PROPOSAL 1THE APPROVAL OF THE MERGER PROPOSAL
The following discussion of the merger does not purport to be complete and is qualified in its entirety by reference to
the merger agreement, which is attached to this proxy statement as
Annex A
and incorporated by reference into this proxy statement. You should read the entire
merger agreement carefully as it is the legal document that governs the merger.
We are asking you to consider and vote upon a proposal, which we refer to as the "
Merger
Proposal
," to approve the merger of POMS Corp, or "
Merger Sub
," a wholly-owned subsidiary of Ocwen Financial Corporation, or
"
Ocwen
," with and into PHH with PHH surviving the merger and becoming a wholly-owned subsidiary of Ocwen in an all cash transaction valued at
approximately $360 million, or $11.00 per share on a fully-diluted basis, which we refer to as the "
merger
," on the terms and conditions of that
certain Agreement and Plan of Merger dated February 27, 2018, which we refer to at the "
merger agreement
," by and among Ocwen, Merger Sub and
PHH. A copy of the merger agreement is attached as
Annex A
to this proxy statement.
The affirmative vote of the holders of a majority of the outstanding shares of our common stock is required for the approval of the Merger
Proposal. This means that, of the shares of our common stock outstanding and entitled to vote on the Merger Proposal (regardless of whether the holders of such shares are present in person or by proxy
at the special meeting), a majority must be voted in favor of the Merger Proposal in order for the merger on the terms and conditions of the merger agreement to be approved. As a result, abstentions
and broker non-votes will have the effect of a vote
against
the Merger Proposal, although they will be considered present for the purposes of
determining the presence of a quorum.
The
members of our board of directors, who beneficially owned an aggregate of less than 1.0% of the outstanding shares of common stock as of April 3, 2018, the record date for the
special meeting, have indicated that they will vote in favor of the Merger Proposal.
PHH Corporation was incorporated in 1953 as a Maryland corporation. For periods between April 30, 1997 and February 1, 2005, we
were a wholly owned subsidiary of Cendant Corporation (now known as Avis Budget Group, Inc.) and its predecessors and provided mortgage banking services, facilitated employee relocations and
provided vehicle fleet management and fuel card services. On February 1, 2005, we began operating as an independent, publicly traded company pursuant to our spin-off from Cendant. On
July 1, 2014, we sold our Fleet Management Services business and began operating as a stand-alone mortgage business.
Our
mortgage business has provided outsourced mortgage banking services to a variety of clients, including financial institutions and real estate brokers throughout the U.S. and focused
on originating, selling, servicing and subservicing residential mortgage loans through our wholly-owned subsidiary, PHH Mortgage Corporation and its subsidiaries, or collectively,
"
PHH Mortgage
". In March 2016, we announced that management and our board of directors were undertaking a comprehensive review of all strategic options
for our company.
As
a result of the strategic review process, in November 2016, we announced our intentions to exit our Private Label Services origination business, or "
PLS
business
". We are substantially complete with the wind-down of the PLS business, subject to certain transition support requirements. During 2017, we
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completed
the delivery of $661 million of Mortgage servicing rights, or "
MSRs
," and advances under our sale agreements with New Residential
Mortgage, LLC, or "
New Residential
," and Lakeview Loan Servicing LLC, or "
Lakeview
," which
are collectively referred to as the "
MSR Sale
," and pursuant to ordinary course sales to other third parties. As part of these sales, we increased our
subservicing and portfolio retention units through agreements with New Residential. Between August 2017 and December 2017, we completed the sale of certain assets of PHH Home Loans, LLC, or
"
PHH Home Loans
," to Guaranteed Rate Affinity, LLC, or "
GRA
," a new joint venture established by
Guaranteed Rate, Inc. and Realogy Holdings Corp., or "
Realogy
". We purchased Realogy's membership interests at book value on March 19,
2018. As of March 31, 2018, we have substantially completed the liquidation of the residual assets of PHH Home Loans and the results of our Real Estate channel will be presented as discontinued
operations for our quarter ended March 31, 2018. These strategic actions to date allowed us to progress towards achieving a new business model of operating as a smaller, less capital-intensive
business focused on subservicing and portfolio retention services.
For
more information about us, please visit our website at www.phh.com. Our website address is provided as an inactive textual reference only. The information provided on our website is
not part of this proxy statement, and therefore is not incorporated by reference. Our common stock is publicly traded on the NYSE under the symbol "PHH." Our executive offices are located at 3000
Leadenhall Road, Mt. Laurel, New Jersey 08054 and our telephone number is (856) 917-1744.
Ocwen Financial Corporation is a Florida corporation organized in February 1988 and is a financial services holding company which, through its
subsidiaries, services and originates loans. Ocwen is headquartered in West Palm Beach, Florida with offices located throughout the United States (U.S.) and in the United States Virgin Islands (USVI)
and with operations in India and the Philippines. With its predecessors, Ocwen has been servicing residential mortgage loans since 1988. Ocwen has been originating forward mortgage loans since 2012
and reverse mortgage loans since 2013. In 2015, Ocwen began originating short-term loans to independent used car dealers but exited that business in early 2018 to focus on its core businesses of
servicing and lending.
Additional
information about Ocwen is available on its website at website http://www.ocwen.com. The website address is provided as an inactive textual reference only. The information
contained on this website is not incorporated into, and does not form a part of, this proxy statement. The common stock of Ocwen is traded under the symbol "OCN" on the New York Stock Exchange
(NYSE). Ocwen's executive offices are located at 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409, and its telephone number is (561) 682-8000.
POMS Corp, a Maryland corporation is currently a wholly-owned subsidiary of Ocwen that was formed exclusively for the purpose of executing the
merger agreement and effecting the transactions contemplated thereby, including the merger. Merger Sub has not carried on any activities to date other than those incident to its formation and the
negotiation and execution of the merger agreement and the completion of the transactions contemplated by the merger agreement. Merger Sub's executive offices are located at 1661 Worthington Road,
Suite 100, West Palm Beach, Florida 33409, and its telephone number is (561) 682-8000.
As part of their ongoing evaluation of the Company's business, our board of directors and senior management from time to time consider potential
strategic alternatives to the continued pursuit of the Company's business plan as an independent company.
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Following
the collapse of the subprime lending market and the decline in home values in 2007 and 2008, and coupled with the related global recession, disruption in the capital and
secondary mortgage markets, reduced liquidity and investor demand for mortgage loans and mortgage-backed securities, and severe financial challenges of the government sponsored mortgage finance
entities, the U.S. federal government became increasingly involved in the mortgage and financial services industries. In the years that followed, the federal government implemented and imposed
numerous regulations, licensing requirements and increased governmental oversight. This wave of regulation included the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in 2010, under
which the newly created Consumer Financial Protection Bureau (which we refer to as the "
CFPB
") was charged with, among other things, administering new
regulations for the mortgage industry. State governments also implemented additional regulations, licensing requirements and governmental oversight programs, and refined their interpretation and
application of existing regulations and their enforcement practices. These changes in the aggregate led to a significant increase in the cost and complexity of originating and servicing residential
mortgages across the industry. As the economy recovered from the recession, record-low interest rates and several government led incentives boosted the mortgage industry during the refinancing wave
from 2010 through 2012. Beginning in 2013 and into 2015, the Company witnessed housing price rebounds in parts of the U.S. and increases in interest rates on longer-term government securities and in
yield requirements for mortgage loans and mortgage-backed securities. In the ensuing years following the refinancing boom, mortgage origination volumes would decrease significantly.
In
light of these market conditions and in order to maximize stockholder value, our board of directors and senior management, with the assistance of the Company's financial advisors,
conducted a strategic review process in the first half of 2014 in which more than 50 potentially interested parties (including Ocwen) were contacted. As a result of this process, the Company sold its
fleet business to Element Financial Corporation in July 2014 for approximately $1.4 billion. The Company did not receive any actionable proposals to acquire either the Company in its entirety
or the mortgage business through this process.
Through
the second half of 2014 and into 2016, the Company returned $300 million to stockholders, reduced its unsecured debt by $680 million and pursued opportunities to
improve the profitability of the mortgage business. However, during this time, the Company's operating environment became increasingly challenging due to the significantly enhanced regulation and
oversight unique to the PLS business model. While the Company is not a bank, the PLS business subjects the Company to both direct and indirect banking supervision, and each PLS client requires a
unique regulatory compliance model. The Company was confronting limited prospects for moderation in client and regulatory oversight, increased client demand for customization, and a shrinking market
as clients in-sourced originations to gain greater control and to satisfy their own regulatory and oversight requirements.
In
light of these challenges, on March 9, 2016, the Company publicly announced that our board of directors was undertaking a comprehensive review of all strategic options. As part
of this process, in accordance with the directives of our board of directors, the Company's financial advisors contacted 57 parties, comprised of 34 industry participants, 17 financial sponsors
and six other potential buyers. 38 of these parties (including Ocwen) executed confidentiality agreements and received confidential information of the Company. The confidentiality agreements contained
customary standstill provisions that would fall away in whole or in part upon the Company's announcement of its entry into a change of control transaction or a transaction for the sale of all or
substantially all of its assets, and in any event the standstill provisions contained an exception that allowed the bidders to make a confidential proposal to our board of directors at any time (or,
in a few cases, to make confidential requests to our board of directors to amend or waive any provision in the confidentiality agreement). While the Company received four preliminary indications of
interest to acquire the whole company, all of those proposals were abandoned by the bidders before any advanced discussions were held.
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The
Company decided during the course of its strategic review process to exit its correspondent lending business and the PLS business, and outsource certain mortgage processing,
underwriting and closing services for the PLS Business to Lenderlive Network, LLC (which we refer to as "
Lenderlive
"). Further, following
extensive negotiations with multiple parties through the second half of 2016, the Company entered into definitive agreements to sell its portfolio of MSRs to Lakeview and New Residential in two
separate transactions. In connection with the sale of MSRs to New Residential, New Residential agreed to retain the Company as a subservicer for at least three years following the completion of the
sale, subject to certain early termination rights. In February 2017, the Company also agreed to sell certain assets and liabilities of PHH Home Loans, its joint venture with Realogy, to GRA, and,
after the consummation of the asset sale, liquidate the residual assets of PHH Home Loans and acquire Realogy's membership interest in PHH Home Loans (we refer to these transactions collectively as
the "
Home Loans Transactions
").
During
the course of the strategic review process, our board of directors and the Company's management, with the assistance of the Company's legal and financial advisors, also spent a
significant amount of time evaluating the possibility of a sale of the assets of the Company followed by a dissolution of the Company, which we refer to as the "Liquidation Scenario," the potential
risks and
benefits to the Company's stockholders in that scenario, and the comparison of the Liquidation Scenario to the continuation of the Company as an independent company with a capital-light business
comprised of subservicing and the related portfolio retention businesses, which we refer to as "
PHH 2.0
".
While
Ocwen was one of the parties contacted during the 2016 strategic review process, Ocwen did not submit a proposal during the process. However, in December 2016, in accordance with
the directives of our board of directors to continue to explore strategic options for the Company, the Company's financial advisor, Credit Suisse Securities (USA) LLC (which we refer to as
"
Credit Suisse
"), met on behalf of the Company with Ocwen to discuss a potential strategic transaction with the Company. Thereafter, members of the
senior management of Ocwen and PHH had a call in early December 2016 regarding a potential strategic transaction and, on January 11, 2017, the senior managements of Ocwen and PHH met,
together with Ocwen's and PHH's respective financial advisors, to discuss their respective companies and the potential for a strategic transaction.
On
January 20, 2017, our board of directors met, together with members of management and representatives of Credit Suisse, Latham & Watkins LLP, counsel to our board
of directors (which we refer to as "
Latham
"), and Jones Day, outside legal counsel to the Company. Following extensive discussions, our board of
directors decided that, while there were many potentially favorable aspects of a transaction with Ocwen that merited further consideration, including the potential for scale and synergies, there were
also a number of factors that would complicate any transaction, including regulatory considerations. In addition to these issues, our board of directors took into account that the Company was then in
final negotiations with GRA regarding the Home Loans Transactions and with LenderLive regarding the outsourcing agreement for the PLS Business, and was also in the process of executing the sale of its
MSR portfolio. Accordingly, our board of directors decided that pursuing a strategic transaction with Ocwen at the time was not feasible and that the Company should focus in the near term on
completing the pending strategic actions and revisit a potential transaction with Ocwen in the coming months.
On
February 15, 2017, the Company announced its intent to transition to PHH 2.0. PHH 2.0 was designed to allow the Company to continue as a going concern and create incremental
value through scaled-down business operations, while also maintaining strategic flexibility, maximizing near-term capital distributions, and preserving the value of its tax assets. The Company decided
to pursue PHH 2.0 instead of the Liquidation Scenario because of the uncertainty regarding the execution and restructuring costs, contingent liabilities and potentially prolonged timeframe for
capital distributions to stockholders in the Liquidation Scenario. However, our board of directors recognized at the time that
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the
PHH 2.0 business model also entailed certain risks, including execution risk (particularly the dependence on subservicing unit growth through business development efforts), competitive risk, legal
and regulatory risks, and client concentration riskafter giving effect to the sale of MSRs
to New Residential, New Residential and Pingora Loan Servicing, LLC would represent approximately 64% and 15%, respectively, of the Company's subservicing portfolio (by units). In connection
with the announcement of PHH 2.0, the Company also announced its intention to return excess cash to its stockholders after the consummation of the asset sale transactions resulting from the strategic
review process.
In
the months following the announcement in February 2017 of the Company's decision to pursue the PHH 2.0 business model, the Company received substantial negative feedback from certain
of its stockholders regarding the decision. There was skepticism among such stockholders about the profitability and long-term viability of the PHH 2.0 business model and the time and investment that
may be required for PHH 2.0 to be successful. Some stockholders questioned whether the potential proceeds from a dissolution of the Company would be more than PHH 2.0's projected return. Certain
stockholders also urged the Company to accelerate cost-cutting measures and evaluate its remaining capital structure to maximize the near-term return of capital to stockholders and minimize the amount
of investment in PHH 2.0 in the near-term.
As
it began the transition to PHH 2.0, the Company began implementing a series of measures to restructure the Company's remaining businesses and shared services platform in an effort to
substantially reduce overhead costs. In addition, our board of directors instructed management to prepare a long-range forecast of the Company under the PHH 2.0 business model, and a refreshed
analysis of the potential proceeds if the Company were to pursue the Liquidation Scenario.
During
this period, the senior management teams of the Company and Ocwen held discussions from time to time regarding their respective companies' business, regulatory positions and the
possibility of a potential strategic transaction. In early April 2017, Ocwen submitted a preliminary due diligence request to the Company and the Company provided the requested materials. Following
its review of the due diligence materials, on April 19, 2017, Ocwen submitted a non-binding indication of interest to acquire the Company for $685 million in the aggregate, or $12.78 per
share. On April 20, 2017, the Company's management, with the assistance of Credit Suisse, provided certain feedback to Ocwen on its indication of interest. On April 22, 2017, Ocwen
submitted a revised non-binding indication of interest increasing its proposed purchase price to $754 million in the aggregate, or $14.06 per share. The Company's senior management discussed
Ocwen's proposal with members of our board of directors, and the directors were generally of the view that, given the regulatory matters facing each of the Company and Ocwen, including the actions
filed by the CFPB and state mortgage and banking regulatory agencies against certain subsidiaries of Ocwen on April 20, 2017 and shortly thereafter, it was not feasible to pursue a strategic
transaction with Ocwen in the near term since the regulatory and execution risks relating to any such transaction would be too significant. Accordingly, the directors instructed management to focus on
pending strategic actions and revisit the possibility for a strategic transaction with Ocwen later in the year.
Around
the same time, an investor in mortgage-related assets, which we refer to as "
Company A
", expressed an interest in a strategic
transaction with the Company. While Company A's interest in such a transaction soon declined, the two companies remained in touch and held general discussions periodically.
At
a special meeting of stockholders held on May 31, 2017, the Company's stockholders approved the sale of MSRs to New Residential and the Home Loans Transactions.
On
June 1, 2017, Company A expressed an interest in resuming discussions regarding a potential strategic transaction and submitted a due diligence request list to the Company.
Around the same time, the Company also had preliminary discussions with two other participants in the subservicing industry,
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which
we refer to as "
Company B
" and "
Company C
," regarding a potential transaction involving the
Company's subservicing platform.
In
its continuing efforts to maximize stockholder value, at the beginning of June 2017, our board of directors instructed management, with the assistance of Credit Suisse, to engage with
all parties that had expressed an interest in a potential transaction since the Company's announcement of PHH 2.0 in February 2017, including Ocwen. In accordance with our board of directors'
instructions, Company A was given access to the Company's online data room by mid-June. On June 22 and June 23, 2017, representatives of the Company held a series of due diligence
sessions with representatives of Company A, covering a wide range of topics, including operations, legal proceedings, compliance matters and employee matters. On June 23, 2017, Ocwen
received access to the online data room. The senior management of the Company also had discussions with the senior management of each of Company B and Company C regarding the framework for a potential
transaction. Ocwen, Company A and Company B were all under confidentiality agreements that were entered into in connection with the 2016 strategic review process. Company C did not participate in the
2016 strategic review process and entered into a confidentiality agreement with a standstill provision that allowed it to make a confidential proposal to our board of directors at any time.
In
the meantime, our board of directors instructed Credit Suisse to reassess the universe of potential strategic partners and identify a list of counterparties that might be interested
in a potential strategic transaction with the Company given the current composition of the Company's business after giving effect to the asset sale transactions and the Company's exit from various
businesses.
Our
board of directors met on June 28, 2017, together with management, Credit Suisse and Latham. During this meeting, Credit Suisse discussed potential transaction counterparties.
Credit Suisse noted that, based on the feedback (or lack thereof) from counterparties following the Company's announcement of PHH 2.0, it believed most of the counterparties that had expressed
interest in the Company's subservicing platform during the 2016 strategic review process were unlikely to have a serious interest in pursuing a strategic transaction with the Company at this time. Our
board of directors and the Company's management and advisors discussed the fact that while a few of the
counterparties, including Company B, might be interested in acquiring the Company's subservicing platform, such a transaction would likely be followed by a liquidation of the Company and expose the
Company's stockholders to the Liquidation Scenario risks previously considered by the board of directors during the course of the Company's strategic review. Following extensive discussions, our board
of directors decided that the Company should focus on the ongoing discussions with Ocwen and Company A and, depending on the outcome of these discussions, selectively contact additional potential
counterparties.
In
the weeks following the June 28 board meeting, the Company's management continued to engage with Ocwen and Company A and provided additional due diligence materials to each
party. On July 11, 2017, representatives of Ocwen attended a management presentation given by the Company as well as due diligence sessions covering different aspects of the Company's business.
On
July 17, 2017, following extensive due diligence, Company A submitted a non-binding indication of interest to acquire the Company for a cash purchase price of
$725 million$775 million in the aggregate, or $13.50$14.50 per share. Company A's proposal assumed, among other things, that up to $700 million of the
cash purchase price would be in the form of a cash dividend paid by the Company to its stockholders prior to the closing. Following the receipt of Company A's proposal, in accordance with the
directives of our Board of Directors, the Company's management and Credit Suisse discussed with Company A certain aspects of the proposal, including the tax implications of a cash dividend for the
Company's stockholders. By late July, discussions with Company A had slowed as a result of both the potential adverse tax implications of the proposed cash dividend to the Company's stockholders and
Company A's desire to postpone further discussions until after the release of the
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Company's
financial results for the second quarter of 2017. In the meantime, Ocwen continued its due diligence efforts with a view towards establishing an updated indication of value for a
whole-company transaction.
On
August 8, 2017, the Company released financial results for the second quarter of 2017, reporting a net loss of $46 million or $0.86 per basic share for the quarter.
While the subservicing business was performing as expected and the business development pipeline was solid, it was unclear whether the business development efforts would result in actual client
acquisitions. The performance of the portfolio retention business was below expectations.
Following
the Company's release of its second quarter results, Ocwen communicated its updated views on certain aspects of the value of the Company. The Company's management, with input
from the Company's advisors, identified a number of issues with Ocwen's preliminary views, including its assessment of the value of the Company's deferred tax assets and the potential exposure related
to the
Company's pending litigation with the CFPB, which we refer to as the "
CFPB litigation
." Shortly thereafter, Ocwen and the Company discontinued further
conversations regarding a potential transaction.
During
the week of August 14, 2017, Company A informed the Company that it was no longer interested in a whole-company transaction, but instead was potentially interested in
acquiring the equity of PHH Mortgage Corporation. At the same time, Company A expressed concerns regarding the parties' ability to reach agreement on valuation, the Company's lack of near-term
profitability and the potential exposure related to the CFPB litigation. In mid-September 2017, Company A indicated that it had no further interest in acquiring the Company or the equity of PHH
Mortgage Corporation.
By
the end of the third quarter of 2017, the Company had completed the sale of the Ginnie Mae MSRs to Lakeview, was on track to complete the sale of PHH Home Loans assets to GRA by the
end of 2017, and had completed the sale of Fannie Mae and Freddie Mac MSRs to New Residential. In addition, during the first three quarters of 2017, the Company returned $301 million of capital
to its stockholders through an issuer tender offer and open market purchases, and reduced the outstanding principal amount of its unsecured debt by $496 million. However, PHH 2.0 was
experiencing difficulties as the subservicing portfolio continued to be subject to natural run-off and business development efforts had not yet produced any material new client acquisitions.
In
early October 2017, the senior management of the Company contacted Ocwen's senior management to assess Ocwen's willingness to reengage with the Company regarding a potential strategic
transaction. By this time, the Company and Ocwen had each made progress on addressing their respective regulatory matters. In particular, the Company had entered into settlement agreements with the
Department of Justice on behalf the Department of Housing and Urban Development and separately on behalf of the U.S. Department of Veteran Affairs and the Federal Housing Finance Agency to
resolve certain matters regarding legacy mortgage origination and underwriting activities, and Ocwen had reached resolutions with regulatory agencies in approximately half of the states that brought
regulatory actions against Ocwen in April 2017. Ocwen indicated that it would be willing to consider reengaging but would first need an update on certain matters, including the status of pending asset
sale transactions, the Company's discussions with regulators on a multi-state mortgage settlement and a view into the Company's financial results for the third quarter of 2017, which was provided on
October 12, 2017.
On
October 23, 2017, Ocwen sent an updated due diligence request list to the Company. Two days later, Ocwen submitted a preliminary, written, non-binding indication of interest to
acquire the Company for up to $426 million in the aggregate, or $13.10 per fully diluted share. Ocwen's proposal provided that PHH stockholders would retain $109 million of potential
liabilities relating to the CFPB litigation in the form of contingent value rights, which we refer to as "
CVRs
," and was conditioned on the completion
of all of the Company's previously announced asset sales.
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Our board of directors met on October 26, 2017, together with management, Credit Suisse and Latham. During the meeting, our board of directors reviewed the
terms of Ocwen's preliminary indication of interest and discussed various aspects of Ocwen's proposal with the advisors, including concerns relating to the CVR structure and the amount of value it
represented and specific areas in which more value might be ascribed. Following extensive discussions, our board of directors decided that it was in the best interests of the Company and its
stockholders to further explore a potential transaction with Ocwen, and instructed management, with the assistance of Credit Suisse, to seek an improvement in Ocwen's proposal, particularly with
respect to overall value and the CVR structure.
The
next day, the senior management of the Company and Ocwen, together with their respective legal and financial advisors, held a telephone call to discuss various work streams relating
to a potential transaction, including due diligence. During this call, Ocwen informed PHH that, under the terms of the settlement agreements that it had entered into with state mortgage and banking
regulatory agencies, Ocwen was required to provide these state regulators with 30 days' advance notice and the opportunity to object before entering into any binding agreement to merge with or
acquire an unaffiliated company such as PHH, and that any of these regulators could object to Ocwen's entry into such strategic transaction during this 30-day period.
During
the following weeks, members of the Company's senior management, together with representatives of Credit Suisse, held a series of meetings with representatives of Ocwen to discuss
the terms of Ocwen's proposal and to provide additional due diligence information regarding the Company.
On
November 7, 2017, the Company released financial results for the third quarter of 2017, reporting a net loss of $55 million or $1.14 per basic share. The subservicing
business was experiencing higher than expected repurchase, indemnification and delinquent servicing expenses coupled with higher payoff amortization, and the portfolio retention business continued to
perform below expectations.
On
November 16, 2017, Ocwen sent a draft merger agreement and CVR term sheet to the Company. The draft documents contemplated, among other things, (i) that Ocwen would have
full control of the CFPB litigation after the closing, (ii) that the CVRs would not be transferable for a period of six months post-closing, and (iii) that the transaction would be
conditioned upon the Company having both a specified amount of available cash and a minimum equity value.
During
the month of November, the Company held preliminary discussions with another participant in the subservicing industry, which we refer to as
"
Company D
," regarding the possibility of a potential strategic transaction. Company D was under a confidentiality agreement entered into
in connection with the 2016 strategic review process and received data room access on November 20, 2017.
On
November 20, 2017, Ocwen submitted an updated, written, non-binding indication of interest to acquire the Company for up to $391 million in the aggregate (or $11.94 per
fully diluted share), consisting of $282 million in cash and $109 million in the form of CVRs. Ocwen indicated that the reduction in its proposed purchase price was primarily due to the
lower earnings forecast provided by the Company and the anticipated impact of the proposed tax reform legislation, which was expected to eliminate loss carryback provisions. Upon review of Ocwen's
updated indication of interest, the Company's management, with input from Credit Suisse, provided certain feedback on Ocwen's proposed purchased price.
Our
board of directors met on November 30, 2017, together with management, Credit Suisse, Latham and Jones Day. During the meeting, our board of directors discussed potential
strategic options for the Company. Credit Suisse updated our board of directors regarding the discussions held with potential counterparties over the last few months, noting that, among other
things:
-
-
despite the Company's public disclosure of its 2016 strategic review process and the broad outreach to solicit interest from third parties
beginning in 2014 and continuing through 2017,
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Credit
Suisse also discussed with our board of directors certain preliminary financial matters pertaining to the Company. In connection with these discussions, management of the Company
reviewed with our board of directors a long-range forecast for the Company, including related assumptions and risks, and
updated our board of directors on management's analysis of the Liquidation Scenario. Following these discussions, Jones Day reviewed with our board of directors the terms of the proposed merger
agreement with Ocwen and the CVR term sheet, highlighting a number of material issues in the proposed documents. Following extensive discussions, our board of directors was of the view that, despite
certain material issues, including significant concerns with respect to the CVR, the proposed transaction with Ocwen still represented the best option for the Company's stockholders. Accordingly, our
board of directors instructed management and the advisors to continue negotiations with Ocwen, with particular focus on price, CVR terms and certainty of closing.
In
accordance with our board of directors' instructions, the Company's senior management proposed to Ocwen an increased purchase price of $405 million in the aggregate, and Jones
Day sent a revised draft of the merger agreement to Sullivan & Cromwell LLP, Ocwen's outside legal counsel, which we refer to as "
S&C
."
