EXHIBIT 10.1
CONTRIBUTION AND SALE AGREEMENT
by and among
FIRST AMERICAN REAL ESTATE SOLUTIONS LLC,
MATRIX BANCORP, INC.,
and
MATRIX ASSET MANAGEMENT CORPORATION
Effective as of August 31, 2004
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
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1.1 Defined
Terms...............................................................1
1.2 Principles of
Construction..................................................6
ARTICLE II
ORGANIZATION OF NEWCO; CLOSING; SCOPE OF BUSINESS
2.1 Organization;
Expenses......................................................6
2.2 Capital Contributions;
Closing..............................................7
2.3 Certain Assets and Liabilities Not
Transferred..............................8
2.4 Instruments of Transfer and
Conveyance......................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MATRIX AND MAMC
3.1 Authorization and Validity of
Agreement.....................................8
3.2 Existence and Good Standing;
Subsidiaries...................................9
3.3 Financial
Statements........................................................9
3.4 Title to
Interests.........................................................10
3.5
Leases.....................................................................10
3.6 Real
Property..............................................................10
3.7 Material
Contracts.........................................................11
3.8 Consents and Approvals; No
Violations......................................12
3.9
Litigation.................................................................12
3.10
Taxes.....................................................................12
3.11 No Changes Since Balance Sheet
Date.......................................14
3.12 Compliance with Laws;
Permits.............................................14
3.13 Intellectual
Properties...................................................15
3.14 Labor
Matters.............................................................17
3.15 Employee Benefit
Plans....................................................18
3.16 Books and
Records.........................................................20
3.17 Nature of
Investment......................................................20
3.18 Transactions with
Affiliates..............................................20
3.19 Broker's or Finder's
Fees.................................................20
3.20 SEC
Filings...............................................................20
3.21
Disclosure................................................................20
3.22 Copies of
Documents.......................................................21
(i)
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FIRST AMERICAN
4.1 Authorization and Validity of
Agreement...................................21
4.2 Existence and Good
Standing...............................................21
4.3 Nature of
Investment......................................................22
4.4 Consents and Approvals; No
Violations.....................................22
4.5
Litigation................................................................22
4.6
Disclosure................................................................22
4.7 Broker's or Finder's
Fees.................................................23
4.8 Financial
Data............................................................23
ARTICLE V
COVENANTS
5.1 Ordinary
Course...........................................................23
5.2 Commercially Reasonable
Efforts...........................................24
5.3 Consents and Further
Assurances...........................................24
5.4 Notices of Certain
Events.................................................24
5.5 Access to Information Concerning
Matrix Business and Records..............25
5.6 Exclusive
Dealing.........................................................25
5.7 Parties to Maintain
Existence.............................................26
5.8 Use of
Name...............................................................26
5.9 Employee
Payments.........................................................26
5.10 Customer
Advances........................................................27
5.11 Minimum
Deposit..........................................................27
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent to the
Obligations of Each of the Parties............27
6.2 Conditions Precedent to the
Obligations of First American.................28
6.3 Conditions Precedent to the
Obligations of Matrix and MAMC................30
ARTICLE VII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
7.1 Survival of
Representations...............................................31
7.2
Indemnification...........................................................31
7.3 Indemnification
Procedure.................................................33
7.4 Post-Closing Tax
Indemnification..........................................34
7.5
Set-Off...................................................................34
ARTICLE VIII
TERMINATION
8.1 Events of
Termination.....................................................34
8.2 Effect of
Termination.....................................................35
ARTICLE IX
MISCELLANEOUS
9.1 Fees and
Expenses.........................................................35
9.2 Extension;
Waiver.........................................................35
9.3
Confidentiality...........................................................36
9.4 Public
Announcements......................................................36
9.5 Records Retained by Matrix, MAMC
and Newco................................36
9.6
Notices...................................................................36
9.7 Entire
Agreement..........................................................38
9.8 Binding Effect; Benefit;
Assignment.......................................38
9.9 Amendment and
Modification................................................38
9.10
Counterparts..............................................................38
9.11 Governing
Law.............................................................38
9.12
Severability..............................................................39
9.13 Further
Assurances........................................................39
9.14 Third Party
Beneficiary...................................................39
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(ii)
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SCHEDULES
EXHIBITS
Exhibit A...Form of Operating Agreement
Exhibit B...Form of Promissory Note
(iii)
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CONTRIBUTION AND SALE AGREEMENT
This
CONTRIBUTION AND SALE
AGREEMENT, effective
as of August 31, 2004, is
entered into by and among FIRST AMERICAN
REAL ESTATE SOLUTIONS LLC, a California
limited liability company ("First
American"); MATRIX
BANCORP, INC., a
Colorado
corporation ("Matrix"); and MATRIX ASSET MANAGEMENT CORPORATION, a Colorado
corporation ("MAMC").
W I T N E S S E T H:
WHEREAS, First
American, Matrix and MAMC (each a "Party" and, collectively,
the "Parties") desire to form a new limited
liability company to own and operate
the Matrix Business (as such term is
defined below);
WHEREAS, to
effectuate their intent the Parties deem it advisable to form a
limited liability company and to contribute
certain assets and
obligations to
such limited liability company; and
WHEREAS, in
order to set forth certain terms and conditions upon which such
limited liability company will be owned and
operated, the Parties desire to
enter into this Agreement.
NOW,
THEREFORE,
in consideration of
the premises and the mutual covenants
hereinafter set forth, the Parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined
Terms. As used in this
Agreement,
the following
terms shall
have the following meanings (such meanings to be
equally applicable to both the
singular and plural forms of the terms
defined):
"Affiliate"
shall mean and include, with reference to any Person, any other
Person (other than Newco) Controlling, Controlled by or under common Control
with such Person.
"Agreed Claims"
shall have the meaning set forth in Section 7.3(d).
