Each Party. The obligations of the
Company, Parent and Merger Subsidiary to consummate the Merger are subject to
the satisfaction of the following conditions:
(a) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending the effectiveness thereof shall have
been issued and remain in effect and no proceedings for that purpose shall have
been initiated or threatened by the SEC and not withdrawn;
(b) any consents, waivers, clearances, approvals and authorizations of
Regulatory Authorities or other Governmental Entities that are necessary to
permit consummation of the Merger shall have been obtained and shall remain in
full force and effect, and all statutory waiting periods in respect thereof
shall have been terminated or have expired, in each case without the imposition
of any condition, restriction or term which could reasonably be expected to have
a Material Adverse Effect;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order, decree or other legal restraint shall prohibit or make
illegal the consummation of the Merger;
(d) tax opinions addressed to each of Parent and the Company by their
respective counsel or independent certified public accountants in form and
substance mutually acceptable to Parent and the Company shall have been obtained
with respect to the Merger, based on customary reliance and subject to customary
qualifications, to the effect that, for federal income tax purposes, the Merger
will qualify as a tax-free "reorganization" under Section 368(a) of the Code;
(e) the Parent Common Stock to be issued to holders of Shares in the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance; and
8.2 Conditions to the Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to consummate the Merger are further
subject to the satisfaction of the following conditions:
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(a) there shall not be effected, instituted, pending or proposed any
action by any Governmental Entity (by legislation, rulemaking, change of
applicable law or otherwise) (i) an effect of which is to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation by Parent or Merger Subsidiary of the Merger, seeking to obtain
material damages or imposing any material adverse conditions in connection
therewith or otherwise directly or indirectly relating to the transactions
contemplated by this Agreement or the Merger, (ii) an effect of which is to
restrain or prohibit Parent's or Merger Subsidiary's ownership or operation (or
that of their respective subsidiaries or affiliates) of all or any portion of
the business or assets of the Company and its subsidiaries, or of Parent and its
subsidiaries or affiliates, or to compel Parent or any of its subsidiaries or
affiliates to dispose of or hold separate all or any material portion of the
business or assets of the Company and its subsidiaries, or of Parent and its
subsidiaries and affiliates, (iii) an effect of which is to impose limitations
on the ability of Parent or any of its subsidiaries or affiliates effectively to
exercise full rights of ownership of the Shares, including, without limitation,
the right to vote any Shares acquired or owned by Parent or any of its
subsidiaries or affiliates on all matters properly presented to the Company's
stockholders, (iv) an effect of which is to require divestiture by Parent or any
of its subsidiaries or affiliates of any Shares, or (v) that otherwise, in the
reasonable judgment of Parent, is likely to have a Material Adverse Effect or a
Parent Material Adverse Effect;
(b) the Company shall have performed in all material respects its
covenants and agreements under this Agreement, and the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality shall be true when made and at and as of the Effective Time as if
made at and as of such time, and the representations and warranties set forth in
this Agreement that are not so qualified shall be true in all material respects
when made and at and as of the Effective Time as if made at and as of such time;
and Parent and Merger Subsidiary shall have received a certificate of the Chief
Executive Officer or a Vice President of the Company to that effect;
(c) no change shall have occurred or been threatened (and no
development shall have occurred or been threatened involving a prospective
change) that, in the reasonable judgment of Parent, has or is likely to have a
Material Adverse Effect;
(d) Parent shall have been furnished with copies of the text of the
resolutions by which the corporate action on the part of the Company necessary
to approve this Agreement, the Stockholders Agreements and the transactions
contemplated hereby and thereby were taken, together with a certificate dated as
of the Effective Time executed on behalf of the Company by its corporate
secretary certifying to Parent that such copies are true, correct and complete
copies of such resolutions and that such resolutions were duly adopted and have
not been amended or rescinded;
(e) the Parent Stockholder Approval shall have been obtained;
(f) Parent's Board of Directors shall have received an opinion from an
investment banking firm selected by Parent to serve as its financial advisor in
connection with the Merger that the Exchange Ratio is fair to Parent from a
financial point of view, which opinion shall have been confirmed in writing on
the date of the Prospectus/Proxy Statement; and
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(g) Parent shall have received an opinion, dated as of or shortly
before the Effective Time, from KPMG Peat Marwick LLP, stating its opinion that
the Merger shall qualify for "pooling of interests" accounting treatment.