Following further discussions between the Company and Ocwen, on December 11, 2017, Ocwen increased its proposed purchase price to up to $398 million in the aggregate (or $12.15 per fully
diluted share), consisting of $289 million in cash and $109 million in the form of CVRs. Later that day, S&C sent a revised draft of the merger agreement to Jones Day. Jones Day and S&C
also exchanged comments on the CVR term sheet.
On
December 14, 2017, the senior managements of PHH and Ocwen, together with their respective legal and financial advisors, met in person to negotiate the terms of the proposed
transaction. Among other things, the parties discussed the terms of the CVR, including the control of the CFPB litigation prior to and after the closing, the closing conditions relating to the
Company's minimum equity value and available cash, and the allocation of risks relating to the pre-signing regulatory advance notice process. Following extensive discussions, the parties generally
agreed, among other things, that:
-
-
PHH would control the defense of the CFPB litigation, subject to a few specified limitations; and
-
-
a minimum net worth threshold would be more appropriate than a minimum equity value threshold and the finance teams of the Company and Ocwen
would work to determine the appropriate formula and thresholds for net worth and available cash, in each case subject to certain carve-outs.
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During
the following weeks, the senior managements of the Company and Ocwen had a series of discussions regarding the determination of net worth and available cash. As part of these
discussions, the parties agreed that the purchase price would be subject to downward adjustments if the Company's net worth declined by more than $22.5 million below the projections provided to
Ocwen, provided that in no event would any such adjustment exceed $18,750,000 in the aggregate. During the same period, Jones Day and S&C exchanged multiple drafts of the merger agreement, the CVR
term sheet and related documentation.
On
January 19, 2018, in light of the substantial progress on the negotiation of the merger agreement and CVR term sheet, Ocwen and the Company decided that Ocwen could commence
the pre-signing regulatory advance notice process, and Ocwen subsequently contacted regulators in 31 states regarding the potential transaction.
In
addition, in light of the fact that New Residential represents 58% of the Company's subservicing portfolio (by units as of December 31, 2017), the Company and Ocwen both were
of the view that it would be prudent to seek New Residential's written consent to the transaction, as required by its subservicing agreement, prior to signing a definitive agreement. If such consent
were not obtained, New Residential would have the right to terminate its subservicing agreement and transfer the loans subserviced by the Company either internally or to another subservicer.
Accordingly, on January 22, 2018, senior managements of the Company and Ocwen informed New Residential of the potential transaction on a confidential basis and requested its written consent to
the transaction.
During
the next few weeks, the Company, Jones Day, Ocwen and S&C continued to negotiate the merger agreement and a CVR agreement.
On
January 31, 2018, the en banc court of the United States Court of Appeals for the District of Columbia Circuit, which we refer to as the "
DC Circuit
Court of Appeals
," reinstated the October 2016 panel decision in the CFPB litigation as it related to issues under the Real Estate Settlement Procedures Act (which we refer to
as "
RESPA
"), including vacating the CFPB order that imposed $109 million of disgorgement penalties on the Company. Over the course of the next
week, representatives of PHH and Ocwen held a series of discussions regarding the implications of the en banc decision and potential next steps in the CFPB litigation. In the course of these
discussions, the Company informed Ocwen that, in light of the en banc decision by the DC Circuit Court of Appeals, the Company believed that its potential exposure to monetary penalties from the CFPB
litigation had been reduced significantly and that a CVR was no longer appropriate.
During
the week of February 12, 2017, the Company was informed by two existing subservicing clients of their intention to remove portions or all of their respective businesses
totaling approximately 115,000 units, representing approximately 17% of the Company's subservicing portfolio (by units as of December 31, 2017), from the Company's platform between the second
quarter of 2018 and first quarter of 2019, placing further pressure on the Company's growth plans.
On
February 16, 2018, Ocwen sent a revised draft of the merger agreement to the Company as part of a package proposal on the proposed transaction. As part of its package proposal,
Ocwen agreed to remove the CVR consideration, but also reduced the aggregate purchase price to $360 million in cash (or $11.00 per fully diluted share). Ocwen indicated that the price reduction
was primarily due to the Company's recent client losses and additional uncertainty regarding the Company's remaining clients. Ocwen also informed PHH that, at the request of certain state regulators,
Ocwen had agreed to extend the review period for the pre-signing regulatory non-objection process to February 23, 2018.
Our
board of directors met on February 18, 2018, together with management, Credit Suisse, Latham and Jones Day. At the meeting, members of management and Credit Suisse reviewed
Ocwen's package proposal with our board of directors. Members of management updated our board of directors on recent client losses and the continuing challenges facing the PHH 2.0 business model.
Management also updated our board of directors on recent acquisitions and other strategic developments involving
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certain
industry participants, which had resulted in intensified competitive pressure. Following extensive discussions, our board of directors decided to continue pursuing the proposed transaction
with Ocwen on the basis of its package proposal, and instructed management and the advisors to seek to improve Ocwen's proposed purchase price and continue negotiations on the transaction documents.
On
February 19, 2017, members of the Company's and Ocwen's senior management discussed certain aspects of Ocwen's proposal. Ocwen indicated it was unwilling to increase its
proposed purchase price, but agreed there would be no purchase price adjustment for declines in the Company's net worth below the projections provided to Ocwen. Ocwen retained the right to terminate
the transaction should the Company's net worth or available cash fall below certain thresholds. In the next few days, management of the Company and Jones Day exchanged multiple drafts of the merger
agreement and disclosure schedules with Ocwen and S&C, and continued negotiating the transaction documents.
On
February 24, 2018, the Company received New Residential's written consent with respect to the proposed transaction with Ocwen, and Ocwen informed the Company that the
pre-signing regulatory advance notice period had lapsed without Ocwen receiving any objections.
Our
board of directors met on February 25, 2018, together with management, Credit Suisse, Latham, Jones Day and DLA Piper LLP (US), Maryland counsel for the Company (which
we refer to as "
DLA
"). At the meeting, members of management and the Company's advisors reviewed with our board of directors the strategic review
process undertaken by the Company in recent years, including the broad auction process conducted in 2016, the proposals received by the Company since the 2016 process, and the potential strategic
options considered by our board of directors since the
announcement of PHH 2.0 in February 2017, including the Liquidation Scenario. Management of the Company presented an updated long-range forecast for the Company, as well as a financial analysis of the
Liquidation Scenario. Management also noted that while the Company had successfully reduced its cost infrastructure in 2017, the Company's business development efforts under the PHH 2.0 model had not
resulted in meaningful new business, the Company was experiencing natural runoff of loans in its subservicing portfolio and the Company was behind expectations for both subservicing units and
portfolio retention volume. Meeting participants discussed in detail the execution risk associated with transitioning to and operating PHH 2.0, and noted that the proposed transaction represented an
opportunity to mitigate certain risks and uncertainties associated with the Company's business transformation and growth efforts. Meeting participants also discussed the impact of the recently passed
tax reform, which effectively removed tax shields on future losses, creating further pressure on achieving the necessary scale within an acceptable timeframe. Our board of directors then discussed the
proposed transaction with Ocwen in detail. In connection with this discussion, Jones Day reviewed the terms of the proposed merger agreement with Ocwen, including closing conditions, the parties'
commitment to seek to obtain regulatory approvals and our board of directors' ability to exercise its fiduciary out. In addition, Credit Suisse reviewed its preliminary financial analysis of the
merger consideration. Following extensive discussions, our board of directors reaffirmed its view that among the strategic options available to the Company, including continued operation as a
standalone company and the Liquidation Scenario, the proposed transaction with Ocwen presented the best option for the Company's stockholders. Accordingly, our board of directors instructed management
and the advisors to finalize the transaction documents as soon as practicable.
During
the next two days, the Company, Jones Day, Ocwen and S&C engaged in a series of discussions to resolve outstanding points on the transaction documents and exchanged multiple
drafts of the merger agreement and disclosure schedules.
Our
board of directors met again on February 27, 2018, together with management, Credit Suisse, Latham, Jones Day and DLA. At the beginning of the meeting, DLA reviewed the
directors' fiduciary duties under Maryland law in connection with their consideration of a sale of the Company. Management then updated our board of directors with respect to its forecasts and the
status of the transaction, the terms of which had been finalized. Thereafter, Credit Suisse reviewed with our board
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of
directors its financial analysis of the merger consideration and rendered an oral opinion, confirmed by delivery of a written opinion dated February 27, 2018, to our board of directors to
the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, the merger
consideration to be received by holders of PHH common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. After further discussions of available
alternatives and potential risks, including continuing with the PHH 2.0 business model and the Liquidation Scenario, our board of directors determined that the proposed merger with Ocwen was in the
best interests of the Company and its stockholders. Accordingly, our board of directors unanimously approved the merger agreement
and the transaction contemplated thereby, including the merger, and resolved to recommend the merger agreement to the Company's stockholders.
Later
in the afternoon of February 27, 2018, following Board approval of the merger agreement and the merger, the Company and Ocwen executed the merger agreement. Thereafter, the
Company issued a press release announcing its entry into the merger agreement.
Past Contacts, Transactions or Negotiations
Other than as described under "Background of the Merger" above, we, Merger Sub and Ocwen have not had any negotiations, transactions or material
contacts during the past two years, and other than as described therein and in the merger agreement there are no present or proposed material agreements, arrangements, understandings or relationships
between our executive officers or directors or affiliates and any of Merger Sub or Ocwen, or their respective executive officers or directors.
Our board of directors unanimously determined that the merger on the terms and conditions of the merger agreement is advisable and in the best
interests of our stockholders, and approved and declared advisable the execution, delivery and performance of the merger and the merger agreement and the consummation of the transactions contemplated
thereby.
Our board of directors recommends that the Company's stockholders vote "FOR" the approval of the merger on the terms and conditions of the merger
agreement.
In
evaluating the merger agreement and the transactions contemplated thereby, our board of directors discussed the proposed transaction with the board of directors' legal counsel and the
Company's management and legal and financial advisors and considered a variety of factors, including the positive factors set forth below, each of which our Board believed supported its
determination:
-
-
our board of directors' knowledge of the PHH 2.0 business model and the business, prospects, financial performance and condition, financial and
operating plans, capital levels and asset quality of the Company and the risks associated with the foregoing if the Company were to remain an independent public company;
-
-
our board of directors' knowledge of current industry, economic and market conditions and industry trends, and the risks associated with the
foregoing if the Company were to remain an independent public company;
-
-
our board of directors' knowledge of the Company's competitive position within relevant markets, including the impact of consolidation within
the industry and the emergence of competitors with considerably greater financial, technical and marketing resources, lower funding cost, access to more diverse funding sources, and broader product
lines;
-
-
the strategic review processes undertaken by our board of directors over the course of the last few years (including the public, broad-based
process to explore a sale of the Company or one or more of its principal businesses in 2016), and our board of directors' evaluation of the alternative means of creating stockholder value available to
the Company, including continuing
40
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41
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Our
board of directors also considered a variety of risks and potentially negative factors concerning the merger and the merger agreement, including the
following:
-
-
the fact that the consummation of the merger is subject to a number of conditions, including the approval by a variety of federal and state
regulatory agencies and the consents of Fannie Mae, Freddie Mac and Ginnie Mae, and such approvals and consents may not be obtained;
-
-
the fact that while Ocwen has agreed to use its reasonable best efforts to obtain the required regulatory approvals, Ocwen is not required to,
and PHH may not, without Ocwen's consent, take any action or agree to any restraint, restriction, limitation, requirement or condition that would, individually or in the aggregate, reasonably be
expected to, impair in any material respect the business or financial condition of the combined company, taken as a whole;
-
-
the fact that under the terms of the merger agreement, Ocwen has the right not to consummate the merger if PHH fails to maintain its adjusted
net worth or available cash above a certain specified level (see "
The Merger AgreementMaterial Adverse Effect
");
-
-
the fact that following the consummation of the merger, PHH will no longer exist as a public company and the stockholders will not be able to
participate in any value creation that PHH could generate going forward, as well as any future appreciation in the value of the combined company;
-
-
the fact that the mortgage servicing industry has been under intensified regulatory scrutiny since the collapse of the subprime lending market
ten years ago, and the possibility that PHH stockholders could receive greater consideration for their shares in a future change-in-control transaction or otherwise in more favorable industry
conditions;
-
-
the risk that, if the merger is not completed:
-
-
the market price of PHH common stock could be affected by many factors, including (i) the reason for which the merger
agreement was terminated and whether such termination results from factors adversely affecting PHH, (ii) the possibility that the marketplace would consider PHH to be an unattractive
acquisition candidate, and (iii) the possible sale of shares by short-term investors following an announcement of the termination of the merger agreement;
-
-
the market's perception of PHH's continuing business and future prospects could adversely affect PHH's relationships with
employees, customers, lenders, vendors and other business partners as well as PHH's relationships with its regulators; and
-
-
PHH may not be able to find another buyer for the whole company, and any potential buyer may withdraw its offer without entering
into any definitive agreement;
-
-
the fact that the merger agreement prohibits PHH from soliciting takeover proposals and requires the payment of a $12.6 million
termination fee if PHH were to terminate the merger agreement to enter into a definitive agreement with respect to an unsolicited superior proposal, which would make it more costly for any other
potential purchaser to acquire PHH;
-
-
the fact that the merger agreement contains certain restrictions on the conduct of PHH's business prior to the consummation of the merger,
which may delay or prevent PHH from undertaking business opportunities that may arise prior to consummation of the merger, and the resultant risk if the merger is not consummated;
-
-
the fact that the receipt of cash in exchange for PHH shares pursuant to the merger will be a taxable transaction for U.S. federal income tax
purposes;
-
-
the significant costs involved in connection with consummating the merger, the substantial management time and effort required to effectuate
the merger and the related disruption to PHH's day-to-day operations during the pendency of the merger;
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-
-
the potential negative effect of the pendency of the merger on PHH's business, including uncertainty about the effect of the proposed merger on
PHH's employees, customers and other parties, which may impair PHH's ability to attract, retain and motivate key personnel, and could cause customers, suppliers and others to seek to change existing
business relationships with PHH;
-
-
the fact that PHH's directors and executive officers have interests in the merger that are different from, or in addition to, the interests of
PHH's stockholders generally, as described under "
The Merger ProposalInterests of Our Directors and Executive Officers in the Merger
"
beginning on page 54;
-
-
the fact that dissenting stockholders do not have the right to seek appraisal of the fair value of PHH common stock under Maryland law; and
-
-
the risk that there can be no assurance that all conditions to the parties' obligations to complete the merger will be satisfied on a timely
basis and, as a result, it is possible that the merger may be delayed or may not be completed even if the merger agreement is adopted by PHH's stockholders.
The
factors listed above as supporting our board of directors' decisions were determined by our board of directors to outweigh the countervailing considerations and risks. The foregoing
discussion of our board of directors' reasons for its recommendation is not meant to be exhaustive, but addresses the material factors considered by our board of directors in connection with its
recommendation. In view of the wide variety of factors considered by our board of directors in connection with its evaluation of the merger and the complexity of these matters, our board of directors
did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Rather, our board of
directors made its determination and recommendation based on the totality of the information presented to it, and the judgments of
individual members of our board of directors may have been influenced to a greater or lesser degree by different factors. The factors, potential risks and uncertainties contained in this section
contain information that is forward-looking in nature and should be read in conjunction with the factors discussed in "
Special Note Regarding Forward-Looking
Statements
".
Our board of directors, at a special meeting held on February 27, 2018, after due consideration, unanimously (i) determined that
the merger is advisable and in the best interests of the Company and its stockholders on the terms and conditions of the merger agreement, (ii) approved the merger agreement and the
transactions contemplated by the merger agreement, including the merger, and (iii) directed that the merger on the terms and conditions of the merger agreement be submitted for consideration by
our stockholders at the special meeting of stockholders.
Our board of directors has approved the merger on the terms and conditions of the merger agreement and unanimously
recommends that stockholders vote "
FOR
" the Merger Proposal.
As a matter of course, PHH does not develop or publicly disclose long-term projections or internal projections of its future performance and is
especially wary of making projections for extended periods given the unpredictability of the underlying assumptions and estimates, although PHH in the past has provided investors with limited
quarterly or full-year financial guidance covering discrete areas of its financial performance. However, in connection with the merger, our management prepared certain non-public, unaudited financial
forecast for PHH, which we refer to as the "
Financial Projections
," and provided the projections to our board of directors to assist our board of
directors in evaluating a possible transaction. The Financial Projections also were provided to Credit Suisse, which was directed
43
Table of Contents
to
use and rely upon such projections in connection with its financial analyses and opinion as described in the section entitled "
Opinion of the Company's
Financial Advisor
."
The
Financial Projections reflect numerous judgments, estimates and assumptions with respect to industry performance, general business, economic, market and financial conditions and
other future events, as well as matters specific to PHH, all of which are inherently uncertain, difficult to predict and many of which are beyond our control. These assumptions included assumptions
about the subservicing market, business development initiatives, operational productivity and interest rates. In addition, certain assumptions were based on information derived from third parties. Our
management believes the Financial Projections were prepared on a reasonable basis and reflected the best then-currently available estimates and judgments of our management when prepared. The Financial
Projections are subjective in many respects and are subject to change based on actual experience and business developments. As such, Financial Projections constitute forward-looking information and
are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted, including the various risks set forth in PHH's periodic reports. For additional
information regarding these risks, please see the section of this proxy statement entitled "Special Note Regarding Forward-Looking Statements." There can be no assurance that the projected results
will be realized or that actual results will not be significantly higher or lower than projected. The Financial Projections should not be considered necessarily reflective of actual future results.
The Financial Projections cover multiple years and such information by its nature becomes less predictive with each successive year.
The
Financial Projections were based upon various assumptions which relate only to the periods presented. The Financial Projections do not take into account any circumstances or events
occurring after the date they were prepared.
The
Financial Projections were not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles, the published guidelines of the SEC
regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. All of the
Financial Projections (excluding industry projections prepared by third parties) were estimates prepared by our management. In addition, the Financial Projections are unaudited and neither PHH's
independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Financial Projections, nor have they
expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the Financial Projections.
Readers of this document are urged not to place undue reliance on the unaudited Financial Projections set forth below and PHH urges all stockholders to review PHH's SEC filings for PHH's actual
financial results.
The
inclusion of the Financial Projections in this proxy statement is not deemed an admission or representation by PHH or any other person that it considered, or now considers, the
Financial Projections as material information or necessarily predictive of actual future results or events. The Financial Projections are not included in this proxy statement in order to influence any
stockholder of PHH with respect to the approval of the proposal to approve the merger agreement.
PHH DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE FINANCIAL PROJECTIONS
INCLUDED IN THIS PROXY STATEMENT TO REFLECT CIRCUMSTANCES EXISTING SINCE ITS PREPARATION OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE UNDERLYING
ASSUMPTIONS ARE SHOWN TO BE IN ERROR, OR TO REFLECT CHANGES IN GENERAL ECONOMIC OR INDUSTRY CONDITIONS.
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Set
forth below is a summary of the Financial Projections:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Total Revenue
|
|
$
|
171
|
|
$
|
225
|
|
$
|
261
|
|
$
|
288
|
|
$
|
307
|
|
Direct Expense
|
|
|
(145
|
)
|
|
(152
|
)
|
|
(170
|
)
|
|
(187
|
)
|
|
(200
|
)
|
Direct Shared Service Expenses
|
|
|
(114
|
)
|
|
(71
|
)
|
|
(70
|
)
|
|
(69
|
)
|
|
(67
|
)
|
EBIT
|
|
|
(88
|
)
|
|
3
|
|
|
21
|
|
|
32
|
|
|
40
|
|
Net Income(1)
|
|
|
(106
|
)
|
|
0
|
|
|
16
|
|
|
23
|
|
|
30
|
|
Adjusted Net Income(2)
|
|
|
(107
|
)
|
|
(4
|
)
|
|
10
|
|
|
18
|
|
|
24
|
|
-
(1)
-
Following
adjustment for interest expense, one-time expenses and income tax benefit/expenses.
-
(2)
-
Following
adjustment for loss in contract adjustment (gross).
PHH has engaged Credit Suisse to act as its financial advisor in connection with the proposed merger. In connection with this engagement, the
board of directors requested that Credit Suisse evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of PHH common stock pursuant to the merger
agreement. On February 27, 2018, at a meeting of the board of directors held to evaluate the proposed merger, Credit Suisse rendered an oral opinion, confirmed by delivery of a written opinion
dated February 27, 2018, to the board of directors to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and
limitations and qualifications on the review undertaken, the merger consideration to be received by holders of PHH common stock pursuant to the merger agreement was fair, from a financial point of
view, to such holders.
The full text of Credit Suisse's written opinion, dated February 27, 2018, to the board of directors, which sets forth, among other things, the assumptions
made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Credit Suisse in connection with such opinion, is attached to this proxy statement as
Annex B
and is incorporated into this proxy statement by reference in its entirety. The description of Credit
Suisse's opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Credit Suisse's opinion. Credit Suisse's opinion was provided to the board of directors
(in its capacity as such) for its information in connection with its evaluation of the merger consideration from a financial point of view and did not address any other terms, aspects or implications
of the proposed merger, the relative merits of the merger as compared to alternative transactions or strategies that might be available to PHH or the underlying business decision of the board of
directors or PHH to proceed with the merger. Credit Suisse's opinion does not constitute advice or a recommendation to any securityholder as to how such securityholder should vote or act on any matter
relating to the proposed merger or otherwise.
In
arriving at its opinion, Credit Suisse reviewed an execution version, provided to Credit Suisse on February 27, 2018, of the merger agreement and certain publicly available
business and financial information relating to PHH. Credit Suisse also reviewed certain other information relating to PHH provided to or discussed with Credit Suisse by the management of PHH,
including financial forecasts and estimates relating to PHH provided to or discussed with Credit Suisse by the management of PHH, and Credit Suisse met with the management of PHH to discuss the
businesses and prospects of PHH. Credit Suisse also considered certain financial and stock market data of PHH, and Credit Suisse compared that data with similar data for companies with publicly traded
equity securities in businesses Credit Suisse deemed relevant. Credit Suisse also considered such other information, financial studies, analyses and investigations and financial, economic and market
criteria which it deemed relevant.
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In connection with its review, Credit Suisse did not independently verify any of the foregoing information and, with PHH's consent, Credit Suisse assumed and
relied upon such information being complete and accurate in all material respects. With respect to the financial forecasts and estimates for PHH (including, without limitation, as to PHH's projected
net worth and available and distributable cash) that Credit Suisse was directed to utilize in its analyses, the management of PHH advised Credit Suisse, and Credit Suisse assumed, with PHH's consent,
that such financial forecasts and estimates were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future
financial performance of PHH and the other matters covered thereby and were appropriate for Credit Suisse's use and reliance for purposes of its analyses and opinion. Credit Suisse expressed no
opinion as to any financial forecasts or estimates or the assumptions on which they were based. Credit Suisse relied, with PHH's consent and without independent verification, upon the assessments of
the management of PHH as to, among other things, (i) the pending sale of PHH's mortgage servicing rights and other asset sales and dispositions, and the exiting of certain businesses,
reorganizations, restructurings and other corporate transactions undertaken by PHH (collectively referred to in this section as the "
disposition
transactions
"), including with respect to the timing thereof and expected amount of distributable cash therefrom, (ii) the potential impact on PHH of certain market,
competitive, cyclical and other trends in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the residential mortgage and real estate markets
and related credit and financial markets, including with respect to interest rates and conditions in the housing market, (iii) the annual portfolio growth and recapture rates of PHH and
(iv) recent events and other aspects relating to PHH's key clients, vendors and other
commercial relationships. Credit Suisse assumed, with PHH's consent, that there would be no developments with respect to any such matters or any adjustments to the merger consideration that would be
meaningful in any respect to Credit Suisse's analyses or opinion.
In
connection with its opinion, Credit Suisse was not requested to make, and it did not make, an independent evaluation or appraisal of the assets or liabilities (contingent, accrued,
derivative, off-balance sheet or otherwise) of PHH or any other entity, nor was Credit Suisse furnished for purposes of its analyses or opinion with any such evaluations or appraisals, and Credit
Suisse's analyses should not be construed as such. Credit Suisse is not an expert in the evaluation of, and Credit Suisse expressed no opinion with respect to, loan portfolios or individual credit
files or the adequacy or sufficiency of allowances for credit losses with respect to loans or any other matters. Credit Suisse also was not requested to make, and it did not make, an evaluation of the
solvency or fair value of PHH under any state, federal or other laws relating to bankruptcy, insolvency or similar matters or any potential or actual litigation, regulatory action or governmental
investigation or possible unasserted claims or other contingent liabilities to which PHH or any other entity was or may have been a party or was or may have been subject or any reserves therefor, and
Credit Suisse assumed, with PHH's consent, that the outcome of such matters would not be meaningful in any respect to Credit Suisse's analyses or opinion.
Credit
Suisse assumed, with PHH's consent, that, in the course of obtaining any regulatory or third-party consents, approvals, agreements or waivers in connection with the merger, no
delay, limitation, restriction or condition, including any divestiture requirements or amendments or modifications, would be imposed or occur that would have an adverse effect on PHH or the merger or
that otherwise would be meaningful in any respect to Credit Suisse's analyses or opinion and that the merger would be consummated in accordance with the terms of the merger agreement and in compliance
with all applicable laws, documents and other requirements without waiver, modification or amendment of any material term, condition or agreement thereof. Representatives of PHH advised Credit Suisse,
and Credit Suisse also assumed, with PHH's consent, that the terms of the merger agreement, when executed, would conform in all material respects to the terms reflected in the execution version
reviewed by Credit Suisse. Credit Suisse did not express any opinion with respect to accounting, tax, regulatory, legal or similar matters, including, without limitation, any opinion with
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respect
to changes in, or the impact of, tax laws, regulations and governmental and legislative policies on the merger, PHH or any other participant in the merger, Credit Suisse assumed that PHH had
or would obtain such advice or opinions from appropriate professional sources, and Credit Suisse relied, with PHH's consent, upon the assessments of representatives of PHH as to such matters.
Credit
Suisse's opinion addressed only the fairness, from a financial point of view and as of its date, of the merger consideration (to the extent expressly specified in such opinion),
without regard to individual circumstances of specific holders with respect to any rights or aspects which may distinguish
such holders or the securities of PHH held by such holders, and did not address any other terms, aspects or implications of the merger, including, without limitation, the form or structure of the
merger, any adjustments to the merger consideration, the financial or other terms or consequences of any disposition transaction or related distributions or any post-closing reorganizations or other
agreement, arrangement or understanding to be entered into in connection with, related to or contemplated by the merger or otherwise. In addition, Credit Suisse's opinion did not address the fairness
of the amount or nature of, or any other aspect relating to, any compensation or other consideration to any officers, directors, employees or securityholders of any party to the merger or any related
entities, or class of such persons, relative to the merger consideration or otherwise. The issuance of Credit Suisse's opinion was approved by Credit Suisse's authorized internal committee.