"Agreement"
shall mean this
Contribution and Sale
Agreement, as the
same
may be amended, restated, modified and/or
supplemented from time to time.
"Assumed
Obligations" shall have the meaning set forth in Section
2.2(a).
"Balance Sheet"
shall have the meaning set forth in Section 3.3(a).
"Balance Sheet
Date" shall mean June 30, 2004.
"Bank" shall
have the meaning set forth in Section 5.11.
"Business Day"
shall mean any day,
excluding Saturday,
Sunday or any day
which shall be a legal holiday in the States of California, Colorado or
Delaware.
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"Business
Record" shall have the meaning set forth in Section 9.5.
"Capital
Account" shall have the meaning
given thereto in the Operating
Agreement.
"Certificate"
shall have the meaning set forth in Section 7.3(a).
"Change
in Control" shall mean, with respect to any Person, (a) the
acquisition in one transaction or a series of related transactions by any
acquiring Person of any voting securities
of such Person or such Person's parent
company or companies, immediately after which such acquiring Person has
beneficial ownership of fifty percent (50%)
or more of the combined voting power
of such Person or such Person's parent company or companies, or (b) the
consummation of any merger, consolidation, recapitalization or reorganization
involving such Person or such Person's
parent company or companies unless the
stockholders of such Person or such Person's
parent company or companies, as
applicable, immediately before such merger,
consolidation,
recapitalization or
reorganization, own, directly or indirectly,
immediately following such merger,
consolidation, recapitalization or
reorganization, more than fifty percent (50%)
of the combined voting power of the
outstanding voting
securities of the Person
resulting from such merger or consolidation
or reorganization
in substantially
the same proportion as their ownership of the voting
securities of such
Person
immediately before such merger, consolidation,
recapitalization
or
reorganization, or (c) any sale, lease, exchange,
transfer or other disposition
(in one transaction or a series of related
transactions) of all or substantially
all of the assets or business of such
Person or such Person's parent company or
companies to any acquiring Person.
"Closing" shall
have the meaning set forth in Section 2.2(c).
"Closing Date"
shall have the meaning set forth in Section 2.2(c).
"Code" shall
mean the Internal
Revenue Code of 1986,
as amended from time
to time, and the regulations promulgated
and the rulings issued thereunder.
"Contract" means
any note, bond, mortgage, indenture, guarantee, license,
franchise, permit, agreement,
understanding,
arrangement, contract, commitment,
lease, franchise agreement or other instrument or
obligation (whether
oral or
written), each including all amendments,
supplements
and other modifications
thereto.
"Control" shall
mean the possession,
directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of Voting
Interests, by contract or otherwise.
"Deposit Term"
shall have the meaning set forth in Section 5.11.
"Encumbrances"
shall mean all liens, encumbrances, restrictions and claims
of every kind and character.
"Entity" shall
mean any Person that is not a natural Person.
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"ERISA" shall
mean the Employee
Retirement Income Security Act of 1974, as
amended.
"Exchange Act"
shall have the meaning set forth in Section 3.20.
"FAEC" shall
have the meaning set forth in Section 5.11.
"Financial
Statements" shall have the meaning set forth in Section 3.3(a).
"First
American" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"First
American Membership Interest" shall have the meaning
set forth in
Section 2.2(b).
"First American
MMA" shall have the meaning set forth in Section 5.11.
"GAAP" means
United States generally accepted accounting principles applied
on a consistent basis.
"Indemnifiable
Taxes" shall have the meaning set forth in Section 7.4(a).
"Indemnified
Party" shall have the meaning set forth in Section 7.3(a).
"Indemnifying
Party" shall have the meaning set forth in Section 7.3(a).
"Intellectual
Property" shall mean all domestic and foreign patents, patent
applications, trademarks, service marks and other indicia of
origin, trademark
and service mark registrations and applications for registrations thereof,
copyrights, copyright registrations and applications for
registration thereof,
Internet domain names and universal
resource locators (URLs), trade secrets,
inventions (whether or not patentable), invention disclosures, moral and
economic rights of authors and inventors
(however denominated),
technical data,
customer lists, corporate and business names,
trade names,
trade dress, brand
names, know-how, show-how, maskworks, formulae, methods (whether or not
patentable), designs, processes, procedures, technology, source codes,
object
codes, computer software programs, databases, data collectors and other
proprietary information or material of any
type, whether
written or
unwritten
(and all good will associated with, and all derivatives, improvements and
refinements of, any of the foregoing).
"Legal
Change" shall mean a change in
applicable
laws, regulations or
business conditions which, in First
American's or FAEC's reasonable discretion,
results in FAEC being unable to continue to conduct Internal Revenue Code
Section 1031 exchanges as they are being
conducted on the date hereof.
"License" shall
have the meaning set forth in Section 3.12(b).
"Losses" shall
have the meaning set forth in Section 7.2(a).
"MAMC"
shall have the meaning
set forth in the
introductory paragraph
of
this Agreement.
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"Material
Adverse Effect" shall mean, (a) with respect to a Person, a
material adverse effect on (i) the validity
or enforceability of
this Agreement
or any Transaction Document against such
Person, (ii) the ability of such Person
to perform its obligations under this Agreement or any other Transaction
Document to which such Person is a party,
or (iii) on the business, properties,
assets, liabilities, condition (financial or
otherwise), results of
operations
or prospects of such Person,
and (b) with
respect to the Matrix
Business, a
material adverse effect on the business, properties, assets, liabilities,
prospects, condition (financial or otherwise), results of operations or
prospects of the Matrix Business.
"Material
Contract" shall have the meaning set forth in Section 3.7(b).
"Matrix" shall
have the meaning set forth in the introductory paragraph of
this Agreement.
"Matrix
Business" shall mean the asset disposition and default
management
services provided by Matrix and its
Affiliates,
including MAMC (but
excluding
Realtybid (as defined below)).
"Matrix
Interests" shall have the meaning set forth in Section 2.2(a).