8.3 Conditions to the Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the further satisfaction of the
following conditions:
(a) there shall not be effected, instituted, pending or proposed any
action by any Governmental Entity (by legislation, rulemaking, change of
applicable law or otherwise) (i) an effect of which is to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
consummation by the Company of the Merger, seeking to obtain material damages or
imposing any material adverse conditions in connection therewith or otherwise
directly or indirectly relating to the transactions contemplated by this
Agreement or the Merger, (ii) an effect of which is to restrain or prohibit
Parent's or Merger Subsidiary's ownership or operation (or that of their
respective subsidiaries or affiliates) of all or any portion of the business or
assets of the Company and its subsidiaries, or of Parent and its subsidiaries or
affiliates, or to compel Parent or any of its subsidiaries or affiliates to
dispose of or hold separate all or any material portion of the business or
assets of the Company and its subsidiaries, or of Parent and its subsidiaries
and affiliates, (iii) an effect of which is to impose limitations on the ability
of Parent or any of its subsidiaries or affiliates effectively to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Parent or any of its subsidiaries or
affiliates on all matters properly presented to the Company's stockholders, (iv)
an effect of which is to require divestiture by Parent or any of its
subsidiaries or affiliates of any Shares, or (v) that otherwise, in the
reasonable judgment of the Company, is likely to have a Material Adverse Effect
or a Parent Material Adverse Effect;
(b) Parent and Merger Subsidiary shall have performed in all material
respects their covenants and agreements under this Agreement, and the
representations and warranties of Parent and Merger Subsidiary set forth in this
Agreement that are qualified as to materiality shall be true when made at and as
of the Effective Time as if made and at and as of such time, and the
representations and warranties set forth in this Agreement that are not so
qualified shall be true in all material respects when made and at and as of the
Effective Time as if made at and as of such time; and the Company shall have
received certificates of the Chief Executive Officer or a Vice President of
Parent and Merger Subsidiary to that effect;
(c) the Company Stockholder Approval shall have been obtained;
(d) no change shall have occurred or been threatened (and no
development shall have occurred or been threatened involving a prospective
change), other than changes resulting from changes in interest rates, that, in
the reasonable judgment of the Company, has or is likely to have a Parent
Material Adverse Effect;
(e) The Company's Board of Directors shall have received an opinion
from an investment banking firm selected by the Company to serve as its
financial advisor in connection with the Merger that the consideration to be
paid by Parent pursuant to this Agreement is fair to the stockholders of the
Company from a financial point of view, which opinion shall have been confirmed
in writing on the date of the Prospectus/Proxy Statement; and
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(f) The Company shall have received an opinion, dated as of or shortly
before the Effective Time, from Ernst & Young LLP, stating its opinion that the
Merger shall qualify for "pooling of interests" accounting treatment.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding the Company
Stockholder Approval or the Parent Stockholder Approval):
(i) by mutual written consent of the Company and Parent;
(ii) by either Parent or the Company, if the meeting, or any
adjournment thereof, at which the Company Stockholder Approval or the Parent
Stockholder Approval is proposed and voted upon, the Company Stockholder
Approval or the Parent Stockholder Approval shall not have been obtained;
(iii) by either the Company or Parent, if the Merger has not been
consummated by March 15, 1999 (provided that the party seeking to terminate the
Agreement shall not have breached its obligations under this Agreement in any
material respect);
(iv) by Parent, at any time prior to the Effective Time, by action
of the Board of Directors of Parent, if (x) there has been a breach by the
Company of any of the representations, warranties, covenants or agreements
contained in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case which has or could reasonably be
expected to have a Material Adverse Effect, provided, however, that Parent shall
not be permitted to terminate this Agreement pursuant to this Section 9.1(iv)(x)
with respect to any such breach or occurrence with respect to which the Company
notifies Parent after the expiration of a ten (10) day period following Parent's
receipt of such notice; or (y) the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Parent or Merger Subsidiary its
approval or recommendation of this Agreement or the Merger, or shall have
resolved to do any of the foregoing;
(v) by the Company, at any time prior to the Effective Time, by
action of the Board of Directors of the Company, if (A) any of the
representations, warranties, covenants or agreements contained in this
Agreement, or if any representation or warranty of the Parent or Merger
Subsidiary shall have become untrue, in either case which has or could
reasonably be expected to have a Material Adverse Effect, provided, however,