Credit
Suisse's opinion was necessarily based upon information made available to Credit Suisse as of the date of Credit Suisse's opinion and financial, economic, market and other
conditions as they existed and could be evaluated on that date. It should be understood that subsequent developments may affect Credit Suisse's opinion, and Credit Suisse does not have any obligation
to update, revise, reaffirm or withdraw its opinion. Credit Suisse did not express any opinion as to the prices or range of prices at which PHH common stock or other securities would trade or be
transferable at any time, including following announcement of the proposed merger. Credit Suisse's opinion did not address the relative merits of the merger as compared to alternative transactions or
strategies that might be available to PHH, nor did it address the underlying business decision of the board of directors or PHH to proceed with the merger.
In
preparing its opinion to the board of directors, Credit Suisse performed a variety of financial and comparative analyses, including those described below. The summary of Credit
Suisse's analyses described below is not a complete description of the analyses underlying Credit Suisse's opinion. The preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not
readily susceptible to partial analysis or summary description. Credit Suisse arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and did not
draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting
portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying its analyses and opinion.
In
its analyses, Credit Suisse considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of
PHH. No company or business used for comparative purposes in Credit Suisse's analyses is identical to PHH, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the
analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the
companies or businesses analyzed. The estimates contained in Credit Suisse's analyses and the implied reference ranges resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In
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addition,
analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired.
Accordingly, the estimates used in, and the results derived from, Credit Suisse's analyses are inherently subject to substantial uncertainty.
Credit
Suisse was not requested to, and it did not, determine or recommend the merger consideration, which was determined through negotiations between PHH and Ocwen, and the decision to
enter into the merger agreement was solely that of the board of directors. Credit Suisse's opinion and financial analyses were only one of many factors considered by the board of directors in its
evaluation of the merger consideration and should not be viewed as determinative of the views of the board of directors or management with respect to the merger or the consideration payable in the
merger.
The summary of the financial analyses described in this section entitled "
Financial
Analyses
" is a summary of the material financial analyses reviewed with the board of directors in connection with Credit Suisse's opinion dated February 27, 2018.
The financial analyses summarized
below include information presented in tabular format. In order to fully understand Credit Suisse's financial analyses, the tables must be
read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full
narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Credit Suisse's financial
analyses.
Selected Public Companies Analysis.
Credit Suisse reviewed certain financial and stock market information relating to PHH and the
following two
selected companies that Credit Suisse considered generally relevant as publicly traded companies with principal operations in the mortgage servicing and/or subservicing industry, collectively referred
to as the selected companies:
-
-
Nationstar Mortgage Holdings Inc.
-
-
Ocwen Financial Corporation
Credit
Suisse reviewed, among other information, closing stock prices as of February 26, 2018 (or, in the case of Nationstar Mortgage Holdings Inc., February 12,
2018, which was the last trading day prior to public announcement of its proposed sale to WMIH Corp.) as a multiple of tangible book value per share as of September 30, 2017. Financial data of
the selected companies were based on public filings and other publicly available information. Financial data of PHH was based on information provided by the management of PHH, public filings and other
publicly available information.
The
overall low to high tangible book value per share (as of September 30, 2017) multiples observed for the selected companies were 0.79x to 1.08x (with a mean and a median of
0.93x). Credit Suisse noted that the tangible book value per share (as of September 30, 2017) multiple observed for PHH was 0.49x based on publicly available information. Credit Suisse then
applied a selected range of tangible book value per share multiples of 0.50x to 0.80x to PHH's tangible book value as of December 31, 2017 based on information provided by the management of
PHH. This analysis indicated the following approximate implied per share equity value reference range for PHH, as compared to the merger consideration:
|
|
|
Implied Per Share Equity Value
Reference Range
|
|
Merger Consideration
|
$8.49 - $13.56
|
|
$11.00
|
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Dividend Discount Analysis.
Credit Suisse performed a dividend discount analysis of PHH's consolidated operations (consisting of PHH's
excess cash
inclusive of the projected cash to be received from PHH's pending sale of its mortgage servicing rights to New Residential Mortgage LLC and PHH's continuing operations) to calculate the
estimated present value of dividends that PHH forecasted would be payable during PHH's fiscal years ending December 31, 2018 through December 31, 2026 based on financial forecasts and
estimates prepared by the management of PHH. The present value (as of December 31, 2017) of PHH's excess cash was calculated using a selected range of discount rates of 8.5% to 16.5%. The
implied terminal values for PHH's continuing operations were derived by applying to PHH's estimated tangible book value as of December 31, 2026 a selected range of tangible book value multiples
of 0.50x to 1.10x and the present values (as of December 31, 2017) of the distributable dividends and terminal values were then calculated using a selected range of discount rates of 13.5% to
21.0%. This analysis indicated the following overall approximate implied per share equity value reference range for PHH, as compared to the merger consideration:
|
|
|
Implied Per Share Equity Value
Reference Range
|
|
Merger Consideration
|
$10.23 - $11.98
|
|
$11.00
|
Credit Suisse observed certain additional information that was not considered part of Credit Suisse's financial analyses with respect to its
opinion but was noted for informational purposes, including the following:
-
-
stock price targets for PHH common stock as reflected in selected publicly available Wall Street research analysts' reports, which indicated an
overall low to high target stock price range for PHH of $11.00 to $12.00 per share;
-
-
historical trading prices of PHH common stock during the 52-week period ended February 26, 2018, which indicated low and high intraday
prices for PHH common stock during such period of approximately $8.01 and $15.00 per share, respectively; and
-
-
the approximate implied equity value reference range for PHH derived by the management of PHH assuming an orderly liquidation of PHH of $6.97
to $9.60 per share.
PHH selected Credit Suisse to act as financial advisor to PHH in connection with the merger based on Credit Suisse's qualifications, experience
and reputation. Credit Suisse is an
internationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.
PHH
has agreed to pay Credit Suisse for its financial advisory services in connection with the proposed merger an aggregate fee of $5.25 million, of which a financial advisory fee
of $2.25 million was previously paid in December 2017 and the remaining $3 million was payable upon delivery Credit Suisse's opinion. In addition, PHH has agreed to reimburse Credit
Suisse for its expenses, including fees and expenses of legal counsel, and to indemnify Credit Suisse and certain related parties for certain liabilities and other items, including liabilities under
the federal securities laws, arising out of or related to its engagement.
As
the board of directors was aware, Credit Suisse and its affiliates in the past have provided and currently are providing investment banking and other financial services to PHH
unrelated to the
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merger
for which Credit Suisse and its affiliates have received and would expect to receive compensation, including, during the two-year period prior to the date of Credit Suisse's opinion, having
acted or acting as financial advisor to PHH in connection with a series of strategic alternative transactions, including certain asset sales or other disposition transactions, and as dealer manager
for a share repurchase and a senior notes tender offer, for which services Credit Suisse and its affiliates received during such two-year period aggregate fees of approximately $14 million. As
the board of directors also was aware, Credit Suisse and its affiliates in the past have provided and currently are providing investment banking and other financial services to Ocwen, for which Credit
Suisse and its affiliates have received and would expect to receive compensation, including, during the two-year period prior to the date of Credit Suisse's opinion, having acted or acting as joint
dealer manager for a bond exchange offer for Ocwen and as a joint bookrunner for certain financings, and as joint lead arranger, joint bookrunner and co-documentation agent for, and as a lender under,
certain credit facilities, of Ocwen and certain of its affiliates, for which services Credit Suisse and its affiliates received during such two-year period aggregate fees of approximately
$6.5 million. Credit Suisse and its affiliates may provide investment banking or other financial services to PHH, Ocwen and their respective affiliates in the future, for which Credit Suisse
and its affiliates would expect to receive compensation.
Credit
Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the
ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for Credit Suisse's and its affiliates' own accounts and the accounts of customers, equity, debt and other
securities and financial instruments (including bank loans and other obligations) of PHH, Ocwen or any other entity that may be involved in the merger and certain of their respective affiliates, as
well as provide investment banking and other financial services to such entities.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, referred to herein as the "
HSR
Act
" and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division
of the Department of Justice, or the "
Antitrust Division
," and the Federal Trade Commission, or the
"
FTC
," and all statutory waiting period requirements have been satisfied. On March 26, 2018, both PHH and Ocwen filed their respective
Notification and Report Forms with the Antitrust Division and the FTC. The merger may not be completed until the expiration of a 30 calendar day waiting period, which, unless earlier terminated by the
Antitrust Division or the FTC, would have expired on April 25, 2018. The FTC granted early termination of this waiting period effective April 19, 2018 with respect to both PHH and Ocwen.
At
any time before or after the effective time of the merger, the Antitrust Division or the FTC could take action under the antitrust laws, including seeking to prevent the merger, to
rescind the merger or to conditionally approve the merger upon the divestiture of assets of PHH or Ocwen or subject to regulatory conditions or other remedies. In addition, U.S. state attorneys
general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger or
permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. There can be no assurance that a challenge
to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.
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The approvals and notices required to complete the merger on the terms and conditions of the merger agreement include (a) notices to, or
approvals of, various state regulatory agencies of the change in control of PHH or its subsidiaries resulting from the transactions contemplated by the merger agreement in all U.S. state and
commonwealth jurisdictions, and (b) notices to, and approvals of, Fannie Mae, Freddie Mac, Ginnie Mae, the Federal Housing Finance Agency, the Veterans Administration and the USDA Rural
Development of the transactions contemplated by the merger agreement. We cannot assure you, however, that these consents, waivers, approvals, permits or authorizations will be obtained in a timely
manner, or at all.
Ocwen expects to fund the transactions contemplated by the merger agreement with a combination of PHH's available cash, Ocwen's available cash
and/or Ocwen's available lines of credit. See "
The Merger AgreementMaterial Adverse Effect
" for additional information
regarding the requirements for PHH to maintain a minimum amount of available cash under the merger agreement.
The following discussion is a summary of the U.S. federal income tax consequences of the merger that are relevant to holders of shares of PHH
common stock whose shares are converted into the right to receive cash pursuant to the merger. This discussion is based upon the Internal Revenue Code of 1986, as amended (referred to as the
"
Code
"), Treasury Regulations promulgated under the Code, court decisions, published positions of the Internal Revenue Service (referred to as the
"
IRS
"), and other applicable authorities, all as in effect on the date of this proxy statement and all of which are subject to change or differing
interpretations, possibly with retroactive effect. This discussion is limited to holders who hold their shares of PHH common stock as "capital assets" within the meaning of Section 1221 of the
Code (generally, property held for investment purposes). This summary does not describe any of the tax consequences arising under the laws of any
state, local or foreign tax jurisdiction and does not consider any aspects of U.S. federal tax law other than income taxation (e.g., state, gift or alternative minimum tax or the Medicare net
investment income surtax). For purposes of this discussion, a "
holder
" means either a U.S. Holder or a Non-U.S. Holder or both, as the context may
require.
This
discussion is for general information only and does not address all of the tax consequences that may be relevant to holders in light of their particular circumstances,
including:
-
-
holders who may be subject to special treatment under U.S. federal income tax laws, such as: financial institutions, tax-exempt organizations,
S corporations or any other entities or arrangements treated as partnerships or pass-through entities for U.S. federal income tax purposes, insurance companies, mutual funds, dealers in stocks and
securities, traders in securities that elect to use the mark-to-market method of accounting for their securities, regulated investment companies, real estate investment trusts, or certain expatriates
or former long-term residents of the United States;
-
-
holders holding the shares as part of a hedging, constructive sale or conversion, straddle or other risk reducing transaction;
-
-
holders that received their shares of PHH common stock in a compensatory transaction;
-
-
holders who own an equity interest, actually or constructively, in PHH or the surviving corporation; or
-
-
U.S. Holders whose "functional currency" is not the U.S. dollar.
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If
a partnership (including an entity or arrangement classified as a partnership for U.S. federal income tax purposes) is a beneficial owner of shares of PHH common stock, the tax
treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding the shares of PHH common stock and partners
therein should consult their tax advisors regarding the consequences of the merger.
We
have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary. No assurance can be given
that the IRS will agree with the views expressed in this summary, or that a court will not sustain any challenge by the IRS in the event of litigation.
THIS DISCUSSION IS PROVIDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE LEGAL ADVICE TO ANY HOLDER. A HOLDER SHOULD CONSULT ITS OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE MERGER IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR OTHER TAX LAWS.
For purposes of this discussion, a "
U.S. Holder
" is a beneficial owner of shares of PHH common
stock who or that is for U.S. federal income tax purposes:
-
-
An individual who is a citizen or resident of the United States;
-
-
A corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any state thereof or
the District of Columbia;
-
-
An estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
-
-
A trust (i) that is subject to the primary supervision of a court within the United States and the control of one or more United States
persons as defined in section 7701(a)(30) of the Code or (ii) that has a valid election in effect under applicable Treasury regulations to be treated as a United States person.
The
receipt of cash by a U.S. Holder in exchange for shares of PHH common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes. In
general, such U.S. Holder's gain or loss will be equal to the difference, if any, between the amount of cash received and the U.S. Holder's adjusted tax basis in the shares surrendered pursuant to the
merger. A U.S. Holder's adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares. Such gain or loss generally will be capital gain or loss and will be
long-term capital gain or loss if such U.S. Holder's holding period in such shares is more than 1 year at the time of the consummation of the merger. A reduced tax rate on capital gain
generally will apply to long-term capital gain of a non-corporate U.S. Holder. There are limitations on the deductibility of capital losses.
For purposes of this discussion, the term "
Non-U.S. Holder
" means a beneficial owner of shares
of PHH common stock who or that is not a U.S. Holder or partnership for U.S. federal income tax purposes.
Special
rules not discussed below may apply to certain Non-U.S. Holders subject to special tax treatment such as "controlled foreign corporations" or "passive foreign investment
companies." Non-U.S. Holders should consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them in light of their particular
circumstances.
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Any
gain realized by a Non-U.S. Holder pursuant to the merger generally will not be subject to U.S. federal income tax unless:
-
-
the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable
income tax treaty, is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States), in which case such gain generally will be subject to U.S. federal income tax
at rates generally applicable to U.S. persons, and, if the Non-U.S. Holder is a corporation, such gain may also be subject to the branch profits tax at a rate of 30% (or a lower rate under an
applicable tax treaty);
-
-
such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition,
and certain other specified conditions are met, in which case such gain will be subject to U.S. federal income tax at a rate of 30% (or a lower rate under an applicable tax treaty); or
-
-
we are or have been a "United States real property holding corporation" (referred to as
"
USRPHC
"), at some point during the applicable statutory period, and the Non-U.S. Holder's shares of PHH's common stock represent a "U.S. real property
interest" (referred to as "
USRPI
"), under the Foreign Investment in Real Property Tax Act (referred to as
"
FIRPTA
").
Under
FIRPTA, dispositions of a USRPI by a foreign person are generally subject to U.S. federal income taxation. If any class of stock in a USRPHC is regularly traded on an established
securities market, stock of such class generally will be considered a USRPI with respect to a foreign person if such foreign person held, directly or constructively, at any time during the applicable
test period, more than 5% of the value of the regularly traded class of stock.
We
believe that we have not been a USRPHC during the applicable statutory period.
Payments made in exchange for shares of PHH common stock pursuant to the merger may be subject, under certain circumstances, to information
reporting and backup withholding. To avoid backup withholding, a U.S. Holder that does not otherwise establish an exemption should complete and return an IRS Form W-9, certifying under
penalties of perjury that such U.S. holder is a "United States person" (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not
subject to backup withholding.
A
Non-U.S. Holder may be subject to information reporting and backup withholding on the cash received in exchange for shares of PHH common stock unless the Non-U.S. Holder establishes an
exemption, for example, by properly certifying its non-U.S. status on an appropriate version of IRS Form W-8.
Backup
withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder's U.S. federal income tax liability, if
any, provided that such holder furnishes the required information to the IRS in a timely manner.
Under our charter and the MGCL, holders of our common stock are not entitled to dissenting stockholders' appraisal rights, rights of objecting
stockholders or other similar rights in connection with the merger agreement or the transactions contemplated thereby, including the merger. Subject to the limited circumstances set forth in
Section 3-202(d) of the MGCL, the MGCL does not provide for appraisal rights or other similar rights to stockholders of a corporation in connection with a merger of a corporation if the shares
of the corporation are listed on the NYSE on the record date for determining stockholders entitled to vote on the transaction. The circumstances of the merger do not satisfy the conditions set forth
in Section 3-202(d) of the MGCL that would trigger such appraisal rights or similar rights.
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If the merger is consummated, following the effective time, our common stock will cease trading on the NYSE and will be deregistered under the
Exchange Act. As such, we would no longer file periodic reports with the SEC.
If the Merger Proposal is not approved by our stockholders or if the merger is not consummated for any other reason, our stockholders will not
receive any payment for their shares of PHH common stock. Instead, PHH will remain a public company, our common stock will continue to be listed and traded on the NYSE and registered under the
Exchange Act and we will continue to file periodic reports with the SEC.
Furthermore,
if the merger is not consummated, and depending on the circumstances that would have caused the merger not to be consummated, it is likely that the price of our common stock
will decline significantly. If that were to occur, it is uncertain when, if ever, the price of our common stock would return to the price at which it trades as of the date of this proxy statement.
Accordingly,
if the merger is not consummated, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of our common stock. If the
merger is not consummated, our board of directors will continue to evaluate and review our business operations, assets, operating results, financial condition, prospects and business strategy, among
other things, and will make such changes as are deemed appropriate and will continue to evaluate all strategic options to seek to enhance stockholder value. If the Merger Proposal is not approved by
our stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to PHH will be offered or that our business, prospects or
results of operations will not be adversely impacted.
In
addition, under specified circumstances, we may be required to pay Ocwen a termination fee of $12,600,000 upon the termination of the merger agreement, as described under
"The Merger AgreementTermination
Fee"
beginning on page 82 of this proxy statement.
In considering the recommendation of our board of directors that you vote to approve the Merger Proposal, you should be aware that aside from
their interests as stockholders of PHH, certain of our directors and executive officers may have interests in the merger that are different from, or in addition to, the interests of the holders of our
common stock. The members of our board
of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to our stockholders that the
Merger Proposal be approved. PHH's stockholders should take these interests into account in deciding whether to vote "
FOR
" the proposal to adopt the
merger agreement. These interests are described in more detail below, and certain of them are quantified within the narrative disclosure and the table below. The merger will constitute a "change in
control," "change of control" or term of similar meaning for purposes of PHH's executive compensation and benefit plans described below.
Except as otherwise specifically noted, for purposes of describing the potential payments and benefits in this section, the following
assumptions were used:
-
-
The relevant price per share of shares of our common stock is $11.00, which is the per share merger consideration.
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-
-
Solely for purposes of the disclosure in this section, the assumed date of the closing of the merger is April 3, 2018. Each executive
officer of PHH employed as of April 3, 2018 experiences a qualifying termination, including a termination by PHH without "cause," resignation by the executive officer for "good reason," or
resignation by the executive officer because his employment becomes "non-comparable employment," or term of similar meaning, as such terms are defined in the relevant PHH plans and agreements as in
effect on the date hereof, immediately following the assumed closing on April 3, 2018.
Severance
Tier I Severance Plan
PHH maintains an Amended and Restated Tier I Severance Pay Plan, effective May 19, 2016, which we refer to as the
"
Tier I Severance Plan,
" that sets forth the severance benefits to which our current executive officers (other than Mr. Stephen P. Staid),
including Messrs. Robert B. Crowl, Michael R. Bogansky and Alberino J. Celini, Ms. Madeline Flanagan and Ms. Kathleen A. Williamson are entitled to, and to which our former
executive officers Mr. Glen A. Messina, Ms. Kathryn M. Ruggieri, Mr. William F. Brown, and Mr. Leith M. Kaplan became entitled upon entering into Separation and General
Release Agreements, subject to their compliance with certain restrictive covenants following their terminations of employment in 2017. The four former executive officers departed from the Company on
June 28, 2017, June 30, 2017, December 31, 2017 and December 31, 2017, respectively.
The
severance benefits as set forth in the Tier I Severance Plan to which our current executive officers (other than Mr. Staid) are entitled and to which each of
Mr. Messina, Ms. Ruggieri and Messrs. Brown and Kaplan became entitled include: salary continuation for one year (except for Mr. Messina who is entitled to receive salary
continuation for two years), which runs concurrent with the duration of the non-compete and nonsolicitation provisions contained in restrictive covenant agreements executed as a condition of
participation in PHH's long-term incentive plan; 100% of the target amount of the cash incentive bonus award granted to the participant under the Management Incentive Plan for the year in which the
qualifying termination occurs, payable over the salary continuation period; outplacement assistance services in an amount not to exceed the annual limitation imposed under Section 402(g) of the
Internal Revenue Code for the year of termination ($18,000 in 2017) to be used within 24 months of the termination; and payment of an amount equal to the cost of COBRA coverage for one year
(except for Mr. Messina who is entitled to payment of an amount equal to the cost of COBRA coverage for two years).
Each of Mr. Robert C. Crowl, who was appointed Chief Executive Officer on June 28, 2017, and Mr. Michael R. Bogansky, who
was appointed Chief Financial Officer on March 29, 2017, are party to an employment agreement that governs their respective rights to severance benefits. Each employment agreement provides the
right to receive the same severance benefits described above under the Tier I Severance Plan (which, for each, is one year with respect to salary continuation and COBRA coverage) upon a
termination by PHH without "cause" or a resignation by the executive for "good reason," in each case, subject to execution of a general release agreement and compliance with certain restrictive
covenants.
Mr. Staid's right to severance benefits is governed by the PHH Amended and Restated Tier II Severance Pay Plan, effective
November 30, 2017, which we refer to as the "
Tier II Severance Plan
". Mr. Staid is our only current executive officer who is not
entitled to the severance benefits set forth in
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the
Tier I Severance Plan. Under the Tier II Severance Plan, Mr. Staid becomes entitled to certain severance benefits, subject to his execution of a release and compliance with
certain restrictive covenants, upon an involuntary termination due to (1) a reduction in PHH's workforce, (2) elimination or discontinuation of his position provided that he is not
offered a comparable position, or (3) other circumstances appropriate for the payment of severance as determined in the sole and absolute discretion of the Human Capital and Compensation
Committee of our board of directors. The severance benefits to which Mr. Staid would become entitled under the Tier II Severance Plan consist of 26 weeks of salary. The severance
benefits payable under the Tier II Severance Plan are not impacted by the merger.
Quantification of Severance Payments Under the Tier I Severance Plan, Tier II Severance
Plan and Employment Agreements
See the section entitled "
Interests of Our Directors and Executive OfficersQuantification of
Potential Payments and Benefits to Our Named Executive Officers in Connection with the Merger
" for an estimate of the value of the severance benefits that would become payable
to each of PHH's named executive officers upon a qualifying termination immediately following the merger. Since Mr. Messina, Ms. Ruggieri, Mr. Brown, and Mr. Kaplan
incurred a qualifying termination prior to the assumed closing date of April 3, 2018, the merger will have no impact on the severance benefits that they are currently receiving, and no
severance amounts are reflected for them. Although the merger will have no impact on Mr. Staid's right to receive severance under the Tier II Severance Plan, an estimate of the value of
the severance benefits that would become payable to him under such plan upon a qualifying termination is reflected below. The estimated aggregate value of severance benefits that would become payable
to PHH's six current executive officers as a group upon a qualifying termination immediately following the merger based on the assumptions described above under
"
Certain Assumptions
" is $3,472,354.
Compensation Granted under PHH 2014 Equity and Incentive Plan
Treatment of Stock Options
All of the PHH stock options held by the executive officers were fully vested and exercisable as of April 3, 2018. Since all of the stock
options have a per share exercise price greater than the merger consideration, all of the stock options will be cancelled at the effective time for no consideration or payment.
At the effective time of the merger, pursuant to the merger agreement, each PHH time-based restricted stock unit (whether cash settled or stock
settled) and each PHH time-based restricted cash unit award that tracks the value of a share of PHH common stock, including each such award held by a director or executive officer of PHH, that is
outstanding as of the effective time will accelerate in full and be cancelled in consideration for the right to receive a cash payment (without interest and less applicable withholding taxes) equal to
the product of (1) the number of shares of our common stock subject to such unit and (2) the per share merger consideration. Certain of PHH's current executive officers (none of whom are
named executive officers) hold time-based restricted cash units that represent the right to receive $1.00. Such awards will become vested upon a termination by PHH without "cause" or a resignation by
the executive for "good reason," following the merger and must be settled within 60 days of such executive officer's termination or resignation.
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At the effective time of the merger, pursuant to the merger agreement, each PHH performance-based restricted stock unit (whether cash settled or
stock settled), including each such award held by an executive officer of PHH, that is outstanding as of the effective time will accelerate in full and be cancelled in consideration for the right to
receive a cash payment (without interest and less applicable withholding taxes) equal to the product of (1) the number of shares of our common stock subject to such unit determined based on the
actual level of achievement of the applicable performance goals through immediately prior to the effective time of the merger, as reasonably determined by the Human Capital and Compensation Committee
of our board of directors, and (2) the per share merger consideration. Based on expected actual performance immediately prior to the effective time of the merger, which is based on the assumed
stock price of $11.00, all of the outstanding performance-based restricted stock units will not vest and will be cancelled at the effective time for no consideration or payment.
At the effective time of the merger, pursuant to the merger agreement, each share of our common stock that is subject to vesting, repurchase, or
other lapse restrictions, all of which are held by directors of PHH, will accelerate in full and be cancelled in consideration for the right to receive a cash payment (without interest and less
applicable withholding taxes) equal to the per share merger consideration.
At the effective time of the merger, the applicable performance criteria for our executive officers' outstanding cash performance incentive
awards granted in 2018 will be considered met. Upon the occurrence of either a termination by PHH without "cause" or the executive officer's resignation for "good reason" following the merger, such
cash performance incentive awards (the applicable performance criteria of which will have been considered met in connection with the merger) must be settled within 60 days of such executive
officer's termination or resignation.