"Matrix
Plan" and "Matrix Plans" shall have the meaning set forth in
Section 3.15.
"Membership
Interest" shall mean, with respect to each of First
American
and Matrix, its respective interest in Newco as determined in
accordance with
the Operating Agreement.
"Newco"
shall mean the
Delaware limited liability company to be formed
pursuant to Article II.
"Newco Business"
shall mean the business owned and operated by Newco
after the Closing, which shall include the
Matrix Business.
"Note" shall
have the meaning set forth in Section 2.2(b).
"Operating
Agreement"
shall mean the
Operating Agreement of
Newco by and
between First American and Matrix
substantially in the form of Exhibit A.
"Operative
Agreements"
shall mean this Agreement and the Transaction
Documents.
"Ordinary
Course" shall mean,
with respect to the Matrix Business (or part
thereof), the ordinary course of commercial
operations
customarily engaged
in
for the operation of the Matrix Business
(or such part thereof)
consistent with
past practices (including with respect to
quantity and frequency).
"Parent"
shall
mean The First American Corporation, a California
corporation.
"Party" and "Parties" shall
have the meaning set forth in the first WHEREAS
clause of this Agreement.
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"Permitted
Encumbrances" shall have the meaning set forth in Section 3.4.
"Person"
shall mean and include any individual, partnership, limited
partnership, association, joint stock company, joint venture, corporation,
trust, limited liability company, unincorporated organization, government,
agency or political subdivision
thereof.
"Pre-Closing
Period" shall have the meaning set forth in Section 3.10(b).
"Realtybid"
shall have the meaning set forth in Section 2.2(a).
"Returns" shall
have the meaning set forth in Section 3.10(a).
"Securities Act"
shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated
thereunder.
"SEC Reports"
shall have the meaning set forth in Section 3.20.
"Solvency
Event" shall mean (i) the failure of the Bank at any time to
remain "well capitalized" within the meaning of 12 CFR
565.4, as amended
from
time to time, and (ii) a failure of the
Bank to be in compliance with applicable
material regulatory requirements.
"Subsidiary"
shall mean, with respect to any Person, (a) any partnership of
which such Person is a general partner or
of which such Person's Subsidiary is a
general partner or (b) any other Entity which, at the time as of which any
determination is being made, is Controlled
by such Person.
"Taxes" shall
mean all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including all
Federal, state, county, local, foreign
and other income, franchise, profits, gross receipts, value-added, social
security, capital gains, capital stock, transfer, sales, use, occupation,
property, excise, severance, windfall profits, stamp, license, payroll,
withholding and other taxes, assessments,
charges, duties, fees, levies or other
governmental charges of any kind whatsoever (whether payable directly or by
withholding and whether or not requiring
the filing of a Return), all estimated
taxes, deficiency assessments, additions to tax, penalties and interest and
shall include any liability for such amounts as a result either of being a
member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any
person or other entity.
"Transaction
Documents" shall have the meaning set forth in Section 6.2(g).
"Transactional Taxes" shall have
the meaning set forth in Section 2.1(c).
"Voting
Interest" shall mean with respect to any Entity, any equity
interest of such Entity having general
voting power under ordinary circumstances
to participate in the election of the governing body of such Entity
(irrespective of whether at the time any other class or classes of equity
interest of such Entity shall have or might have voting
power by reason of
the
happening of any contingency).
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1.2 Principles
of Construction.
(a) All
references
to Articles, Sections, subsections, Schedules and
Exhibits are to Articles, Sections,
subsections, Schedules and Exhibits in or to
this Agreement unless otherwise specified. The words "hereof," "herein" and
"hereunder" and words of similar import when
used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The terms "include" and "including" are not limiting and mean,
respectively, "include without limitation"
and "including without limitation."
(b) All
accounting terms not specifically defined herein shall be
construed
in accordance with GAAP.
(c) In the
computation of periods
of time from a specified date to a later
specified date, the word "from" means "from
and including," the
words "to" and
"until" each mean "to but excluding" and the word "through" means "to and
including."
(d) The Table of
Contents hereto and the Article and Section headings
herein are for convenience only and shall
not affect the construction hereof.
(e) This Agreement and the Transaction Documents are the result of
negotiations among and have been reviewed by
counsel to the Parties and are the
products of all Parties. Accordingly, they shall not be construed
against any
Party merely because of such Party's
involvement in their preparation.
ARTICLE II
ORGANIZATION OF NEWCO;
CLOSING; SCOPE OF BUSINESS
2.1
Organization; Expenses.
(a) Newco shall
be a limited liability company formed under the laws of the
State of Delaware, (i) having as its
registered name as "Matrix Asset Management
LLC" and as from time to time is set forth
in Newco's Certificate
of Formation
and (ii) having its principal offices located at717 17th Street, Suite 200,
Denver, Colorado 80202, or such location as from time to
time is set forth in
Newco's Certificate of Formation.
(b) All
out-of-pocket
costs of the
establishment
of Newco as a
limited
liability company as contemplated by Section
2.1(a) (including
organizational
changes and amendments to organizational
documents that may be made on or before
the Closing Date) shall be shared
seventy-five
percent (75%) by First
American
and twenty-five percent (25%) by
Matrix.
(c) Except as
otherwise provided in clause (b) above, each Party shall bear
its own (i) costs incurred as a result of the
transfer of any Matrix
Interests
to Newco and the transfer of the First
American Membership
Interest (as defined
below) to First American, including
payments to third parties, if any, to obtain
their consent to such transfer, (ii) professional fees and related costs
(including fees and costs of accountants,
attorneys,
benefits specialists,
tax
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advisors and appraisers) incurred by it in connection with the preparation,
execution and delivery of this Agreement
and the Transaction
Documents and the
transactions contemplated hereby or thereby, (iii) the purchase and sale of
Membership Interests, and (iv) sales, use,
transfer, conveyance,
bulk transfer,
business and occupation, value added or income taxes,
or other taxes,
duties,
excises or governmental charges imposed by any taxing
jurisdiction with respect
to the transfer, assignment or conveyance of the
Matrix Interests or
otherwise
on account of this Agreement or the
transactions
contemplated hereby
including
those arising from its corporate
reorganizations and
intercompany
transactions
in contemplation of such transactions (the foregoing taxes described in
this
clause (iv) being hereinafter referred to
as "Transactional Taxes").