that the Company shall not be permitted to terminate this Agreement pursuant to
this Section 9.1(v)(A) with respect to any such breach of occurrence with
respect to which Parent notifies the Company after the expiration of a ten (10)
day period following the Company's receipt of such notice, or (B) the Company
receives an Acquisition Proposal on terms the Company's Board of Directors
(after consultation with its independent financial advisors) determines in good
faith to be more favorable to the Company's stockholders than the terms of the
Merger, and the Company's Board of Directors determines, upon the reasoned
advice of its legal counsel, that to continue to recommend that holders of
Shares vote in favor of the
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Merger, notwithstanding the receipt of such offer with respect to an Acquisition
Proposal, or to fail to recommend or accept the Acquisition Proposal, would
violate the fiduciary duties of the Company's Board of Directors; provided,
however, that the Company shall not be permitted to terminate this Agreement
pursuant to this Section 9.1(v)(B) unless it has provided Parent and Merger
Subsidiary with three (3) business days prior written notice of its intent to so
terminate this Agreement together with a detailed summary of the terms and
conditions (including proposed financing, if any) of such Acquisition Proposal;
provided, further, that Parent shall receive the fees set forth in Section
10.4(b) immediately prior to or concurrently with any termination pursuant to
this Section 9.1(v)(B) by wire transfer in same day funds;
(vi) by the Parent, if the Average Parent Stock Price (as defined
below) is less than the Minimum Price. For purposes of this Agreement, the
"Average Parent Stock Price" shall be the average of the daily closing sales
prices of the Parent Common Stock as reported on the New York Stock Exchange
Composite Transactions reporting system (as reported by The Wall Street Journal
or, if not reported thereby, as reported by another authoritative source as
mutually agreed by Parent and the Company) for the 20 consecutive full trading
days ending on the third business day immediately prior to the last date (as
originally scheduled in the notices mailed to the stockholders of the parties,
and without giving effect to any adjournments or postponements) of the meetings
of stockholders to obtain the stockholder approvals referred to in Section 7.2
hereof; or
(vii) by Parent or the Company, pursuant to Section 7.6 of this
Agreement.
9.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 9.1, this Agreement shall become void and of no effect with no liability
on the part of any party hereto or their respective officers and directors,
except that the agreements contained in Sections 5.6, 6.1, 10.4 and 10.6 shall
survive the termination hereof. Specifically, and without limiting the
generality of the foregoing, Parent and Merger Subsidiary agree that, except as
expressly provided in this Section 9.2 or Section 10.4(b), termination of this
Agreement shall be their sole and exclusive remedy for any nonwillful breach by
the Company of its representations, warranties and covenants under this
Agreement (including termination by Parent pursuant to Section 7.6 of this
Agreement) and the Company agrees that termination of this Agreement shall be
its sole and exclusive remedy for any nonwillful breach by Parent or Merger
Subsidiary of their representations, warranties and covenants under this
Agreement. If this Agreement is terminated by reason of a willful breach by a
party, then the breaching party shall be liable to the non-breaching party for
all actual, consequential and incidental damages suffered by the non-breaching
party arising from such willful breach.
ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and shall
be given,
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if to Parent or Merger Subsidiary, to:
Fidelity National Financial, Inc.
3916 State Street, Suite 300
Santa Barbara, California 93105
Telecopy: (805) 898-7191
Attn: Frank P. Willey, President
with a copy to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660-6441
Telecopy: (714) 725-4100
Attn: C. Craig Carlson, Esq.
if to the Company, to:
Matrix Capital Corporation
1380 Lawrence Street, Suite 1410
Denver, Colorado 80204
Telecopy: (303) 595-9906
Attn: Guy A. Gibson, President
with a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross, Suite 3200
Dallas, Texas 75202
Telecopy: (214) 955-4300
Attn: Ronald J. Frappier, Esq.
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered at the address specified
in this Section.
10.2 Survival of Representations and Warranties. The representations and
warranties and agreements contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement except for the representations, warranties and
agreements set forth in Sections 5.6, 6.1, 6.4, 10.4 and 10.6.
10.3 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the Company, Parent and Merger
Subsidiary or in the case of a waiver, by the party against whom the waiver is
to be effective; provided, that after the adoption of this Agreement by the
stockholders of the Company or the Parent, no such amendment or waiver shall,
without the further
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approval of such stockholders, alter or change (i) the amount or kind of
consideration to be received in exchange for any shares of capital stock of the
Company, or (ii) any of the principal terms of the Merger.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