Quantification of Cash Performance Incentive Awards and Equity-Based Compensation Granted under PHH
2014 Equity and Incentive Plan
See the section entitled "
Interests of Our Directors and Executive OfficersQuantification of
Potential Payments and Benefits to Our Named Executive Officers in Connection with the Merger
" for an estimate of the value of the unvested cash performance incentive awards
and restricted stock units held by each of PHH's named executive officers that would become vested in connection with a qualifying termination of employment following the closing of the merger based
on the assumptions described above under "
Certain Assumptions
" and in the footnotes to the table below (including assumptions relating to
the level of achievement of the applicable performance criteria). Such section will also include an estimate of payments to be made in connection with the merger to Mr. Messina,
Ms. Ruggieri, Mr. Brown, and Mr. Kaplan, each of whom terminated employment with PHH prior to April 3, 2018, in cancellation of outstanding vested equity awards held by
each of those former PHH named executive officers. Based on those assumptions, the estimated aggregate value of the unvested restricted stock units and shares of our common stock subject to vesting,
repurchase, or other lapse restrictions held by PHH's six non-employee directors that would become vested in connection with the merger, is $147,873, assuming a per share price of $11.00. In addition,
the estimated aggregate value of the restricted stock units held by PHH's six non-employee
directors that are vested, but that would be cancelled and paid out in connection with the merger is $1,128,127, assuming a per share price of $11.00. None of PHH's six current executive officers,
other than Messrs. Crowl and Bogansky, for whom the value of the vesting of such awards is reflected in the table below, hold outstanding unvested restricted stock units that would become
vested in connection with the merger. The estimated aggregate
57
Table of Contents
value
of the unvested cash performance incentive awards held by PHH's six current executive officers that would become vested in connection with a qualifying termination of employment immediately
following the merger, based on the applicable performance criteria being deemed met in connection with the merger and based on the assumptions described above under
"
Certain Assumptions
," is $935,625. The estimated aggregate value of the unvested restricted cash units that represent the right to receive
$1.00 held by PHH's six current executive officers (none of whom are named executive officers) that would become vested in connection with a qualifying termination of employment immediately following
the merger is $157,150.
As part of PHH's annual compensation process, PHH grants cash incentive bonuses under the PHH 2018 Management Incentive Plan, which we refer to
as the "
MIP
." Under the terms of the MIP and the 2018 awards, the applicable performance criteria will be deemed met at the target level upon the
closing of the merger. If an executive officer is terminated without "cause" or resigns for "good reason" following the merger and before such bonuses are paid, then the cash incentive bonuses payable
under this MIP will be paid within sixty (60) days of such termination or resignation. Such bonus will be pro-rated to the extent a qualifying termination occurs during the plan year. See the
section entitled "
Interests of Our Directors and Executive OfficersQuantification of Potential Payments and Benefits to Our Named Executive Officers
in Connection with the Merger
" for an estimate of the value of 2018 MIP awards that could become payable to Messrs. Crowl, Bogansky, and Staid upon a qualifying
termination immediately following the merger, which will trigger deemed achievement of the applicable performance criteria at target levels. The estimated aggregate value of 2018 MIP awards that could
become payable to PHH's six current executive officers upon a qualifying termination immediately following the merger, based on achievement of the applicable performance criteria at target levels and
based on the assumptions described above under "
Certain Assumptions
," is $419,010. Mr. Messina, Ms. Ruggieri,
Mr. Brown, and Mr. Kaplan did not receive 2018 MIP awards.
From time to time, PHH awards special cash retention awards to employees that vest based on continued employment with PHH through a specified
date. Under the terms of Mr. Staid's 2017 cash retention award, such award will vest and must be settled within 30 days of his involuntary termination due to a job elimination, reduction
in force, or group layoff. Mr. Staid's 2017 cash retention award is not impacted by the merger. With respect to cash retention awards granted in 2018, if an executive officer who has received
such an award is terminated by PHH without "cause" or the executive officer resigns for "good reason" following the merger, such cash retention award will vest and must be settled within
60 days of such executive officer's termination or resignation. See the section entitled "
Interests of Our Directors and Executive
OfficersQuantification of Potential Payments and Benefits to Our Named Executive Officers in Connection with the Merger
" for an estimate of the value of cash
retention awards that could become payable to Messrs. Crowl, Bogansky, and Staid upon a qualifying termination immediately following the merger. Although the merger will have no impact on the
vesting of Mr. Staid's 2017 cash retention award, an estimate of the value of such award that would become payable to him upon a qualifying termination is reflected below. The estimated
aggregate value of cash retention awards that could become payable to PHH's six current executive officers upon a qualifying termination immediately following the merger based on the assumptions
described above under "
Certain Assumptions
" is $1,168,500. Mr. Messina, Ms. Ruggieri, Mr. Brown, and Mr. Kaplan
do not have any outstanding cash retention awards.
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Table of Contents
Pursuant to the terms of the merger agreement, PHH's non-employee directors and executive officers will be entitled to certain ongoing
indemnification and coverage under certain directors' and officers' liability insurance policies following the merger. Such indemnification and insurance coverage is further described in the section
entitled "
The Merger AgreementDirector and Officer Indemnification and Insurance.
"
Quantification of Potential Payments and Benefits to Our Named Executive Officers in Connection with the Merger
The information set forth in the table below is intended to comply with Item 402(t) of the SEC's Regulation S-K, which requires
disclosure of information about certain compensation for each named executive officer of PHH that is based on, or otherwise relates to, the merger. The amounts shown in the table below are estimates
based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table, and do not reflect
certain compensation actions that may occur before completion of the merger. For purposes of calculating such amounts, the following assumptions were used:
-
-
The relevant price per share of the shares of our common stock is $11.00, which is the per share merger consideration.
-
-
Solely for purposes of the disclosure in this section, the assumed date of the closing of the merger is April 3, 2018. Each named
executive officer of PHH employed as of April 3, 2018 experiences a qualifying termination, including a termination by PHH without "cause," resignation by the named executive officer for "good
reason," or resignation by the named executive officer because his employment becomes "non-comparable employment," or term of similar meaning, as such terms are defined in the relevant PHH plans and
agreements as in effect on the date hereof, immediately following the assumed closing on April 3, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Cash
($)(2)
|
|
Equity
($)(3)
|
|
Perquisites/
Benefits
($)(4)
|
|
Total
($)
|
|
Robert B. Crowl, Chief Executive Officer
|
|
|
2,224,384
|
|
|
456,126
|
|
|
42,837
|
|
|
2,723,347
|
|
Glen A. Messina, former Chief Executive Officer(1)
|
|
|
|
|
|
2,368,421
|
|
|
|
|
|
2,368,421
|
|
Michael R. Bogansky, Chief Financial Officer
|
|
|
874,295
|
|
|
223,850
|
|
|
42,837
|
|
|
1,140,982
|
|
Stephen P. Staid, Senior Vice President, Servicing
|
|
|
825,093
|
|
|
|
|
|
|
|
|
825,093
|
|
William F. Brown, former General Counsel and Corporate Secretary(1)
|
|
|
|
|
|
277,189
|
|
|
|
|
|
277,189
|
|
Leith W. Kaplan, former Chief Risk and Compliance Officer(1)
|
|
|
|
|
|
495,429
|
|
|
|
|
|
495,429
|
|
Kathryn M. Ruggieri, former Chief Human Resources Officer(1)
|
|
|
|
|
|
298,936
|
|
|
|
|
|
298,936
|
|
-
(1)
-
Glen
A. Messina, former Chief Executive Officer, William F. Brown, former General Counsel and Corporate Secretary, Leith W. Kaplan, former Chief Risk and Compliance
Officer, and Kathryn M. Ruggieri, former Chief Human Resources Officer, terminated employment on June 28, 2017, December 31, 2017, December 31, 2017 and June 30, 2017,
respectively. Since each is already receiving severance pursuant to the terms of his or her Separation and General Release Agreement, the only compensation impacted by the occurrence of the merger is
the accelerated payment of outstanding equity awards. Although all of such former named executive officers' outstanding equity awards are fully vested, the table includes the value of payments made in
59
Table of Contents
cancellation
of those outstanding vested equity awards under the PHH 2014 Equity and Incentive Plan in connection with the merger.
-
(2)
-
Cash
. Includes for Messrs. Crowl and Bogansky (a) salary continuation for one year, (b) 100% of
the target amount of the cash incentive bonus award granted to the named executive officer under the MIP, which would be payable over the salary continuation period, (c) pro-rated vesting of
the 2018 MIP awards calculated with applicable performance criteria deemed to be achieved at target levels, which would be payable in a lump sum within 60 days of termination, (d) full
vesting of the 2018 cash performance incentive awards granted under PHH's 2014 Equity and Incentive Plan, calculated with applicable performance criteria deemed to be achieved at target levels, which
would be payable in a lump sum within 60 days of termination, and (e) full vesting of the 2018 cash retention awards, which would be payable in a lump sum within 60 days of
termination. The 2018 cash retention award payments are "double-trigger" and vest prior to December 31, 2018 only upon a qualifying termination of employment during the 2018 calendar year
following the merger. Includes for Mr. Staid (i) 26 weeks of salary continuation, (ii) pro-rated vesting of his 2018 MIP award calculated with applicable performance
criteria deemed to be achieved as target levels, which would be payable in a lump sum within 60 days of termination, (iii) full vesting of his 2018 cash performance incentive award
granted under PHH's 2014 Equity and Incentive Plan, calculated with applicable performance criteria deemed to be achieved at target levels, which would be payable in a lump sum within 60 days
of termination, (iv) full vesting of the 2017 cash retention award, which would be payable in a lump sum within 30 days of termination, and (v) full vesting of the 2018 cash
retention award, which would be payable in a lump sum within 60 days of termination. Although the merger itself will result in the 2018 MIP awards and the 2018 cash performance incentive awards
being deemed achieved at target performance levels, such payments are "double-trigger" and vest early only upon a qualifying termination of employment following the merger. Although the merger will
have no impact on Mr. Staid's right to receive severance under the Tier II Severance Plan or the vesting of his 2017 cash retention award, the amount of severance he would receive under
such plan upon a qualifying termination and the value of his 2017 cash retention award that would vest and become payable upon a qualifying termination are included in the table below. The estimated
cash compensation table below reflects no values for Mr. Messina, Ms. Ruggieri, Mr. Brown, and Mr. Kaplan because those individuals already incurred a qualifying
termination prior to the merger, are receiving severance benefits consistent with the Tier I Severance Plan and pursuant to their individual Separation and General Release Agreements, and the
merger will have no impact on the cash compensation provided thereunder. The estimated amount of each such payment that will vest under the assumptions described above is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Salary
Severance
($)
|
|
Bonus
Severance
($)
|
|
Pro-Rated
2018 MIP
($)
|
|
2018 Cash
Performance
Incentive
Award
($)
|
|
Cash
Retention
Award(s)
($)
|
|
Total
($)
|
|
|
Robert B. Crowl
|
|
|
575,000
|
|
|
718,750
|
|
|
183,134
|
|
|
373,750
|
|
|
373,750
|
|
|
2,224,384
|
|
|
Glen A. Messina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Bogansky
|
|
|
325,000
|
|
|
178,750
|
|
|
45,545
|
|
|
162,500
|
|
|
162,500
|
|
|
874,295
|
|
|
Stephen P. Staid
|
|
|
172,500
|
|
|
|
|
|
74,718
|
|
|
172,500
|
|
|
405,375
|
|
|
825,093
|
|
|
William F. Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leith W. Kaplan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kathryn M. Ruggieri
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(3)
-
Equity
. Includes, for each of Messrs. Crowl, Bogansky, and Staid, who hold unvested awards, the unvested PHH
time-based restricted stock units and unvested PHH performance-based restricted stock units, in each case, that are outstanding as of the assumed closing date of April 3, 2018. The vesting of
all such awards will accelerate in full and each award will be cancelled and converted into the right to receive an amount in cash (without interest and subject to applicable withholding
60
Table of Contents
taxes)
equal to the product of (x) the number of shares of our common stock subject to such unit (with respect to PHH performance-based restricted stock units, based on actual performance
immediately prior to the effective time of the merger as determined by the Human Capital and Compensation Committee of our board of directors, which, based on the assumed stock price of $11.00, would
result in all of the performance-based restricted stock units being valueless), multiplied by (y) the per share merger consideration. In addition, this figure includes the payments made in
cancellation of outstanding vested equity awards under the PHH 2014 Equity and Incentive Plan, including those made to previously terminated executive officers, all of which are already vested.
Pursuant to the terms of the merger agreement, such vesting and payments are "single-trigger" and will occur as a result of the merger itself. All of the PHH stock options held by the named executive
officers were fully vested and exercisable as of April 3, 2018 with exercise prices that exceed the per share merger consideration. Therefore, the merger will have no impact on the vesting of
the named executive officers' outstanding PHH stock options and no value is attributed to them. None of the named executive officers have any outstanding time-based restricted cash units that track
the value of a share of PHH common stock and no value is attributed to them. The estimated value of the PHH restricted stock units that will vest or become payable under the assumptions described
above is shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Performance-Based
Restricted Stock
Units ($)
|
|
Time-Based
Restricted Stock
Units ($)
|
|
Total ($)
|
|
|
Robert B. Crowl
|
|
|
|
|
|
456,126
|
|
|
456,126
|
|
|
Glen A. Messina
|
|
|
|
|
|
2,368,421
|
|
|
2,368,421
|
|
|
Michael R. Bogansky
|
|
|
|
|
|
223,850
|
|
|
223,850
|
|
|
Stephen P. Staid
|
|
|
|
|
|
|
|
|
|
|
|
William F. Brown
|
|
|
|
|
|
277,189
|
|
|
277,189
|
|
|
Leith W. Kaplan
|
|
|
|
|
|
495,429
|
|
|
495,429
|
|
|
Kathryn Ruggieri
|
|
|
|
|
|
298,936
|
|
|
298,936
|
|
-
(4)
-
Perquisites/Benefits
. Includes (a) outplacement assistance services valued at $18,500 to be used within
24 months of the qualifying termination and (b) payment of an amount equal to the cost of COBRA coverage during the duration of the one-year restricted covenants. Such benefits are
"double trigger" and are payable only in connection with a qualifying termination of employment. The estimated perquisites/benefits compensation table below reflects no values for Mr. Messina,
Ms. Ruggieri, Mr. Brown, and Mr. Kaplan because those individuals already incurred a qualifying termination prior to the merger, are receiving severance benefits consistent with
the Tier I Severance Plan and pursuant to their individual Separation and General Release Agreements, and the merger will have no impact on the perquisites/benefits compensation provided
thereunder. None of our named executive officers are entitled to tax reimbursements or gross-ups in connection with the merger. The estimated perquisites/benefits compensation table below reflects no
value for Mr. Staid as his entitlement to severance benefits under the Tier II Severance Plan is limited to salary continuation. The estimated value of these benefits is shown in the
following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Outplacement ($)
|
|
COBRA Coverage ($)
|
|
Total ($)
|
|
|
Robert B. Crowl
|
|
|
18,500
|
|
|
24,337
|
|
|
42,837
|
|
|
Glen A. Messina
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Bogansky
|
|
|
18,500
|
|
|
24,337
|
|
|
42,837
|
|
|
Stephen P. Staid
|
|
|
|
|
|
|
|
|
|
|
|
William F. Brown
|
|
|
|
|
|
|
|
|
|
|
|
Leith W. Kaplan
|
|
|
|
|
|
|
|
|
|
|
|
Kathryn Ruggieri
|
|
|
|
|
|
|
|
|
|
|
61
Table of Contents
Post-Signing Events
On April 17, 2018, a putative class action captioned Lei v. PHH Corporation, et. al., Case No. 1:18-cv-07934 was filed on behalf
of the Company's stockholders against the Company and its directors in the United States District Court for the District of New Jersey. The complaint alleges, among other things, that the Company's
directors have breached their fiduciary duties by approving the sale of the Company to Ocwen at an inadequate price after an inadequate process. The complaint also alleges that the defendants have
violated federal securities laws because the preliminary proxy statement for the merger was materially misleading and omitted certain material facts. The complaint seeks, among other things, an
injunction preventing the consummation of the merger and damages in an unspecified amount.
The
outcome of this lawsuit is uncertain. The Company believes this lawsuit is without merit.
On April 19, 2018, Ocwen announced that its board of directors has determined to appoint Glen Messina, who had served as the President
and Chief Executive Officer of PHH and a director of PHH from January 2012 to June 2017, as the President and Chief Executive Officer of Ocwen, effective upon the consummation of the merger. Ocwen
entered into an offer letter with Mr. Messina on April 17, 2018, which offer letter sets forth the terms and conditions of Mr. Messina's employment with Ocwen. Ocwen disclosed
that, in the event the effective date of the merger does not occur, the offer letter with Mr. Messina will terminate.
62
Table of Contents
THE MERGER AGREEMENT
The following is a summary of the material terms and conditions of the merger agreement. This summary does not purport
to be complete and may not contain all of the information about the merger agreement that is important to you. The description of the merger agreement in this section and elsewhere in this proxy
statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached to this proxy statement as
Annex A
and
is incorporated by reference into this proxy statement. We encourage you to read the merger agreement carefully and in its entirety because it is the primary contractual document that governs the
merger.
Additional information about PHH and Ocwen may be found elsewhere in this proxy statement and in other public reports and documents filed with the SEC. Please see
the section of this proxy statement entitled "Where You Can Find More Information," beginning on page 90.
The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger
agreement. The merger agreement is not intended to be a source of factual, business or operational information about PHH, Ocwen or Merger Sub, and the following summary of the merger agreement and the
copy thereof attached hereto as
Annex A
are not intended to modify or supplement any factual disclosure about PHH in
any documents it publicly files with the SEC. The representations, warranties and covenants made in the merger agreement by PHH, Ocwen and Merger Sub were made solely for the benefit of the parties to
the merger agreement and are qualified and subject to important limitations agreed to by PHH, Ocwen and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in
your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were
negotiated with the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to close the merger if the representations and warranties of
the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts.
The
representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed
with the SEC and in some cases were qualified by confidential disclosures that were made by each party to the other, which disclosures are not reflected in the merger agreement. Moreover, information
concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger
agreement, and subsequent developments or new information that may affect the accuracy of a representation or warranty may or may not be fully reflected in this proxy statement or PHH's public
disclosures. Accordingly, you should not rely on the representations and warranties as being accurate or complete or characterizations of the actual state of facts as of any specified date.
The merger agreement provides for the merger of Merger Sub with and into PHH upon the terms, and subject to the conditions, set forth in the
merger agreement. As the surviving corporation, PHH will continue to exist following the merger as a direct, wholly-owned subsidiary of Ocwen.
The
parties have agreed under the merger agreement that, from and after the effective time, the board of directors of Merger Sub immediately prior to the effective time will become the
initial directors of the surviving corporation, until their respective successors are duly appointed or until their earlier death, resignation or removal. From and after the effective time, the
officers of PHH
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Table of Contents
immediately
prior to the effective time will become the initial officers of the surviving corporation, until their respective successors are duly appointed or until their earlier death, resignation or
removal.
The
articles of incorporation of PHH will be amended and restated at the effective time to be in the form of the articles of incorporation of Merger Sub as in effect immediately prior to
the effective time (with necessary changes to reflect the name, date of incorporation, registered office and registered agent of PHH), which will be the articles of incorporation of the surviving
corporation until thereafter amended in accordance with their terms and applicable law (subject to compliance with requirements in the merger agreement regarding the inclusion of provisions providing
for the exculpation and indemnification of and advancement of expenses to PHH's officers, directors and certain other individuals).
At
the effective time, the bylaws of PHH will be amended and restated in their entirety to be in the form of the bylaws of Merger Sub as in effect immediately prior to the effective
time, and as so amended and restated will be the bylaws of the surviving corporation, until thereafter amended in accordance with their terms, the articles of incorporation of the surviving
corporation and applicable law.
Unless the parties otherwise agree, the closing of the merger, which we refer to as the
"
closing
," will take place on the third business day following the first date on which the conditions to closing (described in the section of this proxy
statement entitled "
Conditions to the Merger
"), other than those conditions that by their nature are to be satisfied only at the closing
(but subject to the fulfillment or waiver of those conditions at the closing), have been satisfied or waived.
The
merger will become effective at such time as the articles of merger are filed with the State Department of Assessments and Taxation of Maryland, or at such later time as Ocwen and
PHH will agree and specify in the articles of merger.
At the effective time, each share of PHH common stock issued and outstanding immediately prior to the effective time, other than shares owned by
Ocwen or Merger Sub (excluding shares held by Ocwen and Merger Sub in mutual funds and the like or otherwise held in a fiduciary or agency capacity, that are beneficially owned by third parties), will
be converted into the right to receive $11.00 per share in cash, without interest, which we refer to as the "
merger consideration
," subject to
adjustment (if any) as described in the next paragraph.
If
at any time during the period between the date of the merger agreement and the effective time, any change in the outstanding shares of PHH common stock occurs as a result of a
reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or any stock dividend with a record date during such period, the merger consideration will be
appropriately adjusted to reflect such change. In addition, if PHH pays any cash dividend (subject to Ocwen's prior consent) between the date of the merger agreement and the effective time, the merger
consideration will be appropriately adjusted such that the aggregate amount of consideration payable in respect of PHH common stock and equity awards will be reduced by the aggregate amount of such
cash dividend.
At
the effective time, each share of PHH common stock owned by Ocwen or Merger Sub (excluding shares held by Ocwen and Merger Sub in mutual funds and the like or otherwise held in a
fiduciary or agency capacity, that are beneficially owned by third parties) will be canceled without payment of any consideration.
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Table of Contents
At or promptly after the effective time, Ocwen will deposit with a paying agent selected by Ocwen (subject to the consent of PHH), which we
refer to as the "
paying agent
," cash in an amount sufficient to pay the aggregate merger consideration payable to holders of our common stock in
accordance with the merger agreement. As soon as reasonably practicable after the effective time, the paying agent will mail to each holder of our shares a letter of transmittal in customary form and
instructions for use in effecting the surrender of such holder's certificated or uncertificated shares in exchange for payment of the merger consideration. If you are a stockholder of record, you will
not be entitled to receive the merger consideration until you have surrendered your stock certificates (or followed the procedures applicable to lost stock certificates) or transferred your
uncertificated shares to the paying agent along with a duly executed letter of transmittal.
You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a
letter of transmittal.
Ocwen,
Merger Sub, the surviving corporation (or any of their subsidiaries) and the paying agent will be entitled to deduct and withhold any applicable required taxes from the merger
consideration. In the event any amount is deducted or withheld from the merger consideration otherwise payable to any holder of Our common stock (and is paid over to the applicable taxing
authorities), that amount will be treated as having been paid to that holder.
At
the effective time, the stock transfer books of PHH will be closed and there will be no further registration of transfers of PHH stock in the stock transfer books. On or after the
effective time, any certificated or uncertificated shares of PHH common stock presented to the paying agent or the surviving corporation will be cancelled and exchanged for the merger consideration in
accordance with the procedures set forth in the merger agreement.
The
paying agent will invest the aggregate merger consideration deposited with it as directed by Ocwen in accordance with the terms of the merger agreement. Any interest and other income
resulting from any such investments will be paid to the surviving corporation. To the extent that there are losses with respect to such investments or the fund diminishes for other reasons below the
level required to make prompt payments of the merger consideration, Ocwen will promptly replace or restore the cash in the fund lost through such investments or other events to ensure that the fund is
at all times maintained at a level sufficient to promptly pay the merger consideration.
If
any portion of the aggregate merger consideration deposited with the paying agent remains unclaimed by holders of PHH common stock twelve months after the effective time, if requested
by Ocwen, the paying agent will deliver such amount to the surviving corporation. Holders of PHH common stock who have not exchanged their shares for the merger consideration will thereafter only look
to the surviving corporation for payment of the merger consideration, subject to abandoned property, escheat or similar laws. None of Ocwen, the surviving corporation or the paying agent will be
liable to holders of PHH common stock for any amount delivered to a public official pursuant to any abandoned property, escheat or similar laws.
If any certificate has been lost, stolen or destroyed, in order to be entitled to receive the merger consideration in respect of such
certificate, the person claiming the certificate to be lost, stolen or destroyed must make an affidavit of that fact and, if required by Ocwen or the paying agent, post a bond, in an amount as Ocwen
may direct, as indemnity against any claim that may be made against it with respect to such certificate.
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At the effective time, any equity awards of PHH outstanding immediately prior to the effective time will be treated as
follows:
-
-
Each stock option, whether vested or unvested, that is outstanding immediately prior to the effective time will be cancelled and converted into
the right to receive an amount in cash equal to the product of (x) the total number of shares of our common stock subject to such stock option immediately prior to the effective time multiplied
by (y) the excess, if any, of $11.00 over the per share exercise price of the stock option, without interest, and subject to any applicable withholding taxes. Since all of the outstanding stock
options have a per share exercise price greater than $11.00, all of the stock options will be cancelled at the effective time for no consideration or payment.
-
-
Each time-based restricted stock unit (whether cash settled or stock settled) and each time-based restricted cash unit that tracks the value of
a share of our common stock, in each case, that is outstanding immediately prior to the effective time will accelerate in full and be cancelled and converted into the right to receive an amount in
cash equal to the product of (x) the number of shares of our common stock subject to such unit multiplied by (y) $11.00, without interest and subject to any applicable withholding taxes.
-
-
Each performance-based restricted stock unit (whether cash settled or stock settled) that is outstanding immediately prior to the effective
time will accelerate in full and be cancelled and converted into the right to receive an amount in cash equal to the product of (x) the number of shares of our common stock subject to such unit
based on the actual performance through immediately prior to the effective time, as reasonably determined by the compensation committee of the board of directors of PHH, multiplied by
(y) $11.00, without interest and subject to any applicable withholding taxes. Based on expected actual performance immediately prior to the effective time of the merger, which is based on the
assumed stock price of $11.00 and will be determined by the Human Capital and Compensation Committee of our board of directors, all of the performance-based restricted stock units will be valueless
and will be cancelled at the effective time for no consideration or payment.
-
-
Each share of PHH common stock granted under PHH's equity incentive plans that is subject to vesting, repurchase or other lapse restrictions
will accelerate in full and be cancelled and converted into the right to receive the merger consideration, without interest and subject to any applicable withholding taxes.
Conditions to the Merger
The respective obligations of PHH, Ocwen and Merger Sub to effect the merger are subject to the satisfaction or waiver on or prior to the
effective time of the following conditions:
-
-
the approval of the merger by the affirmative vote of the holders of a majority of the total number of shares of our common stock outstanding
and entitled to vote on the matter;
-
-
the filing of notifications with, or the receipt of consents and approvals from certain governmental authorities or government-sponsored
enterprises required for consummate the transactions contemplated by the merger agreement, a list of which is set forth in the confidential disclosure letter delivered by each party to the other party
in connection with the merger agreement (we refer to such notifications, consents and approvals as "
required governmental approvals
"), in each case
without the imposition of any "burdensome condition" (as defined below in "
Efforts to Obtain Regulatory Approvals
");
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-
-
the expiration or termination of the waiting period applicable to the consummation of the merger under the HSR Act (which termination has
already occurred); and
-
-
the absence of (x) any order, injunction or judgment prohibiting, enjoining or otherwise preventing the consummation of the merger or
any of the other transactions contemplated by the merger agreement and (y) any law prohibiting or making illegal the consummation of the merger or any of the other transactions contemplated by
the merger agreement.