2.2 Capital
Contributions; Closing.
(a) On or prior
to the Closing Date,
Matrix shall, and shall cause each of
its Affiliates (including MAMC) to,
transfer to Newco, (i) free and clear of all
Encumbrances, other than Permitted
Encumbrances and the Assumed Obligations, all
of the Contracts, customer lists, accounts receivable, assets, properties
(including Intellectual Property), rights, services and interests
constituting
the Matrix Business, which Contracts, customer lists, accounts receivable,
assets, properties, rights, services and interests are set
forth in Part 1 of
Schedule 2.2(a) attached hereto, (ii) the liabilities and
obligations of the
Matrix Business set forth in Part 2 of Schedule
2.2(a) attached hereto (the
"Assumed Obligations"), and (iii) all of the issued and
outstanding membership
interests in Realtybid International,
LLC, a Delaware
limited liability company
("Realtybid"), then owned by Matrix and its Affiliates (all such Contracts,
customer lists, accounts receivable, assets, properties, rights, services,
liabilities, membership interests, obligations and interests in (i),
(ii) and
(iii) are hereinafter referred to as the
"Matrix Interests");
provided that the
book value of the assets so contributed to Newco shall exceed the
liabilities
and obligations so assumed by Newco by
$1,000,000 or more. In
consideration of
the foregoing, First American and MAMC shall
cause Newco to credit the Capital
Account of MAMC and issue to MAMC a
Membership Interest in Newco in an aggregate
amount equal to one hundred percent (100%)
of the Membership
Interests. Matrix
and MAMC jointly and severally represent and warrant to First
American that on
the unaudited balance sheet of MAMC for the
eight month period ended August 31,
2004 previously provided by Matrix to First
American, $2,914,678 of the accounts
receivable represents allowances made to customers of MAMC and there is a
corresponding liability equal to $2,914,678
payable to Matrix.
(b) Immediately
following the
transaction set forth in Section 2.2(a), on
the Closing Date, First American shall (i) transfer to MAMC (A)
cash, by wire
transfer in immediately available funds, in
the amount of $10,000,000, and (B) a
promissory note in the principal amount of $5,000,000, payable in twelve (12)
quarterly installments of principal and interest at six and one-half
percent
(6.5%) per annum and otherwise in the form set forth hereto as Exhibit B (the
"Note"), and (ii) pay Matrix the amount
required by Section
5.10(a) hereof in
cash by wire transfer in immediately
available funds. In
consideration for such
transfers, MAMC shall, and Matrix shall cause MAMC to, transfer to First
American, and cause Newco to credit the
Capital Account of
First American and
issue to First American, a Membership Interest in Newco in an aggregate
amount
equal to seventy-five percent (75%) of the Membership Interests (the "First
American Membership Interest"), free and clear of any restrictions, liens,
encumbrances or rights of others (other than those arising under
the Operating
Agreement in the case of any transfer of Membership Interests). For the
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avoidance of doubt, immediately following the transactions contemplated by
Sections 2.2(a) and (b), MAMC shall be the record and beneficial owner of a
Membership Interest in Newco in an
aggregate amount equal to twenty-five percent
(25%), and First American shall be the record and beneficial owner of a
Membership Interest in Newco in an aggregate amount equal to seventy-five
percent (75%) of the Membership
Interests.
(c) The closing
of the transactions
contemplated
herein (the
"Closing")
shall take place at the offices of Matrix at 700 17th Street, Suite 2100,
Denver, Colorado 80202, at 11:00 a.m. local time on
September 10, 2004, or at
such other place or time or on such other
date as the
Parties may agree (the
date of the Closing being referred to as
the "Closing Date").
2.3 Certain
Assets and Liabilities Not Transferred. Except for the Matrix
Interests, none of First American, MAMC and
their respective Affiliates shall be
required to transfer or contribute on the Closing Date any
Contracts,
assets,
properties, rights, services or interests,
and Newco shall not be
required to
assume on the Closing Date any obligations or liabilities, of First American,
Matrix or their respective Affiliates, including without limitation, any
outstanding notes, credit lines or other
debt obligations. For
the avoidance of
doubt, the assets set forth on Part 3 of
Schedule 2.2(a),
and all
liabilities
and obligations associated therewith, shall be excluded from the
definition of
"Matrix Interests" and shall be excluded
from transfer to Newco hereunder.
2.4 Instruments of Transfer and Conveyance. The sale, transfer and
conveyance of the Matrix Interests shall be effected by
delivery on or prior to
the Closing Date by Matrix of such deeds,
transfers,
endorsements,
assurances,
conveyances, releases, discharges,
assignments,
certificates, drafts, checks or
other instruments of transfer and conveyance, duly executed by Matrix, its
Affiliates and/or Newco, as the case may be, as any Party reasonably deems
necessary to vest in Newco all right,
title and interest in and to the Matrix
Interests, free and clear of any Encumbrance of any kind, except Permitted
Encumbrances.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF MATRIX AND MAMC
Matrix and MAMC
hereby jointly and severally represent and warrant to each
of First American and Newco (which shall be an intended beneficiary of such
representations and warranties) as
follows:
3.1
Authorization and Validity of Agreement.