10.4 Fees and Expenses.
(a) Except as otherwise provided in this Agreement, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
(b) If (w) (1) any person or group (as contemplated by Section
13(d)(3) of the Exchange Act) other than Parent or Merger Subsidiary or any of
their respective subsidiaries or affiliates (collectively, an "Acquiring
Person") shall have become the beneficial owner of a majority of the outstanding
Shares, and (2) either the Company shall fail to obtain the Company Stockholder
Approval or the Company's Board of Directors shall have withdrawn or changed its
recommendation or refused to make a recommendation in favor of this Agreement
and the Merger, or (x) Parent shall have terminated this Agreement pursuant to
Section 9.1(iv)(y), or (y) the Company shall have terminated this Agreement
pursuant to Section 9.1(v)(B), then the Company shall promptly, but in no event
later than five (5) days after the date of any request therefor, reimburse
Parent for the documented fees and expenses of Parent and Merger Subsidiary
related to this Agreement and the transactions contemplated hereby (which fees
and expenses shall not exceed $1,000,000) and an additional fee of $7,500,000
which amounts shall be payable by wire transfer in same day funds; provided,
however, that if the Company shall have terminated this Agreement pursuant to
Section 9.1(v)(B), such amounts shall be paid in accordance with the provisions
of such Section. The Company acknowledges that the agreements contained in this
Section 10.4(b) are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Parent and Merger Subsidiary
would not enter into this Agreement; accordingly, if the Company fails to pay
promptly the amounts due pursuant to this Section 10.4(b), and, in order to
obtain such payments, Parent or Merger Subsidiary commences a suit against the
Company for the fees set forth in this paragraph (b), the prevailing party shall
pay to the other party or parties their costs and expenses (including attorneys'
fees and expenses) in connection with such suit, together with interest on the
amount thereof at the prime rate of Citibank, N.A. on the date such payment was
required to be made.
(c) If the Company or Parent shall have terminated this Agreement
pursuant to Section 7.6, then the party terminating this Agreement shall
promptly, but in no event later than five (5) days after the date of any request
therefor, reimburse the other party for its documented fees and expenses related
to this Agreement and the transactions contemplated hereby (which fees and
expenses shall not exceed $250,000).
10.5 Successors and Assigns; Parties in Interest. The provisions of this
Agreement shall be binding, upon and inure to the benefit of the parties hereto
and their respective successors and
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42
assigns; provided, that no party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement without the consent of the
other parties hereto except that, with the consent of the Company, Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of Parent or any of its wholly-owned subsidiaries, any or all of its
rights or obligations, but any such transfer or assignment will not relieve
Merger Subsidiary of its obligations under this Agreement. Except as expressly
set forth herein nothing in this Agreement, express or implied, is intended to
or shall confer upon any person not a party hereto any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, including to
confer third party beneficiary rights.
10.6 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated, and the parties shall negotiate
in good faith to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
10.7 Governing Law. This Agreement shall be construed in accordance with
and governed by the internal laws of the State of Delaware, without giving
effect to the principles of conflicts of laws thereof, except that the
consummation and effectiveness of the Merger shall be governed by, and construed
in accordance with, applicable provisions of the CBCA and the Delaware General
Corporation Law.
10.8 Entire Agreement. Except for the Confidentiality Agreement dated
March 4, 1998, between the Parent and the Company, this Agreement, including
Exhibits and Disclosure Schedules to this Agreement, constitutes the entire
agreement, and supersedes all other prior agreements, written and oral, among
the parties, with respect to the subject matter hereof.
10.9 Counterparts; Effectiveness; Interpretation. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
When a reference is made in this Agreement to a Section, such reference shall be
to a Section of this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
10.10 Effect of Disclosure Schedule. Notwithstanding anything to the
contrary contained in this Agreement or in any Section of the Disclosure
Schedule, any information disclosed in one Section of the Disclosure Schedule
shall be deemed to be disclosed in all Sections of the Disclosure Schedule, to
the extent that such deemed disclosure is apparent from the information actually
disclosed.
10.11 Arbitration. All disputes between the parties hereto relating to
this Agreement shall be determined solely and exclusively by arbitration in
accordance with the rules then in effect of the American Arbitration Association
pertaining to commercial arbitrations, or any successors hereto ("AAA"), in
Phoenix, Arizona, unless the parties otherwise agree in writing. The parties
shall jointly
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43
select an arbitrator. In the event the parties fail to agree upon an arbitrator
within ten (10) days, then each party shall select an arbitrator and such
arbitrators shall then select a third arbitrator to serve as the sole
arbitrator; provided, that if either party, in such event, fails to select an
arbitrator within seven (7) days, such arbitrator shall be selected by the AAA
upon application of either party. Judgment upon the award of the agreed upon
arbitrator or the so chosen third arbitrator, as the case may be, shall be
binding on the parties and shall be entered by any court of competent
jurisdiction.
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The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ FRANK P. WILLEY
--------------------------------
Name: Frank P. Willey
Title:President
MCC MERGER, INC.
By: /s/ FRANK P. WILLEY
--------------------------------
Name: Frank P. Willey
Title:President
MATRIX CAPITAL CORPORATION
By: /s/ GUY A. GIBSON
--------------------------------
Name: Guy A. Gibson
Title:Chief Executive Officer
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