The
obligations of Ocwen and Merger Sub to effect the merger are further subject to the satisfaction or waiver by Ocwen on or prior to the effective time of the following additional
conditions:
-
-
(i) the representations and warranties of PHH that are qualified by PHH material adverse effect (as defined below in
"
Material Adverse Effect
") will be true and correct, (ii) all other representations and warranties of PHH set forth in the merger
agreement will be true and correct except where any inaccuracies would not, individually or in the aggregate, constitute a PHH material adverse effect and (iii) notwithstanding anything to the
contrary in the foregoing clauses (i) and (ii), (a) the representations and warranties of PHH regarding corporate existence, due authorization and binding effect of the merger agreement,
brokers or finders will be true and correct in all material respects, (b) the representations and warranties of PHH regarding PHH's capitalization and the absence of certain changes since
September 30, 2017 will be true and correct except for
de minimis
inaccuracies, (c) the representations and warranties of PHH regarding
the absence of a PHH material adverse effect since January 1, 2017 will be true and correct in all respects, in each case of (a), (b) and (c) without giving effect to any
qualification or limitation as to materiality or PHH material adverse effect, and in each case of (i) through (iii), both as of the date of the merger agreement and as of the closing date as if
made on and as of the closing date (except to the extent any such representation or warranty, by its term, is expressly limited to a specific date, in which case such representation and warranty will
be so true and correct as of such specific date);
-
-
PHH's performance in all material respects of its covenants and agreements in accordance with the merger agreement at or prior to the closing
date;
-
-
the absence of a PHH material adverse effect since the date of the merger agreement;
-
-
the receipt by Ocwen of a certificate signed on behalf of PHH by an executive officer of PHH to the effect that the foregoing conditions have
been satisfied;
-
-
the consummation of (i) the sale of certain assets of PHH Home Loans to GRA, and (ii) PHH's purchase of Realogy's interests in
PHH Home Loans, which we refer to collectively as the "
PHH Home Loans transactions
," (both of these transactions have been completed); and
-
-
the completion of PHH's exit from its private label solutions business (the exit will be deemed complete for purposes of this condition if
there are less than 100 loans remaining that are being originated by PHH and its subsidiaries for their private label solutions clients). As of the date of this proxy statement, fewer than 10 loans
remain that are being originated by PHH and its subsidiaries for their private label solutions clients.
The
obligation of PHH to effect the merger is further subject to the satisfaction or waiver by PHH on or prior to the closing date of the following additional
conditions:
-
-
the representations and warranties of Ocwen and Merger Sub set forth in the merger agreement are true and correct (without giving effect to any
qualification or limitation as to materiality or Ocwen material adverse effect (as defined below in "
Material Adverse Effect
"), except
where the failure of such representations and warranties to be so true and correct would not, individually or in the aggregate, constitute an Ocwen material adverse effect, in each case both as of the
date of the merger agreement and as of the closing date as if made on and as of the
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closing
date (except to the extent that any such representation or warranty, by its terms, is expressly limited to a specific date, such representation and warranty will be so true and correct as of
such specified date);
-
-
Ocwen's and Merger Sub's performance in all material respects of their covenants and agreements in accordance with the merger agreement at or
prior to the closing date; and
-
-
the receipt by PHH of a certificate signed on behalf of Ocwen and Merger Sub by an executive officer of Ocwen to the effect that the foregoing
conditions have been satisfied.
None
of Ocwen, Merger Sub or PHH may rely on the failure of any closing condition to be satisfied to excuse such party from its obligation to effect the merger if such party's breach of
the merger agreement or failure to use its reasonable best efforts to consummate the merger or the other transactions contemplated by the merger agreement has been the primary cause of or resulted in
the condition of such condition to be satisfied.
For purposes of the merger agreement, "PHH material adverse effect" means any change, effect, event, occurrence, state of facts or development
that (i) has a material adverse effect on the business, financial condition or results of operations of PHH and its subsidiaries taken as a whole (excluding those assets, liabilities,
businesses and employees that have been or will be sold, assigned or otherwise transferred to or assumed by the applicable purchasers as a result of the PHH Home Loans transactions or PHH's sale of
its portfolio of mortgage servicing rights to New Residential Investment
Corp., which we refer to as the "
MSR sale
") or (ii) materially impairs or delays beyond the outside date (as defined below in
"
Termination of the Merger Agreement
"), or would reasonably be expected to materially impair or materially delay beyond the outside date,
PHH's ability to consummate the transactions contemplated by the merger agreement.
Further,
a PHH material adverse effect will be deemed to have occurred if PHH's adjusted net worth is more than $47.5 million below a prescribed amount (which prescribed amount
ranges from approximately $393 million to approximately $489 million, depending on the date of measurement) or if PHH fails to maintain a minimum amount of available cash of a prescribed
amount (ranging from approximately $293 million to approximately $367 million). The parties have agreed that certain changes in PHH's net worth or cash will be excluded from the
determination of adjusted net worth and available cash. For example, if PHH makes any cash dividends or other capital distributions with Ocwen's consent after the date of the merger agreement, the
amount of cash used for such capital distribution will not reduce PHH's adjusted net worth or available cash under the merger agreement. For purposes of determining whether the closing condition
relating to minimum adjusted net worth or minimum available cash is satisfied, adjusted net worth and available cash will be measured the first day on which all of the closing conditions described
above in "
Conditions to the Merger
" (other than those conditions that by their nature are to be satisfied only on the closing date and
conditions relating to the receipt of regulatory approvals that Ocwen has to obtain in order to consummate the merger) have been satisfied or, to the extent permitted under applicable law, waived. PHH
will be required to deliver its estimates of adjusted net worth and available cash within two business days thereafter. Ocwen has the right to dispute PHH's calculation of the amount of adjusted net
worth and available cash (excluding PHH's legal analysis in determining the amount of cash that is distributable under the applicable provisions of Maryland law) and, if PHH and Ocwen are unable to
any such dispute, either party may submit the disputed item to a mutually acceptable independent accountant for resolution.
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In
determining whether a PHH material adverse effect has occurred for purposes of prong (i) of the definition described above, the following changes and circumstances (and their
effects) will be excluded:
-
-
any failure, in and of itself, by PHH and its subsidiaries to meet any internal or published projections, forecasts or revenue or earnings
predictions for any period ending on or after the date of the merger agreement (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to
constitute, or be taken into account in determining whether there has been or will be, a PHH material adverse effect, except to the extent otherwise excluded under the merger agreement);
-
-
the public announcement or consummation of the transactions contemplated by the merger agreement, including the impact thereof on the
relationships (contractual or otherwise) of PHH or any of its subsidiaries with employees, customers, suppliers or partners, and any litigation arising from allegations of any breach of fiduciary duty
or violation of law relating to the merger agreement or the transactions contemplated thereby;
-
-
any hurricane, tornado, flood, earthquake or other natural disaster;
-
-
any decline in the market price of PHH common stock;
-
-
any action or omission taken pursuant to the express terms of the merger agreement, with the express prior written consent of Ocwen or Merger
Sub, or any action taken by Ocwen or Merger Sub after PHH's disclosure to Ocwen and Merger Sub of all material and relevant facts and information to the knowledge of PHH; or
-
-
certain matters set forth in the confidential disclosure letter delivered by PHH to Ocwen in connection with the merger agreement.
In
addition, the following changes and circumstances (and their effects) will be excluded in determining whether a PHH material adverse effect has occurred for purposes of prong
(i) of the definition described above, unless any such change or circumstance has a disproportionate impact on PHH and its subsidiaries, taken as a whole, relative to other for-profit
participants in the industries in which PHH and its subsidiaries conduct their businesses:
-
-
changes in general economic or political (including results of elections) conditions (including any outbreak or escalation of hostilities or
war or any act of terrorism) or changes in the securities, credit or financial markets in general, including changes in interest rates or currency exchange rates;
-
-
changes after the date of the merger agreement that adversely and generally affect the industry in which PHH and its subsidiaries operate; or
-
-
the Tax Reform Act or changes after the date of the merger agreement in laws, statutes, rules or regulations of governmental entities, or
interpretations thereof by governmental authorities, applicable to PHH and its subsidiaries, or in U.S. GAAP or applicable accounting regulations or principles.
For
purposes of the merger agreement, "Ocwen material adverse effect" means any change, effect, event, occurrence, state of facts or development that would, or would reasonably be
expected to, prevent, materially delay beyond the outside date or materially impair the ability of Ocwen or Merger Sub to consummate the merger and the other transactions contemplated by the merger
agreement.
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The merger agreement requires each of the parties to use their respective reasonable best efforts to take (or cause to be taken) all actions and
do (or cause to be done) all things necessary, proper or advisable to consummate the merger as soon as practicable, including using reasonable best efforts (i) to obtain all consents,
approvals, rulings or authorizations that are required to be obtained under applicable law, (ii) to obtain any consents required from third parties, (iii) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability of the parties to consummate the transactions contemplated by the merger agreement, and (iv) to effect as promptly
as practicable all necessary registrations, filings and responses to requests (if any) for additional information or documentary material from any governmental authority.
Without
limiting the generality of the agreements in the preceding paragraph, Ocwen has agreed to use reasonable best efforts to take (or cause to be taken) all actions and do (or cause
to be done) all things that any governmental authority indicates would be required in order to obtain any required governmental approvals or avoid any injunction or law that would enjoin, prevent or
prohibit the consummation of the transactions contemplated by the merger agreement; provided, however, nothing in the merger agreement will be deemed to require Ocwen or Merger Sub or permit PHH to
take any action, or commit to take any action or agree to any restraint, restriction, limitation, term, requirement, provision or condition that would, individually or in the aggregate, reasonably be
expected to, impair in any material respect the business or financial condition of Ocwen and its subsidiaries (including the surviving corporation and its subsidiaries) , taken as a whole (we refer to
each such restraint, restriction, limitation, term, requirement, provision or condition as a "burdensome condition"). In addition, nothing in the merger agreement will be construed to require any
party to take any action in violation of applicable law or commence any litigation with any governmental authority to oppose any enforcement action by any governmental authority or remove any
regulatory orders impeding the parties' ability to consummate the merger.
Subject
to applicable laws relating to the exchange of information, Ocwen will have the right to direct all matters with any governmental authority to the extent relating to the required
governmental approvals consistent with its obligations under the merger agreement, and PHH may not make any registration, filing or response relating to the required governmental approvals without
Ocwen's prior written consent (which will not be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, PHH will be able to respond to questions, information requests and other
inquiries from any governmental authority without Ocwen's prior written consent as long as such responses do not contain any commitments or agreements that would be binding upon Ocwen or the surviving
corporation or is otherwise material to the transactions contemplated the merger agreement that Parent has not consented to previously.
The merger agreement contains representations and warranties made by PHH, Ocwen and Merger Sub to each other. The statements embodied in those
representations and warranties were made solely for purposes of the merger agreement and for the benefit of the parties to the merger agreement and are subject to qualifications and limitations agreed
to by the parties in connection with negotiating the terms of the merger agreement (including in the confidential disclosure letter delivered by PHH to Ocwen and the confidential disclosure letter
delivered by Ocwen and Merger Sub to PHH, in each case in connection with the merger agreement). In addition, some of those representations and warranties were made as of a specific date, may be
subject to a contractual standard of materiality different from that generally applicable to stockholders or may have been used for the purpose of allocating risk between the parties to the merger
agreement rather than establishing matters as facts.
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The
representations and warranties made by PHH (including, in certain cases, with respect to its subsidiaries) to Ocwen and Merger Sub relate to, among other things, the
following:
-
-
with respect to PHH and each of its subsidiaries, due incorporation, valid existence, good standing, corporate authority to carry on its
business and compliance with organizational documents;
-
-
corporate authority to execute and deliver, to perform PHH's obligations under, and to consummate the transactions contemplated by, the merger
agreement;
-
-
the absence of violations of, or conflicts with, organizational documents, applicable law and material contracts as a result of PHH's execution
and performance of the merger agreement;
-
-
governmental consents, notifications, approvals, authorizations or registrations required in connection with PHH's execution or performance of
the merger agreement;
-
-
due execution of the merger agreement by PHH and the enforceability of the merger agreement against PHH;
-
-
the absence of material legal proceedings, claims and governmental orders;
-
-
compliance with applicable laws, governmental orders and permits, and absence of noncompliance claims by any governmental authority or
settlement agreements with governmental authorities;
-
-
capitalization of PHH, ownership of subsidiaries, and the absence of preemptive rights, repurchase, redemption or other rights to acquire
equity interests of PHH or its subsidiaries;
-
-
PHH's SEC filings since January 1, 2015 and the financial statements included therein;
-
-
material contracts and the absence of material breach or default under any material contract;
-
-
the absence of any event or change that would reasonably be expected to have a PHH material adverse effect since January 1, 2017;
-
-
the payment of taxes, the filing of tax returns and other tax matters;
-
-
the absence of collective bargaining agreements, union organization activities and other labor matters;
-
-
employee compensation and benefit plans;
-
-
the absence of certain undisclosed liabilities;
-
-
intellectual property matters;
-
-
policies and procedures regarding protection of personal information;
-
-
compliance with environmental laws and other environmental matters;
-
-
maintenance of insurance policies;
-
-
establishment and maintenance of disclosure controls and procedures and internal controls over financial reporting;
-
-
neither PHH nor any of its subsidiaries being an "investment company" under the Investment Company Act of 1940;
-
-
title to personal property;
-
-
real property leased by PHH or its subsidiaries and the absence of owned real property;
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-
-
compliance with applicable requirements relating to the servicing of mortgage loans and the absence of certain claims from agencies, investors
or insurers;
-
-
the absence of termination notices from PHH's servicing or subservicing clients;
-
-
expected timing for the completion of PHH's previously announced asset sale transactions and its exit from the PLS business;
-
-
brokers and finders for the transaction;
-
-
the information in this proxy statement;
-
-
the PHH stockholder vote required for the approval of the merger agreement and the merger;
-
-
the inapplicability of state takeover statutes to the merger;
-
-
the receipt by our board of directors of an opinion from the Company's financial advisor; and
-
-
the absence of undisclosed related party transactions.
The
representations and warranties made by Ocwen and Merger Sub to PHH relate to, among other things, the following:
-
-
due incorporation, valid existence, good standing and corporate authority to carry on its business;
-
-
corporate authority to execute and deliver, to perform Ocwen's and Merger Sub's obligations under, and to consummate the transactions
contemplated by, the merger agreement;
-
-
the absence of violations of, or conflicts with, organizational documents, applicable law and contractual obligations of Ocwen or Merger Sub as
a result of their execution and performance of the merger agreement;
-
-
governmental consents, notifications, approvals, authorizations or registrations required in connection with Ocwen's and Merger Sub's execution
of the merger agreement or consummation of the transactions contemplated by the merger agreement;
-
-
due execution of the merger agreement by Ocwen and Merger Sub and the enforceability of the merger agreement against Ocwen and Merger Sub;
-
-
the absence of material legal proceedings, claims and governmental orders;
-
-
Ocwen's ownership of Merger Sub and no prior activities of Merger Sub;
-
-
no ownership of shares of our common stock by Ocwen or Merger Sub, and no existing contract between Ocwen or Merger Sub with any member of
PHH's management or directors that is related to PHH or the transactions contemplated by the merger agreement;
-
-
brokers and finders for the transaction;
-
-
sufficiency and availability of funds (taking into account available cash held by PHH) at the closing to pay the aggregate merger consideration
and all other payment obligations in connection with the merger.
-
-
the information in this proxy statement supplied by Ocwen or Merger Sub specifically for inclusion or incorporation by reference into the proxy
statement; and
-
-
the solvency of Ocwen and its subsidiaries (including the surviving corporation) following the consummation of the merger.
Certain
of the representations and warranties of each of PHH, Ocwen and Merger Sub are qualified as to, among other things, "materiality," "PHH material adverse effect" or "Ocwen
material
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adverse
effect," as applicable. None of the representations and warranties contained in the merger agreement will survive the effective time.
Prior to the earlier of the effective time or the termination of the merger agreement in accordance with its terms, except as contemplated by
the merger agreement, as Ocwen may otherwise consent in writing (which cannot be unreasonably withheld, conditioned or delayed), or as specified in the confidential disclosure letter delivered by PHH
to Ocwen in connection with the merger agreement, PHH and its subsidiaries will conduct their operations in the ordinary course of business consistent with past practice and, subject to certain
exceptions, PHH will not, and will cause each of its subsidiaries not to, among other things:
-
-
adopt or propose any change to its organizational documents, except as required by applicable law;
-
-
issue, reissue, sell, grant, pledge, dispose of, transfer, encumber, purchase or repurchase any capital stock (other than the issuance of
shares of our common stock in respect of any equity awards outstanding on the date of the merger agreement) or any securities convertible into capital stock, or any rights, warrants or options to
acquire such capital stock or securities;
-
-
except as required by any existing compensation or benefits plans or as required by applicable law, (i) increase the compensation or
benefits of any director, officer or employee, except for increases in annual salary or wage rate for employees who are not officers in the ordinary course of business consistent with past practice
that do not exceed 5% individually or 3% in the aggregate and, if applicable, the payment of annual bonuses for completed periods on a time frame consistent with the payment of annual bonuses with
respect to 2016, based on actual performance and in the ordinary course of business consistent with past practice, (ii) establish, adopt, amend, or terminate any compensation or benefit plan,
(iii) grant any new awards, or amend or modify the terms of any outstanding awards, under any compensation or benefit plan, (iv) accelerate the vesting or lapsing of restrictions or
payment, or fund the payment, of any compensation or benefits, (v) change any actuarial or other assumptions used to calculate funding obligations with respect to any compensation or benefit
plan or change the manner of contributions to such plans or the basis on which such contributions are determined, except as may be required by GAAP, (vi) forgive any loans or issue any loans to
any director, officer or employee, (vii) hire any employee or engage any independent contractor with an annual compensation in excess of $200,000, (viii) terminate the employment of any
executive officer other than for cause, or (ix) grant or amend any rights to indemnification, advancement of expenses or exculpation of liabilities in favor of any director, officer or
employee, except for entry into such agreements with new hires or new directors on substantially the same terms and conditions as existing agreements for similarly situated individuals;
-
-
enter into, adopt, amend or terminate any collective bargaining agreement or other agreement with a labor union or similar organization;
-
-
except for transactions pursuant to existing contractual obligations listed in PHH's disclosure letter or in the ordinary course of business
consistent with past practice, sell, lease, encumber, dispose of, transfer, license or mortgage any assets, properties or rights, in each case for consideration in excess of $500,000;
-
-
(i) declare, set aside or pay any dividends on, or make any other distributions in respect of any PHH capital stock, (ii) adjust, split,
combine or reclassify any of PHH capital stock or issue any other securities or (iii) purchase, repurchase, redeem or otherwise acquire any capital stock of PHH or any of its subsidiaries or
any other securities thereof (including bonds) or any rights,
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warrants,
options to acquire any such shares or other securities, except for purchases, redemptions or other acquisitions of capital stock or other securities pursuant to an existing restricted stock
purchase agreement with current or former employees;
-
-
except as required by applicable law or consistent with past practice, make, change or revoke any material tax election, file any material
amended tax return, settle or compromise any material tax claim, proceeding or assessment, change any tax accounting method, enter into any closing agreement with respect to taxes, make or surrender
any material tax refund claim, or consent to any extension or waiver of the limitations period applicable to any tax claim or assessment;
-
-
take any action or omit to take any action or enter into any transaction which, to PHH's knowledge, has, or would reasonably be expected to
have, the effect of materially delaying or materially impeding or preventing the consummation of the PHH Home Loans transactions or the MSR sale;
-
-
(i) modify or amend any material contract in a manner adverse in any material respect to PHH's business, or terminate any material contract,
(ii) enter into any successor agreement to an expiring material contract that changes the terms of the expiring contract in a manner adverse in any material respect to PHH's business or
(iii) enter into any new material contract, except subservicing agreements entered into in the ordinary course on terms substantially consistent with existing agreements;
-
-
incur any indebtedness for borrowed money in excess of $1,000,000 in the aggregate or issue any debt securities or assume, guarantee or
otherwise become responsible for or cancel, the indebtedness of any other person, or make or authorize any material loan to any person;
-
-
merge or consolidate with any other person or acquire a material amount of assets or equity of another person (other than immaterial
acquisitions of assets in the ordinary course of business consistent with past practice);
-
-
except as required by applicable law, change any significant method of accounting or accounting principles or practices, except for such
changes required by GAAP;
-
-
terminate, cancel, or materially amend or modify any material insurance policy which is not replaced by an amount of insurance coverage that
PHH deems appropriate for its size and business;
-
-
adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization;
-
-
abandon, allow to lapse, encumber, or grant a license, covenant not to assert or similar right with respect to any material intellectual
property, in each case, other than in the ordinary course of business consistent with past practice;
-
-
except as required by applicable law, materially change any of the architecture or infrastructure of any network, information technology
infrastructure systems or any material component thereof or any other IT assets currently used in and material to PHH's business, other than maintenance or upgrades in the ordinary course of business
consistent with past practice;
-
-
institute, compromise, settle or agree to settle any litigation, dispute or other claim (i) involving amounts that exceed the reserve
therefor on the date of the merger agreement by more than $7,500,000 in the aggregate or (ii) that would impose any non-monetary obligation on PHH or any of its subsidiaries that would continue
after the effective time, other than any obligation to comply with applicable ;aw or refrain from violating applicable law; or
-
-
authorize or enter into any agreement or otherwise make any commitment to do any of the actions described above.
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PHH has agreed that, subject to certain exceptions described below, it will not, and will use reasonable best efforts to cause its subsidiaries
and its or their respective officers, directors, employees and representatives not to, directly or indirectly:
-
-
solicit, initiate or knowingly encourage, induce or facilitate (including by way of providing information) any proposal or offer (whether or
not in writing) with respect to, or any inquiry or proposal that would reasonably be expected to result in, any (i) merger, consolidation, share exchange, other business combination or similar
transaction involving PHH or any of its subsidiaries representing 20% or more of the assets of PHH and its subsidiaries, taken as a whole, (ii) direct or indirect acquisition of more than 20%
of the outstanding shares of PHH common stock or voting power of PHH, (iii) sale, lease, contribution or other disposition, directly or indirectly (including by way of merger, consolidation,
share exchange, other business combination, partnership, joint venture, sale of capital stock of or other equity interests in PHH or any of its subsidiaries or otherwise) of any business or assets of
PHH or any of its subsidiaries representing 20% or more of the consolidated revenues, net income or assets of PHH and its subsidiaries, taken as a whole, (iv) issuance, sale or other
disposition, directly or indirectly, to any person (or the stockholders of any person) or group of persons securities (or options, rights or warrants to purchase, or securities convertible into or
exchangeable for, such securities) representing 20% or more of the voting power of PHH, (v) any tender offer or exchange offer as a result of which any person or group will acquire, directly or
indirectly, beneficial ownership, or the right to acquire beneficial ownership, of 20% or more of the voting power of PHH or (vi) any combination of the foregoing (in each case of
(i) through (vi), other than the merger), which we refer to as a "
takeover proposal
";
-
-
participate in any discussions or negotiations with any person regarding, or furnish any information with respect to, or cooperate in any way
with any person with respect to any takeover proposal or any inquiry or proposal that would reasonably be expected to result in a takeover proposal;
-
-
approve or recommend any takeover proposal;
-
-
approve, recommend, execute or enter into any letter of intent, agreement in principle, memorandum of understanding, merger agreement, asset or
share purchase or share exchange agreement, option agreement or other similar agreement related to any takeover proposal (each such letter, memorandum or agreement is referred to as an
"
acquisition agreement
");
-
-
enter into any agreement or agreement in principle requiring PHH to abandon, terminate or fail to consummate the transactions contemplated by
the merger agreement or breach its obligations thereunder; or
-
-
propose or agree to do any of the foregoing.
In
addition, PHH has agreed to, promptly after the execution of the merger agreement, immediately cease all existing discussions or negotiations with any person conducted heretofore with
respect to any takeover proposal, and request the prompt return or destruction of all confidential information previously furnished to any such person or its representatives.
Notwithstanding
the restrictions described above, at any time prior to the approval of the merger by PHH's stockholders, in response to an unsolicited
bona
fide
written takeover proposal that did not result from any material breach of the non-solicitation restrictions described above and certain other provisions of the merger
agreement, PHH may (i) contact the person making such takeover proposal to clarify the terms and conditions of the takeover proposal and (ii) if our board of directors concludes in
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good
faith, after consultation with its outside legal and financial advisors, that such takeover proposal constitutes or is reasonably likely to result in a "superior proposal" (as defined below), PHH
may:
-
-
furnish information with respect to PHH and its subsidiaries to the person or group of persons who has made such takeover proposal pursuant to
a confidentiality agreement that contains (x) confidentiality terms that are, as determined by PHH in good faith, no less favorable in the aggregate to PHH than those contained in the
confidentiality agreement with Ocwen and (y) a customary standstill provision, as long as any material non-public information furnished to such person or group has previously been provided to
Ocwen or is provided to Ocwen substantially concurrently with the provision of such information to such person or group; and
-
-
participate in discussions regarding the terms of such takeover proposal and the negotiation of such terms with the person making such takeover
proposal.
Under
the merger agreement, the term "
superior proposal
" refers to any
bona fide
written
takeover proposal made by a third party or group pursuant to which such third party (or, in a parent-to-parent merger involving such third party, the stockholders of such third party) or group would
acquire, directly or indirectly, more than 50% of the voting power of PHH or substantially all of the assets of PHH and its subsidiaries, taken as a whole, on terms which our board of directors
determines in good faith (after consultation with its legal and financial advisors) (i) to be superior to the holders of PHH common stock from a financial point of view than the transactions
contemplated by the merger agreement with Ocwen (taking into account any changes proposed by Ocwen to the terms of the merger agreement) including the merger (including the merger consideration),
taking into account all the terms and conditions of such proposal and the person making the proposal (including all financial, regulatory, legal conditions to consummation and other aspects of such
proposal), (ii) is reasonably capable of being consummated on the terms proposed and (iii) for which financing, if a cash transaction (whether in whole or in part), is not a condition to
closing.
PHH
has agreed to promptly notify Ocwen of the receipt of any takeover proposal, including the material terms and conditions thereof and the identity of the person making the proposal.
In addition, PHH has agreed to keep Ocwen informed in all material respects and on a reasonably current basis of any change in the status or material terms of any takeover proposal, and provide to
Ocwen (as soon as practicable after receipt or delivery thereof) copies of all material correspondence and other written material documentation between PHH or any of its subsidiaries and the person
making the takeover proposal.
PHH
has agreed that any violation of the non-solicitation obligations by any representative of PHH or any of its subsidiaries who is (i) a director or officer of PHH or any of its
subsidiaries, (ii) a senior-level employee (i.e., a managing director (or similar title) or more senior) of any financial advisor to PHH or any of its subsidiaries or (iii) a
partner of any outside legal counsel to PHH or any of its subsidiaries will be deemed a breach by PHH.