(a) Each has the
corporate power and
authority to execute and deliver each
of the Operative Agreements to which it is a party,
to perform its
obligations
hereunder and thereunder and to consummate
the transactions
contemplated hereby
and thereby. The execution, delivery and performance by each
of Matrix and MAMC
of each of the Operative Agreements to which it is a party
and the consummation
of the transactions contemplated hereby and thereby,
have been duly
authorized
and approved by each of their boards of directors and, if applicable,
stockholder(s), and no other corporate or stockholder action is necessary to
authorize the execution, delivery and performance by each of them of the
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Operative Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by each of them and,
assuming the due
execution of this
Agreement by First American, is a valid and binding obligation
of each of them,
enforceable against each of them in
accordance
with its terms,
except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally
and to general equitable principles.
(b) Each document and instrument (including each of the Transaction
Documents) to be executed by Matrix,
MAMC and/or their
Affiliates,
if any, as
contemplated by this Agreement, when executed and delivered by each of the
foregoing in accordance with the terms hereof and thereof, has been duly
executed and delivered by Matrix, MAMC or
their Affiliates, as applicable, and,
assuming due execution and delivery by the
other parties thereto,
will be valid
and binding upon Matrix, MAMC or their Affiliates, as applicable, and
enforceable against Matrix, MAMC or their Affiliates, as applicable, in
accordance with its terms, except to the extent that its
enforceability may
be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors'
rights generally and to
general equitable principles.
3.2 Existence
and Good Standing; Subsidiaries.
(a) Each is a
corporation
duly organized, validly existing and in good
standing under the laws of the State of Colorado. Each has all requisite
corporate power and authority to own,
lease and operate its
properties and to
carry on its business as now being
conducted. MAMC is duly qualified or licensed
to conduct the Matrix Business,
and is in good
standing in each jurisdiction in
which the character or location of the
property owned, leased
or operated by it
or the nature of the Matrix Business conducted by it makes such
qualification
necessary. MAMC has delivered to First American true, correct and complete
copies of the articles or certificate of incorporation and bylaws of MAMC, in
each case as amended through the Closing Date.
MAMC is not in
violation of any
of the provisions of its articles or
certificate of incorporation or bylaws.
(b) Except as
set forth on Schedule
3.2(b), MAMC has no
Subsidiaries and
does not otherwise own, or have any right to acquire,
directly or
indirectly,
any capital stock of, or other equity,
ownership, proprietary or voting interest
in, any Person. All issued and outstanding capital stock of MAMC is owned,
of
record and beneficially, by Matrix or a wholly-owned
subsidiary of Matrix, free
and clear of any restrictions on transfer (other than
restrictions
under the
Securities Act and state securities laws), Taxes, Encumbrances, options,
warrants, purchase rights, contracts, commitments, equities, claims, and
demands. There are no outstanding
or authorized
options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require
MAMC to sell, transfer, or otherwise
dispose of any capital stock of MAMC or
that could require MAMC to issue, sell,
or otherwise cause to become outstanding
any of its own capital stock. There are
no outstanding stock appreciation, phantom stock, profit participation, or
similar rights with respect to MAMC.
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3.3 Financial
Statements.
Matrix has heretofore
furnished First
American
with (a) the unaudited balance sheet of MAMC as at the
Balance Sheet Date,
together with the related unaudited
statements of income for the six months then
ended (such balance sheet being hereinafter
referred to as the
"Balance Sheet")
and (b) the balance sheets of MAMC as of end of the
latest fiscal year and
end
of each of the two preceding fiscal years,
inclusive, and the related statements
of income for the years then ended,
together with all explanatory notes thereto,
if any (such statements, together with the Balance Sheet, the "Financial
Statements"). Except as set forth on Schedule
3.3, the Financial Statements,
including any footnotes thereto,
(i) have been prepared
in accordance with GAAP
and fairly present, in all material
respects, the
financial condition,
results
of operation and income of MAMC at such dates and
for the period(s)
covered
thereby and (ii) include all of the assets,
liabilities, obligations and results
of operations of the Matrix Business as at such dates and for the
period(s)
covered thereby.
3.4 Title to
Interests.
(a) Except for
the consents set forth on Schedule 3.8, MAMC possesses good
and valid title to all of the properties and assets (real,
personal, tangible
and intangible) comprising the Matrix Interests, free and clear of all
Encumbrances, except for Encumbrances which (a) are for current taxes,
assessments or governmental charges not yet due and payable,
(b) are reflected
on the Balance Sheet, or (c) with respect to the membership interest of
Realtybid included in the Matrix Interests,
arise under the
operating agreement
of Realtybid, as amended. Encumbrances of
the type described in clauses (a), (b)
and (c) are sometimes referred to as "Permitted Encumbrances". The Matrix
Interests constitute all of the assets
necessary to conduct the Matrix Business
in the Ordinary Course. Matrix owns or has the lawful
right to sell,
assign,
transfer, convey and deliver all of the
Matrix Interests to Newco. The transfer
and delivery of the Matrix Interests pursuant hereto shall vest in Newco
good
and valid title to the Matrix
Interests.
(b) At the time
of the transfer of
Membership
Interest contemplated by
Section 2.2(b), MAMC will transfer to First
American such
Membership
Interest
free and clear of any restrictions, liens, encumbrances or rights of others
(other than those arising under the
Operating Agreement)
arising by or
through
Matrix or its Affiliates.
3.5 Leases.
Except for the leases
and subleases set forth on Parts 1 and 3
of Schedule 2.2(a), neither MAMC nor the
Matrix Business is subject to any lease
or sublease relating to real property.
Except as set forth o
Schedule 3.5, each
such lease and sub-lease set forth on Part
1 of Schedule 2.2(a) is in full force
and effect; all rents and additional rents due to date from MAMC on
each such
lease and sublease have been paid; in each case,
MAMC has not received
notice
that it is in material default thereunder; and, to the knowledge of Matrix
and
MAMC, there exists no event, occurrence, circumstance, condition or act
(including the transactions contemplated by this Agreement) which, with the
giving of notice, the lapse of time or the
happening of any further event or
condition, would constitute a material
default by MAMC or any other party under
such lease and sublease.
3.6 Real
Property. Except for the leasehold and subleases set forth on
Parts 1 and 3 of Schedule 2.2(a), MAMC does
not own, directly or indirectly, in
whole or in part, any interest in any real
property.
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<PAGE>
3.7 Material
Contracts.
(a) Schedule
3.7(a) sets forth a
complete list of all
Material Contracts
and all customer contracts related to the
Matrix Business.
(b) Except as set forth in Schedule 3.7(a), in connection with the
ownership or operation of the Matrix
Business, MAMC neither
has nor is bound by
(i) any Contract relating to the employment of any Person, or any bonus,
deferred compensation, pension, profit sharing, stock option, employee stock
purchase, retirement or other employee
benefit plan or arrangement (other than
such benefit plans that are set forth on
Schedule 3.15), (ii) any Contract which
contains restrictions with respect to payment of dividends or any other
distribution, (iii) any Contract relating to
capital expenditures
in excess of
$10,000 individually or $25,000 in the
aggregate, (iv) any
loan or advance to,
or investment in, any Person or Contract relating to the making of any such
loan, advance or investment, (v) any Contract involving indebtedness of MAMC,
(vi) any guarantee or other contingent
liability in respect
of any indebtedness
or obligation of any Person, (vii) any management service, consulting or any
other similar type Contract which is not cancelable
without penalty within 30
days, (viii) any Contract limiting the
ability of the Matrix Business to engage
in any line of business or to compete
with any Person,
(ix) any Contract not
entered into in the Ordinary Course which is not cancelable without penalty
within 30 days, (x) any Contract
concerning
any joint venture,
partnership or
business alliance, (xi) any Contract for
title services or any similar agreement
with any title insurance company, (xii) any Contract that apportions or
allocates liability between, or otherwise modifies the
respective
liabilities
of, the Matrix Business and any of its
current or former
customers with respect
to products or services purchased by such customer from the Matrix Business,
(xiii) any Contract which by its operation
or termination could
have a Material
Adverse Effect on the Matrix Business, (xiv) any Contract that amends,
supplements or restates any of the
foregoing, and (xv)
any other agreement that
is material to the Matrix
Business (each of the Contracts in clauses (i) to
(xiv) above, a "Material Contract").
(c) Each
contract or agreement
set forth (or required
to be set forth) on
Schedule 3.7(a) is in full force and effect
and there exists no default or event
of default or event, occurrence, condition or act (including the transfer of
Matrix Interests hereunder) arising out of any action or
inaction by Matrix or
any of its Affiliates, or to the knowledge
of Matrix and MAMC, any other Person,
which, with the giving of notice, the lapse of time or the
happening of any
other event or condition, would become a
default or event of default thereunder.
MAMC has not violated any of the terms or
conditions
of any Contract set
forth
(or required to be set forth) on Schedule
3.7(a) in any material
respect, and,
to the knowledge of Matrix and MAMC, all of
the covenants to be performed by any
other party thereto have been fully
performed.
(d) Except as
set forth on Part 1 of Schedule 3.7(d), the Matrix Business
is not subject to any Contract with any
customer that accounted for more than 1%
of the total sales of the Matrix
Business for the twelve (12) calendar month
period ended immediately prior to the date
of this Agreement. Set
forth on Part
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<PAGE>
2 of Schedule 3.7(d) is a true and complete list
of all suppliers to the Matrix
Business to whom the Matrix Business paid more than fifty thousand dollars
($50,000) for the twelve (12) calendar
month period ended
immediately prior
to
the date of this Agreement. The relationships of the Matrix
Business with each
such customer and supplier are good
commercial working relationships, and except
as set forth on Schedule 3.7(d) no such or customer or
supplier has canceled or
otherwise terminated, or threatened to cancel or otherwise terminate, its
relationship with the Matrix Business. None of Matrix, MAMC or any of their
Affiliates has received any notice that any
such customer or supplier may cancel
or otherwise materially and adversely modify
its relationship
with the Matrix
Business, or limit its services,
supplies or materials
to the Matrix Business,
or its usage or purchase of the
services and products of the Matrix
Business
either as a result of the transactions
contemplated hereby or otherwise.
3.8 Consents
and Approvals; No Violations. Assuming the making and/or
obtaining to the reasonable satisfaction of the Parties of such
applications,
registrations, declarations, filings, authorizations, orders, consents and
approvals as are set forth in Schedule
3.8, the execution and delivery by each
of Matrix and MAMC of each of the
Operative Agreements to which it is a
party,
and the consummation of the transactions
contemplated
hereby and thereby,
(a)
will not violate the provisions of the articles of
incorporation
or bylaws or
similar organizational documents of Matrix and MAMC,
(b) will not violate
any
statute, rule, regulation, order or decree of any
public body or authority
applicable to Matrix or MAMC, or to which the Matrix Business or the Matrix
Interests may be subject, (c) will not require any filing with, or permit,
consent or approval of, or the giving of any
notice to, any
governmental
or
regulatory body, agency or authority, (d) will not require the consent
of the
shareholders of Matrix, and (e) will not result in a
violation or breach by
either Matrix or MAMC of, conflict with,
constitute (with or
without due notice
or lapse of time or both) a default by
either Matrix or MAMC under, or result in
the creation of any Encumbrance
upon any of the Matrix
Interests under, any
of
the terms, conditions or provisions of any
Contract or any other
instrument or
obligation to which any of Matrix,
MAMC or their
Affiliates is a party,
or by
which the Matrix Interests may be bound,
excluding from the
foregoing clauses
(b), (c) and (e) filings, notices, permits, consents and approvals
the absence
of which, and violations, breaches, defaults, conflicts and liens which
would
not, individually or in the aggregate, have a Material Adverse Effect on the
Matrix Business.