PHH has agreed that, subject to certain exceptions as described below, neither our board of directors nor any committee thereof will
(i) withdraw or propose to withdraw (or modify or propose to modify in any manner adverse to Ocwen) our board of directors' recommendation of the merger agreement and the transactions
contemplated thereby to PHH's stockholders, (ii) approve, recommend or declare advisable, or propose publicly to approve, recommend or declare advisable, any takeover proposal,
(iii) approve, recommend or declare advisable, or propose to approve, recommend or declare advisable, or allow PHH or any of its subsidiaries to execute or enter into, any acquisition
agreement, (iv) enter into any agreement, letter of intent, or agreement in principle requiring PHH to abandon, terminate or fail to consummate the transactions contemplated by the merger
agreement or breach its obligations thereunder, (v) fail to recommend against any takeover proposal subject to federal tender
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offer
rules in a Solicitation/Recommendation Statement on Schedule 14D-9 within 10 business days after the commencement of such takeover proposal, (vi) fail to include our board of
directors' recommendation of the merger agreement in this proxy statement or re-affirm such recommendation within 10 business days following Ocwen's written request (provided that Ocwen may not make
such request more than twice in connection with any takeover proposal), or (vii) resolve or agree to do any of the actions in the foregoing clauses (i) through (vi) (we refer to
any of the foregoing actions as an adverse recommendation change).
Notwithstanding
the foregoing restrictions, at any time prior to the approval of the merger by PHH's stockholders, subject to compliance with the requirements and procedures described
below, our board of directors may, in response to an unsolicited
bona fide
written takeover proposal that did not result from any material breach of the
non-solicitation restrictions described above under "
No Solicitation by PHH
" and certain other provisions of the merger agreement, make an
adverse recommendation change or terminate the merger agreement to enter into a definitive acquisition agreement with respect to such takeover proposal if our board of directors has determined, after
consultation with its outside legal and financial advisors, that such takeover proposal constitutes a superior proposal and that, following consultation with outside legal counsel, the failure to make
an adverse recommendation change or terminate the merger agreement is reasonably likely to violate our board of directors' fiduciary duties to PHH's stockholders under applicable law.
In
addition, at any time prior to the approval of the merger by PHH's stockholders, subject to compliance with the requirements and procedures described below, our board of directors may
make an adverse recommendation change in response to an "intervening event" (as defined below) if our board of directors determines, after consultation with its outside legal counsel, that failure to
make an adverse recommendation change is reasonably likely to violate our board of directors' fiduciary duties to PHH's stockholders under applicable law. For purposes of the merger agreement, an
"intervening event" refers to any material development or change in circumstances relating to PHH or any of its subsidiaries occurring or arising after the date of the merger agreement that
(i) was not known by nor reasonably foreseeable to our board of directors as of the date of the merger agreement, and (ii) does not relate to or involve any takeover proposal; provided,
however, that in no event will any of the following be deemed, either alone or in combination, to constitute an interviewing event: (1) changes in the market price or trading volume of PHH
common stock, in and of themselves, (2) the timing of any required governmental approval, (3) the dismissal or any other resolution of the CFPB litigation (as defined below under
"
CFPB Litigation
") or (4) the fact that, in and of itself, PHH exceeds internal or published projections.
Prior
to making any adverse recommendation change in response to a superior proposal or intervening event or terminating the merger agreement in order to accept a superior proposal, PHH
is required to comply with the following requirements and procedures:
-
-
PHH must give Ocwen at least five business days' prior written notice of its intention to effect an adverse recommendation change or terminate
the merger agreement, including (i) in the case of a superior proposal, the details of the terms and conditions of the superior proposal that is the basis of the proposed action, the identity
of the person making the superior proposal, and a copy of the proposed transaction agreements and other material documents (in the event of any material change to the terms of the superior proposal,
PHH is required to deliver to Ocwen an additional notice and the notice period will restart, except that the notice period will be at least three business days rather than at least five business days)
or (ii) in the case of an intervening event, the material facts and circumstances of the intervening event;
-
-
during such notice period, to the extent Ocwen seeks to negotiate, PHH must negotiate, and must use reasonable best efforts to cause its
financial and legal advisors to negotiate, with Ocwen in good faith to make such adjustments to the terms and conditions of the merger
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agreement
so that it results in a transaction that is (i) in the case of a takeover proposal, no less favorable to PHH's stockholders than such takeover proposal or (ii) in the case of
an intervening event, enables our board of directors to determine (after consultation with its legal counsel) that failure to make an adverse recommendation change is not reasonably likely to violate
our board of directors' fiduciary duties to PHH's stockholders under applicable law; and
-
-
following the end of the last notice period, our board of directors is required to determine, (i) in the case of a superior proposal,
after consultation with its outside legal and financial advisors, that the takeover proposal continues to constitute a superior proposal or (ii) in the case of an intervening event, after
consultation with its outside legal counsel, that the failure to make an adverse recommendation change is still reasonably likely to violate our board of directors' fiduciary duties to PHH's
stockholders under applicable law.
Nothing
in the merger agreement will prohibit PHH or our board of directors from complying with Rules 14a-9, 14d-9, 14e-2 and Item 1012(a) of Regulation M-A
promulgated under the Exchange Act, or from issuing a "stop, look and listen" statement pending disclosure of its position thereunder or making any required disclosure to the PHH's stockholders.
PHH is party to a pending litigation with the Consumer Financial Protection Bureau, which we refer to as the
"
CFPB
," relating to an order issued by the CFPB against PHH and certain of its affiliates on June 4, 2015. We refer to this matter as the "CFPB
litigation." PHH has agreed that, from the execution of the merger agreement until the effective time, it will (i) reasonably consult with Ocwen at regular intervals regarding the status of the
CFPB litigation and in advance of any meeting with the CFPB with respect to the CFPB litigation, (ii) provide Ocwen with a reasonable opportunity to review and comment on material developments
in the CFPB litigation, and (iii) consider in good faith all comments reasonably proposed by Ocwen with respect to the CFPB litigation. In addition, PHH has agreed that it will not, without
Ocwen's prior consent (not to be unreasonably withheld, conditioned or delayed), (a) file or otherwise commence any appeal in connection with the CFPB litigation or (b) settle or agree
to settle the CFPB litigation if such settlement (1) exceeds a specified amount, (2) imposes any restriction on Ocwen's ability to operate PHH's business (as conducted as of the date of
the merger agreement) after the effective time (excluding existing restrictions and restrictions on the PLS business or any other business that PHH no longer owns or conducts), (3) imposes any
monetary penalty or other obligation on Ocwen or its subsidiaries (excluding the surviving corporation and its subsidiaries) or (4) contains any admission of fault or any non-standard or
unusual release language.
In connection with the merger, Ocwen will assume through the surviving corporation PHH's 7.375% Senior Notes due 2019 and 6.375% Senior Notes
due 2021, and either pay off or assume PHH's existing warehouse facilities and advance receivables facility. Prior to the effective time, Ocwen will execute and deliver any supplements, amendments or
other instruments required for the assumption of the senior notes.
PHH has agreed under the merger agreement to hold a special meeting of its stockholders to consider and take action upon approval of the merger
as soon as reasonably practicable after this proxy statement is cleared by the SEC. PHH may only adjourn, postpone or recess the special meeting in order to obtain a quorum or solicit additional votes
(so long as such meeting is not adjourned, postponed or recessed to a date on or after the outside date).
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During the period prior to the effective time, upon reasonable request and notice by Ocwen and subject to applicable laws relating to exchange
of information, PHH will, and will cause its subsidiaries to, afford to Ocwen's officers, employees, accountants, counsel and other representatives access to PHH's properties, books, certain
contracts, commitments and records, and to PHH's officers, employees, accounts, counsel and other representatives, in each case in a manner not unreasonably disruptive to the operation of the business
of PHH and its subsidiaries.
Without
limiting the generality of the foregoing, prior to the determination date for purposes of calculating PHH's adjusted net worth and available cash (see
"
Material Adverse Effect
" above), PHH will deliver to Ocwen, no later than the 15th day of each month, a report containing PHH's
most current estimate of its adjusted net worth and available cash, in each case as of the last day of the full calendar month immediately preceding the date of such report. After the determination
date for purposes of calculating PHH's adjusted net worth and available cash, PHH will deliver to Ocwen, no later than the Wednesday of each calendar week, a report containing PHH most current
estimate of available cash as of the last day of the calendar week immediately preceding the date of such report.
Under the merger agreement, Ocwen has agreed to indemnify, and to cause the surviving corporation to indemnify, for a period of six years after
the closing and to the fullest extent permitted or required by applicable law, each individual who was a director or officer of PHH or any of its subsidiaries prior to the effective time or has served
at the request of PHH as a director, officer, member, trustee or fiduciary of another entity prior to the effective time, which we refer to collectively as the "
PHH indemnified
parties
," with respect to all claims and liabilities (including attorneys' fees and disbursements) incurred or arising in connection with any claim, action, investigation, suit
or proceeding, including with respect to matters existing or occurring or alleged to have existed or occurred at or prior to the effective time (including the merger agreement and the transactions and
actions contemplated thereby), arising out of or pertaining to the fact that the PHH indemnified party is or was an officer or director of PHH or any of its subsidiaries or is or was serving at the
request of PHH or any of its subsidiaries as a director or officer of another person or any act or omission by such PHH indemnified party while serving in such capacity, whether asserted or claimed
prior to, at or after the effective time.
Ocwen
has also agreed that all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time in
favor of the current or former directors, officers or employees of PHH or any of its subsidiaries as provided in their respective organizational documents or in any indemnification, employment or
other similar agreements will survive the merger and continue in full force and effect in accordance with their terms. For a period of six years after the closing, to the fullest extent permitted by
applicable law, Ocwen will cause the organizational documents of the surviving corporation and its subsidiaries to contain provisions no less favorable with respect to exculpation and indemnification
of and advancement of expenses to the PHH indemnified parties than those set forth in the respective organizational documents as of the date of the merger agreement.
In
addition, for a period of six years after the effective time, Ocwen will either cause PHH's current directors' and officers' liability insurance and fiduciary liability insurance to
be maintained, or provide substitute policies of not less than the existing coverage and containing terms and conditions that are no less favorable to the covered individuals than the policies
currently maintained by PHH with respect to claims arising from facts or events occurring on or before the effective time. In lieu of the foregoing, PHH may, prior to the effective time and upon
written notice to Ocwen, purchase a six-year prepaid "tail policy" for PHH's current and former directors and officers (and any individual
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who
becomes an officer or director of PHH prior to the effective time) who are currently covered by directors' and officers' and fiduciary liability insurance coverage currently maintained by PHH. The
merger agreement provides that in no event will the aggregate annual premium payments for any continuing coverage, substitute policies or "tail policies" exceed 250% of the annual premium paid by PHH
for such insurance for the year ended December 31, 2017.
The
PHH indemnified parties are third-party beneficiaries of the provisions described above, and such individuals will have the right to enforce the provisions of the merger agreement
summarized above.
Ocwen has agreed that for a period from the effective time through December 31, 2018, it will provide to each continuing employee of PHH
and its subsidiaries with (i) an annual base salary or base wage and target annual incentive compensation opportunities (excluding equity and long-term incentive compensation) that are, in each
case, no less than those provided to such continuing employee immediately prior to the effective time and (ii) employee benefits that are substantially similar in the aggregate to the employee
benefits provided to the continuing employees immediately prior to the effective time. In addition, Ocwen has agreed that from the effective time until the one year anniversary of the closing date of
the merger, Ocwen will continue to maintain or cause to be maintained, without amendment, certain of PHH's severance plans and incentive plans with respect to the continuing employees in accordance
with the terms thereof, and provide the payments and benefits specified therein.
After
the closing of the merger, Ocwen will use reasonable best efforts to cause any employee benefit plans sponsored or maintained by Ocwen or the surviving corporation or their
subsidiaries in which the continuing employees are eligible to participate to (i) waive any pre-existing conditions or limitations and eligibility waiting periods under any such plans that are
group health plans of Ocwen or its affiliates with respect to the continuing employees and their eligible dependents, (ii) give each continuing employee credit for the plan year in which the
effective time occurs towards applicable co-payments, deductibles and annual out-of-pocket limits for medical expenses incurred prior to the effective time for which payment has been made, and
(iii) give each continuing employee service credit for his or her employment with PHH and its subsidiaries for purposes of vesting, level of benefits and eligibility to participate under the
applicable plan, as if such service had been performed with Ocwen (except for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits,
or to the extent it would result in a duplication of benefits). In addition, after the closing of the merger, Ocwen will provide credit to each continuing employee for accrued unused sick leave and/or
accrued unused paid time off in the amount available to such
continuing employee immediately prior to the effective time, in accordance and subject to the terms of the applicable policy of PHH.
If
requested in writing by Ocwen at least 10 business days prior to the effective time (to the extent permitted by applicable law and the terms of the applicable plan or arrangement),
PHH will cause its 401(k) plans to be terminated immediately prior to the effective time. In such event, Ocwen will permit each eligible continuing employee to, as of the effective time, become a
participant in an Ocwen 401(k) plan and make rollover contributions of "eligible rollover distributions" in cash or notes (in the case of participant loans and to the extent permitted by Ocwen's
401(k) plan) in an amount equal to the eligible rollover distribution portion of the account balance distributed to each such continuing employee from such PHH 401(k) plans to Ocwen's 401(k) plan.
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The merger agreement contains additional agreements between PHH and Ocwen relating to, among other things, the
following:
-
-
notifications of certain matters, including any material breach of any representation, warranty, covenant or agreement in the merger agreement;
-
-
preparation of this proxy statement;
-
-
ensuring exemption of certain transactions in connection with the merger under Rule 16b-3 under the Exchange Act;
-
-
ensuring inapplicability of state takeover statutes;
-
-
defense of litigation relating to the merger or other transactions contemplated by the merger agreement; and
-
-
assistance and cooperation with respect to integration planning and Ocwen's post-closing reorganization activities.
The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time (notwithstanding any stockholder
approval) in the following circumstances:
-
-
by mutual written consent of Ocwen and PHH;
-
-
by either Ocwen or PHH if:
-
-
the merger has not been consummated on or before September 27, 2018, which we refer to as the
"
outside date
," provided that the outside date will be extended to December 27, 2018 if the closing condition relating to the receipt of the
required governmental approvals has not been satisfied on September 27, 2018 but all other conditions described under "
Conditions to the
Merger
" have been satisfied (or, in the case of conditions that by their terms are to be satisfied at the closing, capable of being satisfied on such date); provided, further,
that this right to terminate the merger agreement will not be available to a party that has breached the merger agreement and such breach was the primary cause of the failure to consummate the merger
by the outside date;
-
-
any permanent injunction prohibiting the merger or any of the transactions contemplated by the merger agreement has become
effective, final and nonappealable, or any law prohibiting the merger or any of the transactions contemplated by the merger agreement has been enacted, promulgated or enforced by any governmental
authority; provided, that the terminating party has complied in all material respects with its obligations described under "
Efforts to Obtain Regulatory
Approvals
"; or
-
-
the vote required to adopt the merger agreement is not obtained at the special meeting of PHH stockholders.
In
addition, PHH may terminate the merger agreement in the following circumstances:
-
-
prior to the approval of the merger by PHH's stockholders, in order to enter into a definitive acquisition agreement with respect to a superior
proposal; provided that PHH has complied in all material respects with its obligations described under "
No Solicitation by PHH
" and certain
procedures described under "
Adverse Recommendation Change; Fiduciary Termination
" above, and concurrently pays the termination fee to Ocwen
as described under "
Termination Fee
" below; or
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-
-
there has been a material breach of any representation, warranty, covenant or agreement in the merger agreement by Ocwen or Merger Sub, which
breach would give rise to the failure to satisfy a condition to PHH's obligation to consummate the merger, and such failure is not curable or has not been cured within the earlier of the outside date
and 30 days following PHH's written notice to Ocwen of such breach; provided that PHH will not have this right to terminate the merger agreement if PHH is then in breach of any representation,
warranty, covenant or agreement in the merger agreement that would give rise to the failure to satisfy a condition to Ocwen's and Merger Sub's obligation to consummate the merger.
In
addition, Ocwen may terminate the merger agreement in the following circumstances:
-
-
prior to the approval of the merger by PHH's stockholders, our board of directors has made an adverse recommendation change; or
-
-
there has been a material breach of any representation, warranty, covenant or agreement in the merger agreement by PHH, which breach would give
rise to the failure to satisfy a condition to Ocwen's and Merger Sub's obligation to consummate the merger, and such failure is not curable or has not been cured within the earlier of the outside date
and 30 days following Ocwen's written notice to PHH of such breach; provided that Ocwen will not have this right to terminate the merger agreement if Ocwen is then in breach of any
representation, warranty, covenant or agreement in the merger agreement that would give rise to the failure to satisfy a condition to PHH's obligation to consummate the merger.
If
the merger agreement is terminated, it will become void and of no effect with no liability on the part of any party to another party; provided, however, that (i) certain
provisions, including those relating to confidentiality, termination fee, governing law and jurisdiction will survive the termination and (ii) no party will be released from liabilities arising
out of any willful breach of the merger agreement or fraud.
PHH will be required to pay a termination fee of $12,600,000 to Ocwen under the following
circumstances:
-
-
Ocwen terminates the merger agreement as a result of an adverse recommendation change by our board of directors;
-
-
PHH terminates the merger agreement in order to enter into a definitive acquisition agreement with respect to a superior proposal;
-
-
(i) a third party has publicly announced and not withdrawn a takeover proposal prior to the special meeting of PHH's stockholders to vote on
the approval of the merger or the termination of the merger agreement, (ii) PHH or Ocwen terminates the merger agreement due to the failure to obtain the required PHH stockholder approval of
the merger agreement or the failure to consummate the merger on or before the outside date, or Ocwen terminates the merger agreement due to a material breach by PHH, and (iii) within
12 months of such termination, PHH consummates a takeover proposal or enters into a definitive acquisition agreement with respect to a takeover proposal that is subsequently consummated (solely
for purpose of this provision, any reference to 20% in the definition of takeover proposal will be deemed to refer to 50% instead); or
-
-
PHH or Ocwen terminates the merger agreement due to the failure to obtain the required PHH stockholder approval of the merger agreement but, at
the time of such termination, Ocwen would also have been permitted to terminate the merger agreement as a result of an adverse recommendation change by our board of directors.
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In
the event the termination fee is payable, from and after the payment of the termination fee by PHH to Ocwen, PHH will have no further liability of any kind.
The parties to the merger agreement have agreed that irreparable damage would occur in the event that the parties do not perform their
obligations under the provisions of the merger agreement in accordance with its specified terms or otherwise breach such provisions. Accordingly, the parties have agreed that the parties will be
entitled to an injunction or injunctions, specific performance or other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provisions of the merger
agreement.
At any time prior to the effective time, the merger agreement may be amended by PHH, Ocwen and Merger Sub by an instrument in writing signed on
behalf of each of the parties; provided, however, that after the approval of the merger by PHH's stockholders, no amendment which requires further approval of PHH's stockholders under applicable law
or the rules and regulations of the NYSE may be made without such further approval.
The merger agreement is governed and construed in accordance with the laws of the State of Delaware, without giving effect to principles or
rules of conflict of laws; provided, however, that the provisions of the merger agreement relating to the mechanics of the merger and the fiduciary duties of our board of directors will be governed by
the laws of the State of Delaware.
Each
party to the merger agreement has agreed to irrevocably and unconditionally submit to the exclusive jurisdiction of the Delaware Court of Chancery (and if the Delaware Court of
Chancery is unavailable, any Delaware State court and the Federal court of the United States of America sitting in the State of Delaware) for the purposes of any suit, action or other proceeding
arising out of the merger agreement or any transaction contemplated thereby.
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SUBMISSION OF STOCKHOLDER PROPOSALS
If the merger is consummated, we will not have public stockholders and there will be no public participation in any future meeting of
stockholders. However, if the merger is not consummated or if we are otherwise required to do so under applicable law, we would hold a 2018 annual meeting of stockholders. Proposals from stockholders
are given careful consideration by us in accordance with Rule 14a-8 of the Exchange Act, or "
Rule 14a-8
." If a 2018 annual meeting is
held, we
will provide all stockholders with the opportunity, under certain circumstances and consistent with our by-laws and the rules of the SEC, to participate in the governance of the Company by submitting
stockholder proposals that they believe merit consideration at the 2018 annual meeting of stockholders. To enable management to analyze and respond to proposals that stockholders wish to have included
in the proxy statement and proxy card for that meeting, our by-laws, consistent with Rule 14a-8, require that any such proposal be received by us in writing no later than the tenth day
following the public announcement of the date of the 2018 annual meeting of stockholders. Any stockholder proposal submitted must also be in compliance with our by-laws and must contain specified
information about each nominee or the proposed business and the stockholder making the nomination or proposal. Pursuant to our by-laws, any stockholder proposal or director nomination for that meeting
that is submitted outside the processes of Rule 14a-8 will be considered "untimely" unless it is received by us no later than the tenth day following the public announcement of the date of the
2018 annual meeting of stockholders.
Proxies
solicited by our board of directors for the 2018 annual meeting of stockholders may confer discretionary authority to vote on any untimely stockholder proposals or director
nominations without express direction from stockholders giving such proxies. All stockholder proposals and director nominations must be addressed to the attention of our Corporate Secretary at PHH
Corporation, 3000 Leadenhall Road, Mount Laurel, New Jersey 08054. The chairman of our annual meeting of stockholders may refuse to acknowledge the introduction of any stockholder proposal or
director nomination not made in compliance with the foregoing procedures.
HOUSEHOLDING OF SPECIAL MEETING MATERIALS
Stockholders that share the same address may not receive separate copies of proxy materials, unless we have received contrary instructions from
such stockholders. This practice is known as "householding" and is intended to reduce the printing and postage costs associated with mailing duplicative sets of proxy materials to stockholders sharing
the same address. If you are receiving multiple sets of our proxy materials and wish to receive only one set in the future, or if you are currently only receiving one set of our proxy materials and
wish to receive separate sets of proxy materials for you and the other stockholders sharing your address, please notify us or your bank, broker or other nominee by indicating your preference on the
enclosed proxy card or vote instruction form. We will deliver an additional copy of our proxy materials to you, without charge, upon written request sent to Investor Relations at PHH Corporation,
3000 Leadenhall Road, Mount Laurel, New Jersey 08054. Our proxy materials are also available on our website at http://www.phh.com.
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OTHER BUSINESS
As of April 27, 2018, our Board is not aware of any other business to come before the special meeting. If, however, any additional
matters are presented at the special meeting, it is the intention of the persons named in the accompanying proxy to vote in accordance with their judgment on those matters.
MISCELLANEOUS
You should not send in your PHH stock certificates until you receive transmittal materials after the merger is
consummated.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR TO OR FROM ANY PERSON TO WHOM OR FROM WHOM, IT IS UNLAWFUL TO
MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL
MEETING.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT.
THIS PROXY STATEMENT IS DATED April 27, 2018. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY.
Your vote is very important.
Whether or not you plan to attend the special meeting, please vote your shares by telephone, electronically
via the
Internet or by completing and returning the enclosed proxy card or vote instruction form. Giving your proxy now will not affect your right to vote in person if you attend the special meeting.
If
you have questions about this proxy statement, the special meeting or the merger or the merger agreement, you should contact: MacKenzie Partners, Inc., our proxy solicitor, toll-free
at +1-800-322-2885.
If you have questions or need assistance in voting your shares, please call:
1407
Broadway, 27th Floor
New York, New York 10018
proxy@mackenziepartners.com
Call Collect: (212) 929-5500
or
Toll-Free (800) 322-2885
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By Order of the Board of Directors:
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Vice President, Deputy General Counsel and Corporate Secretary
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ANNEX A
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
by
and among
OCWEN
FINANCIAL CORPORATION,
POMS
CORP
and
PHH
CORPORATION
Dated
as of February 27, 2018
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AGREEMENT AND PLAN OF MERGER
This
AGREEMENT AND PLAN OF MERGER, dated as of February 27, 2018 (this "
Agreement
"), is by and among Ocwen Financial Corporation, a Florida
corporation ("
Parent
"), POMS Corp, a Maryland corporation and a direct wholly-owned subsidiary of Parent ("
Merger Sub
" and, together with
Parent, the "
Acquirer Parties
"), and PHH Corporation, a Maryland corporation (the "
Company
" and together with Parent and Merger Sub, the
"
Parties
" and each, a "
Party
").
W
I
T
N
E
S
S
E
T
H
:
WHEREAS,
the Board of Directors of the Company (the "
Company Board
"), the Board of Directors of Parent and the Board of Directors of
Merger Sub have each unanimously (i) approved this Agreement and the transactions contemplated by this Agreement, including the Merger (as defined herein), on the terms and subject to the
conditions of this Agreement, and (ii) determined that the Merger and the other transactions contemplated by this Agreement on the terms and subject to the conditions of this Agreement are
advisable and in the best interests of the Company and the Acquirer Parties, respectively, and their respective equityholders;
WHEREAS,
the Company Board has unanimously resolved to recommend that the holders of shares of Company Common Stock (as defined herein) adopt this Agreement in accordance with
Section 3-105 of the MGCL;
WHEREAS,
Parent, as the sole stockholder of Merger Sub, as of the date hereof, shall, immediately after the execution and delivery of this Agreement, deliver a written consent approving
this Agreement and the transactions contemplated by this Agreement, including the Merger; and
WHEREAS,
the Parties desire to make certain representations, warranties and agreements in connection with the Merger and also to prescribe certain conditions to the Merger, in each case
as set forth in this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1
Definitions
.
As used in this Agreement the following terms have the meanings indicated:
"
Acceptable
Confidentiality Agreement
" means a confidentiality agreement between the Company and a Person contemplating making a Company Takeover Proposal
that contains (i) confidentiality terms that are, as determined by the Company in good faith, no less
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favorable in the aggregate to the Company than those contained in the Confidentiality Agreement and (ii) a customary standstill provision.
"
Acquirer Disclosure Letter
" means the disclosure letter of the
Acquirer
Parties, dated as of the date of this Agreement, and delivered by Parent to the Company concurrently with the execution of this Agreement.
"
Acquirer SEC Documents
" means all reports, schedules, forms,
statements and
other documents (including exhibits and other information incorporated therein) filed with the SEC as required by the SEC to be filed by the Acquirer Parties since January 1, 2016, together
with any documents filed during such period by the Acquirer Parties to the SEC on a voluntary basis on Form 8-K.
"
Affiliate
" means, with respect to any Person, any other Person
that
directly, or through one or more intermediaries, controls such Person.
"
Agency
" means any of the Federal Housing Administration, the
United States
Department of Housing and Urban Development, the United States Department of Agricultural Rural Development, the United States Department of Veterans Affairs or any applicable State Agency;
provided
that, solely for purposes of the representations and warranties in
Section 4.6(c)
,
Section 4.23(a)
and
Section 4.23(b)
, Agency shall also include the GSEs.
"
Agreement
" means this Agreement as the same may be amended,
supplemented or
modified in accordance with the terms hereof.
"
Anti-Bribery Laws
" means the U.S. Foreign Corrupt Practices
Act of 1977 and
all other applicable anti-bribery and anti-corruption Laws.