3.9 Litigation. Except as set forth in Schedule
3.9, there is no
action,
suit or proceeding at law or in equity by
any Person, or any
arbitration or any
administrative or other proceeding by or before or, to the
knowledge of Matrix
and MAMC, any investigation by, any governmental body, instrumentality or
agency, pending or to the knowledge of Matrix and MAMC threatened, against
Matrix or MAMC or any of their Affiliates
which, if adversely determined, would,
individually or in the aggregate,
have a Material
Adverse Effect on the
Matrix
Business. Except as set forth in Schedule
3.9, neither Matrix nor any of its
Affiliates is subject to any judgment,
order or decree entered in any lawsuit or
proceeding which may, individually or in
the aggregate, have a
Material Adverse
Effect on the Matrix Business. There are no such suits, actions, claims,
proceedings or investigations pending or, to the knowledge of
Matrix and MAMC,
threatened, seeking to prevent or challenging any of the transactions
contemplated by the Operative
Agreements.
3.10 Taxes.
(a) Tax Returns.
Matrix has timely
filed or caused to be timely filed with
the appropriate taxing authorities all
material returns,
statements, forms
and
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<PAGE>
reports (including elections, declarations, disclosures, schedules, estimates
and information tax returns) for Taxes
("Returns") that are required to be filed
by, or with respect to, the Matrix Business
and the Matrix Interests on or prior
to the Closing Date. The Returns have accurately reflected all material
liability for Taxes of the Matrix
Business and the Matrix Interests for the
periods covered thereby.
(b) Payment of
Taxes. All Taxes and
Tax liabilities due by or with respect
to the income, assets or operations of Matrix and
its Affiliates (to the extent
attributable to the Matrix Business) for all taxable years or other taxable
periods that end on or before the Closing
Date and, with respect
to any taxable
year or other taxable period beginning on
or before and ending after the Closing
Date, the portion of such taxable year
or period ending on
and including
the
Closing Date ("Pre-Closing Period") have
been timely paid or will be timely paid
in full prior to the Closing Date or
accrued and adequately
disclosed and fully
provided for in accordance with GAAP on the Balance Sheet with respect to
taxable years or periods (or portions
thereof) ending on or before the
Balance
Sheet Date, and, with respect to taxable
years or periods (or portions thereof)
ending after the Balance Sheet Date, on the books and records of MAMC in
accordance with GAAP and disclosed in
writing to First American.
(c) Other Tax
Matters.
(i) None of
Matrix or any of its
Affiliates has (A) been the subject of an
audit or other examination of Taxes by the
tax authorities of any nation, state
or locality with respect to the Matrix
Business or the Matrix Interests, nor is
such an audit contemplated or pending, and (B) received any notices from any
taxing authority relating to any issue
which could affect any Tax liability with
respect to the Matrix Business or the
Matrix Interests.
(ii) As of the
Closing Date, none of
Matrix nor any of its
Affiliates (A)
has entered into an agreement or waiver or been requested to enter into an
agreement or waiver extending any statute
of limitations relating to the payment
or collection of Taxes with respect to the Matrix Business or the Matrix
Interests, (B) is presently contesting any Tax liability with respect to the
Matrix Business or the Matrix Interests before any court, tribunal or agency,
(C) has granted a power of attorney to any
Person relating to the Tax matters of
the Matrix Business or the Matrix Interests, or (D) has applied for and/or
received a ruling or determination
from a taxing
authority regarding a
past or
prospective transaction of the Matrix
Business or the Matrix Interests.
(iii) All Taxes
relating to the Matrix
Business or the Matrix Interests
which Matrix or any of its Affiliates is
(or was) required by law to withhold or
collect have been duly withheld or
collected, and have
been timely paid over to
the proper authorities to the extent due
and payable.
(iv) None of the
Matrix Interests consists of any United States real
property interests within the meaning of Section 897
of the Code and Matrix is
not a United States real property
holding company within
the meaning of Section
897(c)(2) of the Code.
(v) As of the Closing Date, there are no tax sharing, allocation,
indemnification or similar agreements (other than this Agreement) in effect
between Matrix, or any of its Affiliates or any
predecessor thereof,
and any
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<PAGE>
other Person (including Matrix and any
Affiliate or predecessors thereof) under
which the Matrix Business, the Matrix Interests, First American or Newco could
be liable for any Taxes or other claims of
any Person.
(vi) Neither the
Matrix Business nor
the Matrix Interests
are subject to
any agreement that would require it to make
any payment that would constitute an
"excess parachute payment" for purposes of
Sections 280G and 4999 of the Code.
(vii) To the
knowledge of Matrix
and MAMC, no claim has
ever been made by
any taxing authority in a jurisdiction where Matrix or MAMC does not file
Returns that the Matrix Business or the Matrix
Interests are or may
be subject
to taxation by that jurisdiction.
(viii)
Immediately
prior
to, and immediately subsequent to, the
consummation of the transfer of the Matrix
Interests pursuant to
the provisions
of this Agreement, MAMC will be a solvent
corporation
with the ability to
pay
its debts as they become due. For purposes
of this paragraph,
"solvent" shall
mean that the present fair saleable value of MAMC's assets is greater
than the
amount that will be required to pay its
liability on its existing debts as they
become absolute and matured.
3.11 No Changes
Since Balance Sheet Date. Since the Balance Sheet Date,
except as contemplated or expressly required or permitted by this
Agreement or
as disclosed in Part 1 of Schedule 3.11,
there has not been a
Material Adverse
Effect on the Matrix Business. Without
limiting the foregoing, since the Balance
Sheet Date, except as disclosed in Part 2 of Schedule
3.11, MAMC has not (a)
incurred any liability or obligation of any
nature (whether
accrued, absolute,
contingent or otherwise), except in the Ordinary
Course, (b) permitted any of
its assets to be subjected to any Encumbrance (other than Permitted
Encumbrances), (c) sold, leased, transferred or otherwise disposed of any
assets, except in the Ordinary Course, (d) made any capital expenditure or
commitment therefor, (e) made any bonus or profit sharing distribution or
payment of any kind, or increased the
compensation of any officer or granted any
general salary or benefits increase to its employees other
than in the Ordinary
Course (f) increased its indebtedness, (g) written off as uncollectible any
notes or accounts receivable, except write-offs in the Ordinary
Course charged
to applicable reserves, none of which individually or in the aggregate is
material to MAMC, (h) canceled or waived
any claims or rights of material value,
(i) made any change in any method of accounting or auditing practice, (j)
entered into, become subject to, accelerated, terminated, made material
modifications to, or cancelled any material agreement, contract, lease, or
license to which MAMC is a party or by
which the Matrix
Business is bound (k)
otherwise conducted its business or entered into any material transaction,
except in the Ordinary Course or (l) agreed, whether or not in writing,
to do
any of the foregoing.
3.12 Compliance
with Laws; Permits.
(a) MAMC is in
compliance with all applicable laws, regulations, orders,
judgments and decrees, including if applicable to the
Matrix Business the
Fair
Credit Reporting Act, as amended,
and the Real Estate
Settlement and Procedures
Act, as amended, and the rules and
regulations
promulgated
thereunder, except
where the failure to so comply would not,
individually or in the aggregate, have
a Material Adverse Effect on the Matrix
Business. None of
Matrix nor any of its
Affiliates has received any written
notice that any
violation of the foregoing
is being or may be alleged.
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<PAGE>
(b) MAMC
possesses all
franchises, licenses,
certificates
of authority,
permits or other authorizations (each, a "License") necessary for the Matrix
Business, except where the failure to possess such a License would not,
individually or in the aggregate,
have a Material
Adverse Effect on the
Matrix
Business. All such Licenses are in full force and effect and MAMC has not
received any notice of any event, inquiry, investigation or proceeding
threatening the validity of such Licenses, except where the failure of such
Licenses to be in full force and effect or
such event, inquiry, investigation or
proceeding would not, individually or in
the aggregate, have a
Material Adverse
Effect on the Matrix Business. None of Matrix nor any of its
Affiliates
has
received notice of any proceeding for suspension or revocation of,
or similar
proceedings with respect to, any such
License and to the knowledge of Matrix and
MAMC, no fact or circumstance exists that could form the basis for any
such
proceedings. No jurisdiction has demanded or requested that MAMC qualify or
become licensed as a foreign
corporation.
3.13
Intellectual Properties.
(a) Except as
disclosed in Schedule 3.13(a), (i) the operation of the
Matrix Business as currently conducted requires no rights under patents,
registered or unregistered trademarks or registered or unregistered service
marks, other than rights under
patents, trademarks and service marks owned
by
MAMC, and rights granted for the benefit of MAMC
pursuant to valid license
agreements that are in full force and effect, which ownership rights and
licenses constitute a part of the Matrix Interests, and (ii) within the
three-year period immediately preceding the date of this
Agreement, MAMC
made
use of no rights under any patents,
trademarks
or service
marks in the
Matrix
Business other than those owned by MAMC (or
its
predecessors-in-interest), and
rights granted for the benefit of MAMC
under valid license agreements.
(b) Except as
disclosed on Schedule 3.13(b), (i) the operation of the
Matrix Business as currently conducted requires no rights under copyrights,
other than rights under copyrights owned by MAMC, and rights granted for the
benefit of MAMC pursuant to valid license
agreements that are in
full force and
effect, which ownership rights and licenses constitute a part of the
Matrix
Interests, and (ii) within the three-year
period immediately preceding the date
of this Agreement, MAMC made no use of rights under
any copyright in the Matrix
Business, other than those owned by MAMC
(or its predecessors-in-interest), and
rights granted for the benefit of MAMC
under valid license agreements.
(c) Except as
disclosed on Schedule 3.13(c), (i) the operation, development
and maintenance of the Matrix Business as
currently conducted requires no rights
in and to Internet domain names and URLs,
corporate and business
names, trade
names, brand names and computer
software programs other than rights in and
to
Internet domain names and URLs, corporate
and business names, trade names, brand
names and computer software programs owned by MAMC, and rights
granted for the
benefit of MAMC pursuant to valid license
agreements that are in
full force and
effect, which ownership rights and licenses constitute a part of the
Matrix
Interests, and (ii) within the three-year
period immediately preceding the date
of this Agreement, MAMC made use of no rights in and
to Internet domain
names
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<PAGE>
and URLs, corporate and business names,
trade names,
brand names and
computer
software programs in the Matrix Business
other than those owned by MAMC (or its
predecessors-in-interest), and rights granted for the benefit of MAMC under
valid license agreements.
(d) The
operation, development
and maintenance of the Matrix Business
as
currently conducted requires no rights under trade secrets or proprietary
information (including those in computer software and databases and to those
disclosed in patent applications) other than rights under trade secrets and
proprietary information owned by MAMC, and rights granted for the benefit of
MAMC pursuant to valid license agreements that are in full force and
effect,
which ownership rights and licenses
constitute a part of
the Matrix
Interests.
Within the three-year period immediately preceding the date of this
Agreement,
MAMC made use of no rights under any trade
secret or proprietary
information in
the Matrix Business other than those owned by MAMC (or its
predecessors-in-interest), and rights granted for the benefit of MAMC under
valid license agreements.
(e) Except as
set forth on Schedule 3.13(e), no claim adverse to MAMC's or
the Matrix Business' interests in the
Intellectual Property used or held for use
in the Matrix Business or MAMC's license
agreements
with respect
thereto has
been made. To the knowledge of Matrix and MAMC, no such claim has been
threatened or asserted, no reasonable basis exists for any such claim,
and no
Person has infringed or otherwise violated
MAMC's or the Matrix Business' rights
in any of such Intellectu