"
Appeal
" means any appeal of a resolution of the CFPB
Litigation pursuant to
a final judgment by a court of competent jurisdiction (including the
en banc
decision of the U.S. Court of Appeals for the D.C. Circuit dated
January 31, 2018) by filing a petition for writ of certiorari to the U.S. Supreme Court, or any appeal of a determination by the CFPB after remand.
"
Applicable Law
" means any Law applicable to any of the Parties
or any of
their respective Affiliates, directors, officers, employees, properties or assets.
"
Applicable Month End
" means (a) the last day of the full
calendar
month immediately prior to the Determination Date or (b) if the Determination Date is within the first seven (7) days of a calendar month, the last day of the second to last full
calendar month immediately prior to the Determination Date.
"
Applicable Requirements
" means, as of the time of reference,
the Company's
or any of its Subsidiaries' respective Contractual Obligations with respect to the origination, servicing, insuring, purchase, sale or filing of claims in connection with Loans.
"
Asset
" means any asset, property, right, Contract and claim,
whether real,
personal or mixed, tangible or intangible, of any kind, nature and description, whether accrued,
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contingent or otherwise, and wheresoever situated and whether or not carried or reflected, or required to be carried or reflected, on the books of any Person.
"
Asset
Purchase Agreement
" means that certain Asset Purchase Agreement, dated as of February 15, 2017, by and between Guaranteed Rate
Affinity, LLC, the Company, PHH Home Loans, LLC, and RMR Financial, LLC.
"
Asset
Sale Transactions
" means the transactions contemplated by the Asset Sale Transactions Agreements.
"
Asset
Sale Transactions Agreements
" means the Asset Purchase Agreement, the MSR Purchase Agreement and the JV Interests Purchase Agreement.
"
Available
Cash
" means unrestricted cash of the Company and its Subsidiaries, calculated in accordance with Schedule 1.1(AC) of the Company
Disclosure Letter, that the Company has determined in good faith (as supported by reasonable documentary detail provided to Parent) is available to be distributed by the Company to Parent or the
Paying Agent as of the Determination Date in accordance with the organizational documents of the Company and Applicable Law, including Section 2-311 and any other applicable provisions of the
MGCL.
"
Board
of Directors
" means the Board of Directors of Parent, Merger Sub, the Company or the Surviving Corporation, as the case may be.
"
Business
Day
" means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by Law
or executive order to close.
"
Capitalization
Date
" means 5:00 p.m., Eastern Time, on February 26, 2018.
"
CFPB
"
means the Consumer Financial Protection Bureau.
"
CFPB
Litigation
" means the pending litigation between the CFPB and the Company and certain of its affiliates relating to the CFPB's order dated
June 4, 2015 (File #2014-CFPB-0002).
"
Claim
"
means any action, claim, suit, proceeding, petition, appeal, demand, demand letter, lien, notice of non-compliance or violation, litigation,
dispute, complaint, proceeding (including arbitral or other administrative), arbitration, investigation, consent order or consent agreement.
"
Code
"
means the Internal Revenue Code of 1986, as amended.
"
Company
Business
" means the business of the Company and its Subsidiaries, as will be conducted as of the consummation, in full, of the Asset Sale
Transactions (other than the portion of the transactions contemplated by the MSR Purchase Agreement that have not been completed as of the date hereof).
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"
Company Capital Stock
" means, collectively, Company Common Stock and Company Preferred Stock.
"
Company Common Stock
" means the Common Stock, par value $0.01
per share, of
the Company.
"
Company Credit Facilities
" means the facilities set forth on
Schedule 1.1(CCF)
of the Company Disclosure Letter.
"
Company Disclosure Letter
" means the disclosure letter of the
Company,
dated as of the date of this Agreement, and delivered by the Company to Parent concurrently with the execution of this Agreement.
"
Company IP
" means all Intellectual Property Rights that are
owned or
purported to be owned by, or exclusively licensed to, the Company or any of its Subsidiaries.
"
Company Material Adverse Effect
" means any change, effect,
event,
occurrence, state of facts or development that (a) has a material adverse effect on the business, financial condition or results of operations of the Company and its Subsidiaries taken as a
whole (excluding the assets, liabilities, businesses and employees that have been or will be sold, assigned or otherwise transferred to or assumed by the applicable purchaser (or purchasers) pursuant
to the Asset Sale Transactions Agreements);
provided
,
however
, that in no event shall any of the following be deemed, either alone or in
combination, to constitute, nor shall any of the following (including the effect of any of the following) be taken into account in determining whether there has been or will be, a Company Material
Adverse Effect for purposes of this clause (a): (i) changes in general economic or political (including results of elections) conditions (including any outbreak or escalation of
hostilities or war or any act of terrorism) or changes in the securities, credit or financial markets in general, including changes in interest rates or currency exchange rates, (ii) changes
after the date hereof adversely and generally affecting the industry in which the Company and its Subsidiaries operates, (iii) any failure, in and of itself, by the Company and its Subsidiaries
to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the
date of this Agreement (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether
there has been or will be, a Company Material Adverse Effect, except to the extent otherwise excluded hereunder), (iv) the Tax Reform Act or changes after the date hereof in Laws, statutes,
rules or regulations of governmental entities, or interpretations thereof by Governmental Authorities, applicable to the Company and its Subsidiaries, or in U.S. GAAP or applicable accounting
regulations or principles, (v) the public announcement or consummation of the transactions contemplated by this Agreement, including the impact thereof on the relationships (contractual or
otherwise) of the Company or any of its Subsidiaries with employees, customers, suppliers or partners, and any litigation arising from allegations of any breach of fiduciary duty or violation of Law
relating to this Agreement or the transactions contemplated hereby, (vi) any hurricane, tornado, flood, earthquake or other natural disaster, (vii) any decline in the market price of the
Company Common Stock, (viii) any action or omission taken pursuant to the express terms of this Agreement, with the express prior written consent of Parent or Merger Sub or any action taken by
Parent or Merger Sub after disclosure to Parent and Merger Sub by the Company of all
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material and relevant facts and information to the Knowledge of the Company, or (ix) any matter set forth on
Schedule 1.1(MAE)
of the Company Disclosure Letter, except in the case of the foregoing clauses (i), (ii) or (iv), if such change has a
disproportionate impact on the Company and its Subsidiaries, taken as a whole, relative to other for profit participants in the industry in which the Company and its Subsidiaries conduct their
businesses or (b) materially impairs or delays beyond the Outside Date, or would reasonably be expected to materially impair or materially delay beyond the Outside Date, the Company's ability
to consummate the transactions contemplated by this Agreement;
provided
,
further
, that a Company Material Adverse Effect will be deemed to
have occurred if either (x) the Net Worth Shortfall determined in accordance with
Section 3.1(b)
is greater than $47,500,000 or (y) Available Cash
determined in accordance with
Section 3.1(b)
is less than the Target Cash Amount.
"
Company
Net Worth
" means the net worth of the Company as of the Applicable Month End, calculated based on the Company's unaudited consolidated balance
sheet as of the Applicable Month End and in accordance with
Schedule 1.1(CNW)
of the Company Disclosure Letter.
"
Company
Notes
" means, collectively, (a) the 7.375% Senior Unsecured Notes due 2019, and (b) the 6.375% Senior Unsecured Notes due 2021, each
governed by the Company Notes Indenture.
"
Company
Notes Indenture
" means the Indenture, as supplemented by (a) in the case of the 7.325% Senior Unsecured Notes due 2019, the Second
Supplemental Indenture, dated as of August 23, 2012, and the Fourth Supplemental Indenture, dated as of July 3, 2017 and (b) in the case of the 6.375% Senior Unsecured Notes due
2021, the Third Supplemental Indenture, dated as of August 20, 2013, and the Fifth Supplemental Indenture, dated as of July 3, 2017, in each case, between the Company and The Bank of New
York Mellon Trust Company, N.A.
"
Company
Preferred Stock
" means the Company preferred stock, par value $0.01 per share.
"
Company
Required Governmental Approvals
" means all notices to or consents or approvals from any Governmental Authority listed on
Schedule 1.1(CRGA)
of the Company Disclosure Letter.
"
Company
SEC Documents
" means all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein)
filed with the SEC as required by the SEC to be filed by the Company since January 1, 2015, together with any documents filed during such period by the Company to the SEC on a voluntary basis
on Form 8-K.
"
Company
Software
" means any Software developed by or on behalf of, or otherwise owned by, the Company or any of its Subsidiaries that is material to the
conduct of the Company Business.
"
Company
Stock Plans
" means the Company 2014 Equity and Incentive Plan and the Company Amended and Restated 2005 Equity and Incentive Plan.
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"
Contract
" means any agreement, contract, obligation, promise or undertaking, whether written or oral, that is
binding upon any Person or its property under Applicable Law.
"
Contractual Obligation
" means, as to any Person, any
obligation of such
Person under any Contract to which such Person is a party or by which it or any of its property is bound.
"
Determination Date
" means the first day on which all of the
conditions to
the obligations of the Parties set forth in
ARTICLE VIII
(other than (a) those conditions that, by their nature, are to be satisfied only at the Closing and
(b) the Parent Required Governmental Approvals) have been satisfied or, to the extent permissible under Applicable Law, waived.
"
ERISA
" means the Employee Retirement Income Security Act of
1974, as
amended.
"
ERISA Affiliate
" means any entity (whether or not
incorporated) that,
together with the Company or any of its Subsidiaries, would be treated as a "single employer" within the meaning of Section 4001 of ERISA or Section 414 of the Code.
"
Exchange Act
" means the U.S. Securities Exchange Act of 1934,
as amended,
and the rules and regulations promulgated thereunder.
"
Governmental Authority
" means the government of any nation,
state, city,
locality or other political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including the SEC, the
CFPB, any Agency, all applicable stock exchanges and any other SROs having jurisdiction over the Company or Parent, any of their Subsidiaries and any Person controlled, through stock or capital
ownership or otherwise, by any of the foregoing.
"
Government Official
" means an employee, officer, or
representative of, or
any person otherwise acting in an official capacity for or on behalf of a Governmental Authority, whether elected or appointed, including an officer or employee of a state-owned or state-controlled
enterprise, a political party, political party official or employee, candidate for public office, or an officer or employee of a public international organization (such as the World Bank, United
Nations, International Monetary Fund, or Organization for Economic Cooperation and Development).
"
GSE
s" means the Federal National Mortgage Association, the
Federal Home
Loan Mortgage Corporation and the Government National Mortgage Association.
"
HSR Act
" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as
amended.
"
Indebtedness
" means, as to any Person and without duplication,
(a) all obligations of such Person for borrowed money (including, reimbursement and all other obligations with respect to surety bonds, letters of credit and bankers' acceptances, whether or
not matured), (b) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable, accrued commercial or trade liabilities arising in
the ordinary course of business (including repurchase agreements, fails to receive and pending
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trades, open derivative contracts and other payables to clearing organizations, brokers, dealers and customers), accrued
compensation and other accrued liabilities (including taxes, legal reserves, asset retirement obligations and property provisions), (c) all capitalized lease obligations of such Person,
(d) all guarantees and similar arrangements having the economic effect of a guarantee of such Person of any Indebtedness of any other Person, (e) all obligations of such Person pursuant
to securitization or factoring programs or arrangements, (f) net cash payment obligations of such Person under swaps, options, derivatives and other hedging agreements or arrangements that will
be payable upon termination thereof (assuming they were terminated on the date of determination) or (g) all outstanding reimbursement obligations of such Person or any Subsidiary thereof in
respect of any amounts actually drawn under any letter of credit and bankers' acceptance or similar credit transaction;
provided
, that Indebtedness shall not include
Trading Indebtedness.
"
Indenture
" means the Indenture, dated as of January 17,
2012,
between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee, as amended, modified or supplemented in accordance with its terms.
"
Information
" means all information, whether or not patentable
or
copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, Contracts, instruments, surveys, discoveries,
ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer
programs or other software, marketing plans, customer names, communications by or to attorneys, memos and other materials prepared by attorneys or under their direction (including attorney work
product), and other technical, financial, legal, employee or business information or data.
"
Insurer
" means any Person who insures or guarantees
(a) all or any
portion of the risk of loss upon the obligor's default on any Loan or (b) against hazard, flood, earthquake, title or other risk of loss, including a Governmental Authority, any certificate
guarantee insurer, any provider of private mortgage insurance and any insurer or guarantor under any standard hazard insurance policy, any federal flood insurance policy, any title insurance policy,
any earthquake insurance policy, or any other insurance policy applicable to a Loan and any successor thereto.
"
Intellectual Property Rights
" means, in any and all
jurisdictions
throughout the world, any rights in or to any of the following: (a) trademarks, service marks, brand names, certification marks, collective marks, Internet domain names and social media
handles, logos, symbols, trade dress, trade names, corporate names, and other indicia of origin, all registrations and applications for registration of the foregoing, and the goodwill associated
therewith and symbolized thereby, including all renewals of the same, (b) inventions, discoveries, ideas and improvements, whether patentable or not, and all patents, patent applications,
registrations, invention disclosures and applications, including any divisions, revisions, supplementary protection certificates, continuations, continuations-in-part, renewals, extensions, re-issues
and re-examinations, (c) Trade Secrets, (d) published and unpublished works of authorship whether or not copyrightable, including Software, other compilations of information, manual and
other documentation, in each case whether or not registered or sought to be registered, copyrights in and to the foregoing, together with all common law rights and moral rights therein, and any
applications and registrations therefor, including extensions, renewals, restorations, reversions,
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derivatives, translations, localizations, adaptations and combinations of the above, and (e) all other
intellectual property, industrial or proprietary rights.
"
Investor
" means, with respect to each Loan serviced under a
Servicing
Agreement, any Person which owns such Loan serviced under a Servicing Agreement.
"
IT Assets
" means computers, Software, databases, hardware,
servers,
workstations, routers, hubs, switches, circuits, networks, data communications lines and all other information technology equipment owned, licensed or otherwise used by the Company or its
Subsidiaries.
"
JV Interests Purchase Agreement
" means that certain Joint
Venture Interests
Purchase Agreement, dated as of February 15, 2017, between Realogy Services Venture Partner LLC, PHH Broker Partner Corporation, and the Company.
"
Knowledge of the Company
" means the actual knowledge of the
individuals
listed on
Schedule 1.1(K)
of the Company Disclosure Letter following reasonable inquiry.
"
Knowledge of Parent
" means the actual knowledge of the
individuals listed
on
Schedule 1.1(K)
of the Acquirer Disclosure Letter following reasonable inquiry.
"
Law
" means any federal, state, local, municipal or foreign
(including
supranational) law, statute, ordinance, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Authority.
"
Liabilities
" means any and all losses, obligations, claims,
charges, debts,
demands, actions, causes of action, suits, damages, fines, penalties, offsets and other liabilities, including all Contractual Obligations and those arising under or out of any Law, litigation or
Order,
whether absolute or contingent, inchoate or otherwise, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising.
"
Lien
" means, whether arising under any Contract or otherwise,
any security
interests, liens, encumbrances, easements, covenants, encroachments or other survey defects, pledges, mortgages, retention agreements, hypothecations, rights of others, assessments, restrictions,
voting trust agreements, leases, options, rights of first offer, proxies, title defects, and charges or other restrictions or limitations of any kind or nature whatsoever.
"
Loan
" means any residential mortgage loan.
"
Merger Sub Common Stock
" means the common stock, par value
$0.10 per share,
of Merger Sub.
"
MGCL
" means the Maryland General Corporation Law.
"
MSR Purchase Agreement
" means that certain Agreement for the
Purchase and
Sale of Servicing Rights, dated as of December 28, 2016, by and between New Residential Mortgage LLC, PHH Mortgage Corporation and, solely for the limited purposes set forth therein, the
Company.
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"
Net Worth Shortfall
" means the absolute value of the amount by which
the Company Net Worth, as determined in accordance with
Section 3.1(b)
, is less than the applicable Target Net Worth Amount as of the Determination Date.
"
NYSE
"
means the New York Stock Exchange.
"
Order
"
means any order, award, decision, injunction, judgment, ruling, decree, charge, writ, subpoena or verdict entered, issued, made or rendered by any
Governmental Authority or arbitrator.
"
Parent
Required Governmental Approvals
" means all notices to or consents or approvals from any Governmental Authority listed on
Schedule 1.1(PRGA)
of the Acquirer Disclosure Letter.
"
Permitted
Lien
" means, with respect to any Person, any (a) Lien for Taxes not yet due and payable, or the amount or validity of which is being
contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with U.S. GAAP, (b) encumbrance or imperfection of title, if
any, that is not, individually or in the aggregate, material in amount or does not, individually or in the aggregate, materially detract from the value, marketability or utility of the properties to
which it relates and does not materially interfere with the present or proposed use of such properties or otherwise materially impair the operation or occupancy of such properties, (c) Lien
imposed or promulgated by Laws with respect to real property and improvements, including zoning, planning, entitlement and other land use and environmental regulations promulgated by Governmental
Authorities, (d) mechanics', carriers', workmen's, repairmen's and similar statutory or common law Liens incurred in the ordinary course of business for amounts not yet due and payable, or the
amount or validity of which is being contested in good faith by appropriate proceedings and for which appropriate reserves have been established in accordance with U.S. GAAP, (e) title
of a lessor under a capital or operating lease, (f) pledges or deposits by such Person or any of its Subsidiaries under workmen's compensation Laws, unemployment insurance Laws, social security
Laws or similar legislation, or good faith deposits in connection with bids, tenders, Contracts (other than for the payment of indebtedness) or leases to which such entity is a party, or deposits to
secure public or statutory obligations of such entity or to secure surety or appeal bonds to which such entity is a party, or deposits as security for contested Taxes, in each case incurred or made in
the ordinary course of business, (g) non-exclusive licenses of Intellectual Property Rights granted to third parties in the ordinary course of business by such Person or any of its
Subsidiaries, (h) Liens imposed by Applicable Law that relate to obligations that are not yet due and have arisen in the ordinary course of business, (i) any Liens specifically disclosed
in any reports made available to Parent by the Company prior to the date hereof and (j) Liens discharged at or prior to the Effective Time.
"
Person
"
means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity.
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"
Personal
Information
" means (a) any information concerning an individual that would be considered nonpublic personal information or otherwise
protected under any Applicable Laws
concerning personal privacy, data breach notification or the collection, use, storage, processing, transfer, disclosure or protection of personal information, (b) an individual's financial
information and (c) any information regarding an individual's medical history or treatment.
"
Registered
IP
" means all Company IP issued by, registered or filed with, renewed by or the subject of a pending application before any Governmental
Authority or Internet domain name registrar anywhere in the world.
"
Required
Governmental Approvals
" means the Company Required Governmental Approvals and the Parent Required Governmental Approvals.
"
SEC
"
means the U.S. Securities and Exchange Commission.
"
Securities
Act
" means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"
Servicing
Agreement
" means any Contract pursuant to which the Company or any Subsidiary is obligated to a third party to administer, collect and remit
payments of principal and interest, to collect and forward payments of Taxes and insurance, to administer escrow accounts, and to foreclose, repossess or liquidate collateral after default, or serve
as a servicer or subservicer.
"
Servicing
Rights
" means, with respect to any Loan, the right and obligation to administer, collect and remit payments of principal and interest, to collect
and forward payments of Taxes and insurance, to administer escrow accounts, to provide other services required with regard to such Loan, and to receive the contractually provided compensation for such
services and to exercise any rights as a servicer or subservicer pursuant to any Servicing Agreement.
"
Software
"
means any computer software programs, source code, object code, algorithms, models, data and documentation, including any computer software
programs that incorporate and run Parent's pricing models, formulae and algorithms.
"
SRO
"
shall mean any domestic or foreign securities, broker-dealer, investment adviser and insurance industry self-regulatory organization.
"
State
Agency
" means any state agency or other Governmental Authority with authority to regulate the activities of the Company or any of its Subsidiaries
relating to the origination or servicing of Loans or to determine the investment or servicing requirements with regard to Loan origination, purchasing, servicing, master servicing or certificate
administration performed by the Company or any of its Subsidiaries.
"
Subservicing
Agreements
" means the agreements set forth on
Schedule 1.1(SA)
of the Company Disclosure Letter.
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"
Subsidiary
"
of any Person means, as of the relevant date of determination, any other Person of which 50% or more of the voting power of the outstanding
voting equity securities or 50% or more of the outstanding economic equity interest is owned, directly or indirectly, by such first Person.
"
Target
Net Worth Amount
" means the applicable amount set forth on
Schedule 1.1(CNW)
.
"
Target
Cash Amount
" means the applicable amount set forth on
Schedule 1.1(AC)
.
"
Tax
Reform Act
" means Public Law No. 115-97 (Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the
budget for fiscal year 2018).
"
Taxes
"
means (a) any and all taxes, duties, fees, excises, premiums, assessments, imposts, levies and other charges or assessments of any kind
whatsoever imposed by any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or other basis, including those levied on, or measured by, or described with respect
to, income, gross receipts, profits, gains, windfalls, capital, capital stock, production, recapture, transfer, land transfer, license, gift, occupation, wealth, environment, accumulated earnings,
personal holding company, net worth, net wealth, indebtedness, surplus, sales, goods and services, harmonized sales, use, value-added, excise, special assessment, alternative or add-on, stamp,
withholding, business, franchising, real or personal property, health, employee health, payroll, workers' compensation, employment or unemployment, severance, social services, social security,
education, or utility, and including surtaxes and customs, import and export duties; (b) all interest, penalties, fines, additions to tax or other additional amounts imposed by any
Governmental Authority on or in respect of amounts of the type described in clause (a) or this clause (b); (c) any liability for the payment of any amounts of the type described
in clause (a) or (b) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period; and (d) any liability for the payment of any amounts
of the type described in clause (a) or (b) as a result of any obligation to indemnify any other Person by contract or as a result of being a transferee or successor in interest to any
party.
"
Tax
Return
" means any and all returns, reports, claims for refund, disclosures, declarations, elections, notices, forms, designations, filings, and
statements (including estimated tax returns and reports, withholding tax returns and reports, and information returns and reports), and amendments thereto, filed, furnished or required to be filed or
furnished in respect of Taxes, including any schedule or attachment thereto or amendment thereof.
"
Trade
Secrets
" means, collectively, trade secrets and other intellectual property or proprietary rights in formulae, know-how, confidential or proprietary
information, methods, processes, protocols, specifications, techniques, research in progress, algorithms, source code, data, designs, drawings, schematics, blueprints, flow charts, models, strategies,
prototypes, testing procedures and testing results, and other forms of technology (whether or not embodied in any tangible form).
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"
Trading
Indebtedness
" means, with respect to any Person, any margin facility or other margin-related indebtedness of such Person for borrowed money or any
other such indebtedness incurred exclusively to finance the securities, derivatives, commodities or futures trading positions and related assets and liabilities of such Person and its Subsidiaries,
including collateralized loan, any obligations under any securities lending and/or borrowing facility and any day loans and overnight loans with settlement banks and prime brokers to finance
securities, derivatives, commodities or futures trading positions and margin loans, including any unsecured guarantee by such Person or any of its Subsidiaries (excluding a broker dealer Subsidiary
guarantee of such indebtedness of a non-broker dealer Subsidiary (other than any of its Subsidiaries that are consolidated with it for regulatory capital purposes)).
"
U.S. GAAP
"
means U.S. generally accepted accounting principles in effect from time to time.
"
Willful
Breach
" means, with respect to any representation, warranty, agreement or covenant set forth in this Agreement, an intentional action or omission
by a Party that both (a) causes such Party to be in breach of such representation, warranty, agreement or covenant and (b) such Party knows at the time of such intentional action or
omission is or would constitute a breach, or would reasonably be expected to result in a breach, of such representation, warranty, agreement or covenant.
Section 1.2
Other Capitalized Terms
.
The following terms shall have the meanings specified in the indicated section of this Agreement:
|
|
|
Term
|
|
Section
|
Acquirer Material Adverse Effect
|
|
5.1
|
Acquirer Parties
|
|
Preamble
|
Acquirer Related Parties
|
|
9.3(d)
|
Acquisition Agreement
|
|
7.4(a)
|
Agreement
|
|
Preamble
|
Articles of Merger
|
|
2.3
|
Burdensome Condition
|
|
7.2(a)
|
Certificates
|
|
3.4(a)
|
CFPB
|
|
7.11
|
CFPB Litigation
|
|
7.11
|
Closing
|
|
2.2
|
Closing Date
|
|
2.2
|
Company
|
|
Preamble
|
Company 401(k) Plan
|
|
7.16(c)
|
Company Adverse Recommendation Change
|
|
7.4(c)
|
Company Board
|
|
Recitals
|
Company Board Recommendation
|
|
7.1(c)
|
Company Compensation Committee
|
|
3.3(c)
|
Company Equity Awards
|
|
3.3(e)
|
Company Indemnified Parties
|
|
7.7(a)
|
Company Intervening Event
|
|
7.4(i)
|
Company Lease
|
|
4.22(b)
|
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|
|
|
Term
|
|
Section
|
Company Leased Facility
|
|
4.22(b)
|
Company Material Contract
|
|
4.9(a)
|
Company Notice of Intervening Event
|
|
7.4(e)
|
Company Notice of Superior Proposal
|
|
7.4(d)
|
Company Performance-Based RSU
|
|
3.3(c)
|
Company Plan
|
|
4.13(a)
|
Company Privacy Policy
|
|
4.16
|
Company Related Parties
|
|
9.3(d)
|
Company Restricted Share
|
|
3.3(e)
|
Company RSU
|
|
3.3(c)
|
Company Securities
|
|
4.7(b)
|
Company Stock Option
|
|
3.3(a)
|
Company Stockholder Approval
|
|
4.2
|
Company Stockholder Meeting
|
|
7.1(a)
|
Company Stockholders
|
|
7.1(a)
|
Company Takeover Proposal
|
|
7.4(i)
|
Company Termination Fee
|
|
9.3(b)
|
Company Time-Based RCU
|
|
3.3(d)
|
Company Time-Based RSU
|
|
3.3(b)
|
Company Year-End Balance Sheet
|
|
4.14
|
Confidentiality Agreement
|
|
7.3(b)
|
Continuation Period
|
|
7.16(a)
|
Continuing Employees
|
|
7.16(a)
|
Credit Suisse
|
|
4.29
|
Effective Time
|
|
2.3
|
Environmental Laws
|
|
4.17
|
ERISA Plans
|
|
4.13(a)
|
Expenses
|
|
10.10
|
Fund
|
|
3.4(a)
|
Injunction
|
|
8.1(c)
|
Intervening Event Notice Period
|
|
7.4(e)
|
Independent Accountant
|
|
3.1(b)
|
IRS
|
|
4.13(b)
|
Losses
|
|
7.7(a)
|
Maximum Amount
|
|
7.7(c)
|
Material Claim or Order
|
|
4.5(b)
|
Merger
|
|
2.1
|
Merger Consideration
|
|
3.1(a)
|
Merger Sub
|
|
Preamble
|
Non-Recourse Party
|
|
10.11
|
Open Source License
|
|
4.15(f)
|
Outside Date
|
|
9.1(b)(i)
|
Parent
|
|
Preamble
|
Parent 401(k) Plan
|
|
7.16(c)
|
Parties
|
|
Preamble
|
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|
|
|
Term
|
|
Section
|
Party
|
|
Preamble
|
Paying Agent
|
|
3.4(a)
|
PBGC
|
|
4.13(e)
|
Permits
|
|
4.6(b)
|
PLS
|
|
4.24(b)
|
PLS Exit
|
|
4.24(b)
|
Post-Closing Plans
|
|
7.16(a)
|
Proxy Statement
|
|
7.1(a)
|
PTO
|
|
7.16(d)
|
Representatives
|
|
7.4(a)
|
Resolution Period
|
|
3.1(b)
|
Rights Agent
|
|
Recitals
|
Sarbanes-Oxley Act
|
|
4.8
|
SDAT
|
|
2.3
|
Superior Company Proposal
|
|
7.4(i)
|
Superior Proposal Notice Period
|
|
7.4(d)
|
Surviving Articles of Incorporation
|
|
2.4
|
Surviving Corporation
|
|
2.1
|
Surviving Organizational Documents
|
|
2.4
|
Uncertificated Shares
|
|
3.4(a)
|
Section 1.3
Other Definitions
.
Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice
versa, and references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time. When used
herein:
(a) the
word "
or
" is not exclusive unless the context clearly requires otherwise;
(b) the
word "
control
" (including, with correlative meanings, the terms "
controlled by
" and "
under
common control with
"), as used with respect to any Person, means the direct or indirect possession of the power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by Contract or otherwise;
(c) the
words "
including
," "
includes
," "
included
" and
"
include
" are deemed to be followed by the words "
without limitation
";
(d) the
terms "
herein,
" "
hereof
" and "
hereunder
" and other words of similar import
refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;
(e) the
terms "
Dollars
" and "
$
" mean U.S. Dollars;
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(f) all
section, paragraph or clause references not attributed to a particular document shall be references to such parts of this Agreement, and all exhibit, annex and
schedule references not attributed to a particular document shall be references to such exhibits, annexes and schedules to this Agreement; and
(g) references
to any statute or regulation refer to such statute or regulation as amended, modified, supplemented or replaced from time to time (and, in the case of
statutes, include any rules and regulations promulgated under the statute) and references to any Section of any statute or regulation include any successor to such section.
Section 1.4
Absence of Presumption
.
This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting or causing any instrument to be drafted.
Section 1.5
Headings
.
The section and article headings contained in this Agreement are inserted for convenience of reference only and will not affect the meaning or interpretation of this Agreement. All
references to Sections, Articles or Schedules contained herein mean Sections, Articles or Schedules of this Agreement unless otherwise stated.
ARTICLE II
THE MERGER
Section 2.1
The Merger
.
Upon the terms and subject to the conditions set forth in this Agreement at the Effective Time, Merger Sub shall merge with and into the Company (the
"
Merger
"), and the separate existence of Merger Sub shall cease. The Company shall continue as the surviving entity in the Merger (the "
Surviving
Corporation
") and shall continue its existence under the Laws of the State of Maryland, with all its rights, privileges, immunities, powers and franchises. The Merger shall have the
effects set forth in the MGCL.
Section 2.2
Closing
.
The closing of the Merger (the "
Closing
") shall take place by the electronic or physical exchange of documents (a) at 10:00 a.m., New York City
time on the third Business Day following the first day on which there is satisfaction or waiver in writing of all of the conditions to the obligations of the Parties set forth in
Article VIII
(other than those conditions that, by their nature, are to be satisfied only at the Closing, but subject to the waiver or fulfillment of those
conditions) or (b) at such other time and date or at such other place as Parent and the Company may mutually agree upon in writing (the day on which the Closing takes place being the
"
Closing Date
").
Section 2.3
Effective Time
.
As soon as practicable following the satisfaction or waiver of the conditions set forth in
Article VIII
, on the Closing Date, Merger Sub and the
Company shall duly execute and file articles of merger (the "
Articles of Merger
") with the State Department of Assessments and Taxation of Maryland (the
"
SDAT
") in accordance with, and shall make all other filings or recording and take all such other action required with respect to, the Merger under relevant provisions of
the MGCL. The Merger will become effective when the Articles of Merger are filed in the office of the SDAT or at such later date or time as Parent and
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the
Company specify in the Articles of Merger (the time the Merger becomes effective being the "
Effective Time
").
Section 2.4
Constituent Documents of the Surviving Corporation
.
(a) At
the Effective Time and without any further action on the part of the Company and Merger Sub, the articles of incorporation of the Company as in effect immediately
prior to the Effective Time shall be amended and restated as of the Effective Time to be in the form of the articles of incorporation of Merger Sub as in effect immediately prior to the Effective Time
(except that (i) all references to the name, date of incorporation, registered office and registered agent of Merger Sub therein may be changed to refer to the name, date of incorporation,
registered office and registered agent, respectively, of the Company and (ii) any references naming the incorporator(s), original board of directors or original subscribers for shares of Merger
Sub may be omitted) and, as so amended and restated, will be the articles of incorporation of the Surviving Corporation (the "
Surviving Articles of Incorporation
") until
thereafter amended in accordance with their terms and Applicable Law (but subject to
Section 7.7
).
(b) The
Parties shall take all necessary action such that the by-laws of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated as
of the Effective Time to be in the form of the by-laws of Merger Sub as in effect immediately prior to the Effective Time and, as so amended and restated, will be the by-laws of the Surviving
Corporation (together with the Surviving Articles of Incorporation, the "
Surviving Organizational Documents
") until thereafter amended in accordance with its terms, the
articles of incorporation of the Surviving Corporation and Applicable Law (but subject to
Section 7.7
).
Section 2.5
Directors and Officers
.
(a) The
members of the Board of Directors of Merger Sub immediately prior to the Effective Time shall be the members of the Board of Directors of the Surviving Corporation
as of the Effective Time, each to hold office in accordance with the Surviving Organizational Documents, until their respective successors are duly appointed, or their earlier death, resignation or
removal.
(b) The
officers of the Company immediately prior to the Effective Time shall be the officers of Merger Sub as of the Effective Time, each to hold office in accordance with
the Surviving Organizational Documents, until their respective successors are duly appointed, or their earlier death, resignation or removal.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
Section 3.1
Merger Consideration
.
(a) Except
as otherwise provided in
Section 3.1(d)
, at the Effective Time, by virtue of the Merger and without any action on the part of
the holder of any Merger Sub Common Stock or of any Company Capital Stock, each share of Company Common Stock
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issued
and outstanding immediately prior to the Effective Time shall be converted into the right to receive an amount in cash equal to $11.00, without interest (such amount, the "
Merger
Consideration
").
(b) No
later than the second Business Day after the Determination Date, the Company will deliver to Parent its estimates of the Company Net Worth and Available Cash. In the
event Parent disagrees with the Company's calculation of either of such estimates, the Company and Parent will cooperate in good faith to resolve such dispute as promptly as practicable (and in any
event no later than two Business Days (the "
Resolution Period
")) following the Company's delivery of its estimates and agree on the amount of the Company Net Worth and/or
Available Cash, which shall be treated as such for purposes of this Agreement;
provided
,
however
, that Parent will not have the right to
dispute the Company's legal analysis in determining the amount of cash that is distributable in accordance with Section 2-311 or any other applicable provisions of the MGCL, including whether
or not any specific cash is available for distribution; and provided, further, that for the avoidance of doubt Parent and Merger Sub may dispute the actual calculation of Available Cash. In the event
the Parties are unable to resolve any dispute regarding the Company Net Worth and/or Available Cash within the Resolution Period, the Parties shall promptly (and in any event within two Business Days)
after the end of the Resolution Period submit the disputed items to Ernst & Young LLP or, if such firm is not available, a mutually acceptable nationally recognized accounting firm that
has not provided material services to either the Company or Parent or any of their respective Affiliates in the preceding three years (the "
Independent Accountant
"). The
Parties shall instruct the Independent Accountant to render a decision to the disputed items as soon as practicable (and in any event within 10 days) after the submission to it of the disputed
items. Each of the Company and Parent shall make available to the Independent Accountant all information, records, data and working papers as may be reasonably requested by the Independent Accountant
in connection with the resolution of the disputed items;
provided
that if the estimates of the Company Net Worth and/or Available Cash delivered by the Company in
accordance with the first sentence of this
Section 3.1(b)
was calculated as of the date in clause (b) of the definition of Applicable Month End, the Company
will update such calculation to reflect the more recent date in clause (a) of such definition and deliver such updated calculation to Parent and to the Independent Accountant as promptly as
practicable, and the determination of the Independent Accountant hereunder shall be made with respect to such updated calculation (unless Parent agrees with such updated calculation, in which case a
determination by the Independent Accountant shall not be required). The Independent Accountant shall act as an expert and not as an arbitrator to calculate, based solely on the written submissions of
the Company, on the one hand, and Parent, on the other hand, and not by independent investigation, regarding the disputed items and shall be instructed that its calculation (i) must be made in
accordance with the requirements of this Agreement and (ii) with respect to each item in dispute, must be within the range of values established for such amount as determined by reference to
the value assigned to such amount by the Company and by Parent. Except for any dispute to the extent relating to any interpretation of Law or terms of this Agreement, the determination of the
Independent Accountant concerning any item in dispute shall be final, conclusive and binding on the Parties without further right of appeal. The cost of the Independent Accountant in connection with
its services pursuant to this
Section 3.1(b)
shall be shared equally by the Company and Parent.
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(c)
The Merger Sub Common Stock issued and outstanding immediately prior to the Effective Time shall, at the Effective Time, be converted into and
become one validly issued, fully paid and nonassessable share of common stock, par value $0.10 per share, of the Surviving Corporation with the same rights, powers and privileges as the shares so
converted and shall constitute the only outstanding shares of capital stock of the Surviving Corporation. At the Effective Time, all certificates representing common stock of Merger Sub shall be
deemed for all purposes to represent the number of shares of common stock of the Surviving Corporation into which they were converted in accordance with the immediately preceding sentence.
(d) At
the Effective Time, each share of Company Capital Stock held by the Company as treasury stock (other than shares in a Company Plan) or owned by Parent or Merger Sub
(other than shares held in trust accounts, managed accounts, mutual funds and the like, or otherwise held in a fiduciary or agency capacity, that are beneficially owned by third parties) immediately
prior to the Effective Time shall be cancelled, and no payment shall be made with respect thereto.
Section 3.2
Cancellation of Company Common Stock
.
At the Effective Time, all of the outstanding shares of Company Common Stock, upon conversion pursuant to
Section 3.1(a)
, shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist. Certificates representing such shares of Company Common Stock, if any, prior to the Effective Time shall be deemed for all
purposes to represent the Merger Consideration into which such shares of Company Common Stock were converted in the Merger pursuant to
Section 3.1(a)
. Holders of
Company Common Stock (excluding those shares subject to
Section 3.1(d
)) as of immediately prior to the Effective Time will, as of the Effective Time, cease to be,
and will have no rights as, stockholders of the Company, other than rights to receive the Merger Consideration provided under this
Article III
.
Section 3.3
Company Equity Awards
.
(a)
Treatment
of Options
.
At the Effective Time, each then-outstanding option to purchase Company Common Stock granted under the Company Stock Plans (each, a "
Company Stock Option
"),
whether vested or unvested, shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Stock Option to
receive (without interest), as soon as practicable after the Effective Time, an amount in cash equal to the product of (x) the total number of shares of Company Common Stock subject to such
Company Stock Option immediately prior to the Effective Time,
multiplied
by
(y) the excess, if any, of the Merger Consideration (over
the exercise price per share of Company Common Stock subject to such Company Stock Option, less applicable Taxes required to be withheld with respect to such payment. For the avoidance of doubt, any
Company Stock Option that has an exercise price per share of Company Common Stock that is greater than or equal to the Merger Consideration shall be cancelled at the Effective Time for no
consideration or payment.
(b)
Company
Time-Based RSUs
.
At the Effective Time (i) any vesting conditions applicable to each outstanding restricted stock unit (whether cash-settled or equity-settled) subject to only time-based or
service-based vesting requirements under the Company Stock Plans (a "
Company Time-Based RSU
") shall, automatically and without any required
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action
on the part of the holder thereof, accelerate in full, and (ii) each Company Time-Based RSU shall, automatically and without any required action on the part of the holder thereof, be
cancelled and shall only entitle the holder of such Company Time-Based RSU to receive (without interest), as soon as reasonably practicable after the Effective Time, an amount in cash equal to the
product of (x) the number of shares of Company Common Stock subject to such Company Time-Based RSU immediately prior to the Effective Time
multiplied
by
the Merger Consideration, less applicable Taxes required to be withheld with respect to such payment;
provided
, that, with respect to any
Company Time-Based RSUs that constitute nonqualified deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the Effective Time without triggering a
Tax or penalty under Section 409A of the Code, such payment shall be made at the earliest time permitted under the applicable Company Stock Plan and award agreement that will not trigger a Tax
or penalty under Section 409A of the Code.
(c)
Company
Performance-Based RSUs
.
At the Effective Time (i) any vesting conditions applicable to each outstanding restricted stock unit (whether cash-settled or equity-settled) subject to performance-based or
market-based vesting requirements under the Company Stock Plans (a "
Company Performance-Based RSU
" and, together with the Company Time-Based RSUs, the
"
Company RSUs
"), whether vested or unvested, shall, automatically and without any required action on the part of the holder thereof, accelerate, and (ii) each
Company Performance-Based RSU shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Performance-Based
RSU to receive (without interest), as soon as reasonably practicable after the Effective Time, an amount in cash equal to the product of (x) the number of shares of Company Common Stock subject
to such Company Performance-Based RSU immediately prior to the Effective Time based on actual performance through immediately prior to the Effective Time, as reasonably determined by the compensation
committee of the Company Board (the "
Company Compensation Committee
")
multiplied
by
(y) the Merger
Consideration, less applicable Taxes required to be withheld with respect to such payment;
provided
, that, with respect to any Company Performance-Based RSUs that
constitute nonqualified deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the Effective Time without triggering a Tax or penalty under
Section 409A of the Code, such payment shall be made at the earliest time permitted under the applicable Company Stock Plan and award agreement that will not trigger a Tax or penalty under
Section 409A of the Code.
(d)
Company
Time-Based RCUs
.
At the Effective Time (i) any vesting conditions applicable to each outstanding restricted cash unit that tracks the value of a share of Company Common Stock under the Company
Stock Plans (a "
Company Time-Based RCU
") shall, automatically and without any required action on the part of the holder thereof, accelerate in full, and (ii) each
Company Time-Based RCU shall, automatically and without any required action on the part of the holder thereof, be cancelled and shall only entitle the holder of such Company Time-Based RCU to receive
(without interest), as soon as reasonably practicable after the Effective Time, an amount in cash equal to the product of (x) the number of shares of Company Common Stock subject to such
Company Time-Based RCU immediately prior to the Effective Time
multiplied
by
(y) the Merger Consideration, less applicable Taxes
required to be withheld with respect to such payment;
provided
,
that
, with respect to any Company Time-Based RCUs that constitute nonqualified
deferred compensation subject to Section 409A of the Code and that are not permitted to be paid at the Effective Time without triggering a Tax or penalty
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under Section 409A of the Code, such payment shall be made at the earliest time permitted under the applicable Company Stock Plan and award agreement that will not
trigger a Tax or penalty under Section 409A of the Code.
(e)
Company
Restricted Shares
.
At the Effective Time (i) any vesting conditions applicable to each share of Company Common Stock subject to vesting, repurchase or other lapse restrictions pursuant to an award
granted under the Company Stock Plans (a "
Company Restricted Share
") shall, automatically and without any required action on the part of the holder thereof, accelerate in
full and (ii) each Company Restricted Share shall, automatically and without any required action on the part of the holder thereof, be cancelled and converted automatically, in accordance with
the procedures set forth in this Agreement, into the right of the holder to receive the Merger Consideration, less applicable Taxes required to be withheld with respect thereto.
(f)
Company
Actions
.
At or prior to the Effective Time, the Company, Company Board and the Company Compensation Committee, as applicable, shall adopt any resolutions and take any actions that are necessary
to effectuate the treatment of Company Stock Options, Company RSUs, Company Time-Based RCUs and Company Restricted Shares (collectively, the "
Company Equity Awards
")
pursuant to this
Section 3.3
. The Company shall take all actions necessary to ensure that from and after the Effective Time neither Parent nor the Surviving
Corporation will be required to deliver shares of Company Common Stock or other capital stock of the Company to any Person pursuant to or in settlement of Company Equity Awards.
Section 3.4
Surrender and Payment
.
(a) At
or promptly after the Effective Time (but in any event within one Business Day), the Parent shall deposit, or shall cause to be deposited (i) with a paying
agent selected by Parent (subject to the consent, not to be unreasonably withheld, conditioned or delayed, of the Company) (the "
Paying Agent
"), for the benefit of the
holders of (A) certificates that immediately prior to the Effective Time evidenced shares of Company Common Stock (the "
Certificates
") and (B) uncertificated
shares of Company Common Stock (the "
Uncertificated Shares
"), for exchange in accordance with this
Article III
, cash in an amount equal
to the aggregate amount payable as Merger Consideration under
Section 3.1(a)
(the "
Fund
"). As soon as reasonably practicable after the
Effective Time and in any event not later than the third (3rd) Business Day following the Effective Time, the Paying Agent shall mail to each holder of shares of Company Common Stock at the Effective
Time a letter of transmittal in customary form and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the
Certificates or transfer of the Uncertificated Shares to the Paying Agent) for use in connection with such exchange. Upon proper surrender of a Certificate for exchange and cancellation or transfer of
Uncertificated Shares to the Paying Agent, together with a letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other customary documents as
may be required pursuant to such instructions, the holder of such Certificate or Uncertificated Shares shall be entitled to receive in exchange therefor the Merger Consideration in respect of the
shares of Company Common Stock formerly represented by any such Certificate or Uncertificated Shares, and such Certificate so surrendered and any such Uncertificated Shares so transferred shall
forthwith be cancelled.
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(b)
Each holder of shares of Company Common Stock that have been converted into the right to receive the Merger Consideration shall be entitled to
receive, upon (i) surrender to the Paying Agent of a Certificate, together with a properly completed letter of transmittal, or (ii) receipt of an "agent's message" by the Paying Agent
(or such other evidence, if any, of transfer as the Paying Agent may reasonably request) in the case of a book-entry transfer of Uncertificated Shares, Merger Consideration in respect of the Company
Common Stock formerly represented by such holder's Certificate or Uncertificated Share. Until so surrendered or transferred, as the case may be, each such Certificate or Uncertificated Share shall
represent after the Effective Time for all purposes only the right to receive such Merger Consideration.
(c) If
any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or the transferred Uncertificated
Share is registered, it shall be a condition to such payment that (i) either such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer or such Uncertificated
Share shall be properly transferred and (ii) the Person requesting such payment shall pay to the Paying Agent any transfer or other Taxes required as a result of such payment to a Person other
than the registered holder of such Certificate or Uncertificated Share or establish to the reasonable satisfaction of the Paying Agent that such Taxes have been paid or are not payable.
(d) At
and after the Effective Time, there shall be no further transfers on the stock transfer books of Company Capital Stock. If, after the Effective Time, Certificates or
Uncertificated Shares are presented to the Surviving Corporation, they shall be cancelled and exchanged for the Merger Consideration provided for, and in accordance with, the procedures set forth in
this
Article III
.
(e) Any
portion of the Merger Consideration made available to the Paying Agent pursuant to
(a
) that remains unclaimed by the holders of shares
of Company Common Stock twelve (12) months after the Effective Time shall, at the request of Parent, be delivered to the Surviving Corporation, and any such holder who has not exchanged shares
of Company Common Stock for the Merger Consideration in accordance with this
Section 3.4
prior to that time shall thereafter look only to the Surviving Corporation
for payment of the Merger Consideration, without any interest thereon. Notwithstanding anything to the contrary contained herein, none of the Acquirer Parties, the Company, the Paying Agent or any
other Person shall be liable to any holder or former holder of shares of Company Common Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat
or similar Laws.
(f) The
Paying Agent will invest all cash included in the Fund as directed by Parent;
provided
,
however
, that any
investment of such cash will be limited to direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the United States of America in commercial
paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, and, in any such case, no such instrument will have a
maturity exceeding three months, and that no such investment or loss thereon will affect the amounts payable to holders of Certificates or Uncertificated Shares pursuant to this
Article III
. Any interest and other income resulting from such investments will be paid to the Surviving Corporation pursuant to
Section 3.4(e)
. To the extent that there are
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losses with respect to such investments, or the Fund diminishes for other reasons below the level required to make prompt payments of the Merger Consideration as contemplated
hereby, Parent will promptly replace or restore the portion of the Fund lost through investments or other events so as to ensure that the Fund is, at all times, maintained at a level sufficient to
make such payments. The Fund will not be used for any purpose other than the foregoing.
Section 3.5
Adjustments
.
(a) If,
during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of Company Common Stock shall occur as a result of
a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, or any stock dividend thereon with a record date during such period (for the avoidance of doubt,
excluding any change that results from any exercise of options outstanding as of the date hereof to purchase shares of Company Common Stock granted under the Company's stock option or compensation
plans or arrangements), the Merger Consideration shall be appropriately adjusted.
(b) If,
during the period between the date of this Agreement and the Effective Time, the Company pays any cash dividend (subject to Parent's consent right pursuant to
Section 6.1
of this Agreement, if any), the Merger Consideration shall be appropriately adjusted such that the aggregate amount of consideration payable in respect
of Company Common Stock, Company Stock Options, Company RSUs, Company Time-Based RCUs and Company Restricted Shares pursuant to this
Article III
will be reduced by
the aggregate amount of such cash dividend paid to holders of Company Common Stock.
Section 3.6
Lost Certificates
.
If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in such amount as Parent may direct, as indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent will issue, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration to be paid in respect thereof pursuant to this Agreement.
Section 3.7
Withholding
.
Merger Sub, Parent, the Surviving Corporation or any of their Subsidiaries, the Paying Agent, and the Rights Agent (without duplication) shall be entitled to deduct and withhold from any
payment otherwise payable pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to such payment under all applicable Tax Laws. To the extent that amounts are
so deducted or withheld, such withheld amounts (i) shall be paid over to the appropriate Governmental Authority and (ii) shall be treated for all purposes of this Agreement as having
been paid to the recipient of the payment in respect of which such deduction and withholding was made.
Section 3.8
Dissenter's Rights
.
In accordance with Section 3-202(c)(1) of the MGCL and the Articles of Incorporation of the Company, no dissenters' or appraisal rights will be available to stockholders with
respect to the Merger.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except
as disclosed in the Company Disclosure Letter (with specific reference to the Section or subsection of this Agreement to which the information stated in such Company Disclosure
Letter relates;
provided
, that any item on the Company Disclosure Letter in any one or more sections of the Company Disclosure Letter shall be deemed disclosed with
respect to other sections of this Agreement and all other sections or subsections of the Company Disclosure Letter to the extent that the relevance of such disclosure is reasonably apparent on its
face (without the need to examine or understand any underlying document or information) notwithstanding the absence of a specific cross reference) or in the Company SEC Documents filed after
January 1, 2017 and prior to the date hereof to the extent that the relevance of such disclosure is readily apparent on its face (without the need to examine or understand any underlying
document or information) (but excluding, in each case, any disclosures set forth in any risk factor section, in any section relating to forward looking statements and any other disclosures included in
such Company SEC Documents solely to the extent that they are cautionary, predictive or forward looking in nature, whether or not appearing in such sections), the Company hereby represents and
warrants to Parent as follows:
Section 4.1
Corporate Existence and Power
.
Each of the Company and its Subsidiaries (a) is duly incorporated or formed and validly existing and, except as would not reasonably be expected to have a material impact on the
Company or its Subsidiaries or their respective operations, taken as a whole, is in good standing (in jurisdictions where applicable) under the Laws of the jurisdiction of its incorporation or
formation, (b) has all requisite power (corporate, company or limited partnership, as the case may be) and authority to own and operate its property, assets or rights, to lease the property,
assets or rights it operates as lessee and to conduct the business in which it is currently engaged in all material respects and (c) is duly qualified to do business and in good standing (in
jurisdictions where applicable) under the Laws of each jurisdiction in which its ownership, lease or operation of property, assets or rights or the conduct of its business requires such qualification,
except, in each case of (b) and (c), where the failure to have such power or authority or to be so qualified would not reasonably be expected to have a Company Material Adverse Effect.
Section 4.2
Authorization; No Contravention
.
The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated by this Agreement. The
execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby have been duly authorized and approved by the Company, and no corporate, company, limited
partnership, stockholder or other action on the part of the Company is necessary other than the receipt of the affirmative vote of a majority of the votes entitled to be cast by the holders of Company
Common Stock (the "
Company Stockholder Approval
"). Assuming the accuracy of the representations and warranties of Parent and Merger Sub in
Article V
of this Agreement, the execution, delivery and performance by the Company of this Agreement and the transactions contemplated hereby, assuming that the
consents, approvals and filings referred to in
Section 4.3
are duly obtained and/or made, (a) do not and will not violate in any material respect, materially
conflict with or result in any event of default or material breach or contravention of (or with due
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notice or lapse of time or both would result in any event of default or material breach or contravention of), or give rise to a right of termination, cancellation or
acceleration of any material obligation or to the loss of a material benefit under, or the creation of any material Lien under, (i) any Company Material Contract, (ii) any organizational
document of the Company or any of its Subsidiaries or (iii) any Law applicable to the Company or its Subsidiaries and (b) except for expiration or early termination, as the case may be,
of all applicable waiting periods under the HSR Act, do not and will not, violate in any material respect any Orders of any Governmental Authority against, or binding upon, the Company or its
Subsidiaries.
Section 4.3
Governmental Approvals
.
Except for (a) such filings and notifications as may be required by the HSR Act, (b) any required consent, notification, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority set forth on
Schedule 4.3
of the Company Disclosure Letter, (c) the filing of the Proxy
Statement with the SEC, (d) receipt of the Company Stockholder Approval, (e) the filing of the Articles of Merger with the SDAT and (f) filings required under the Exchange Act,
the Securities Act, "blue sky" Laws or the rules of the NYSE, no approval, consent, exemption or authorization by, or notice to, or filing with, any applicable Governmental Authority having
jurisdiction or supervision over the Company or any of its Subsidiaries, and no lapse of a waiting period under Applicable Law, is necessary or required in connection with the execution, delivery or
performance by the Company of this Agreement (including, effectiveness of the Surviving Organizational Documents and the Merger) or the transactions contemplated hereby, except for any such approval,
consent, exemption, authorization, notice or filing the failure of which to make or obtain would not would reasonably be expected to materially impair or materially delay beyond the Outside Date the
Company's ability to consummate the transactions contemplated by this Agreement.
Section 4.4
Binding Effect
.
This Agreement has been duly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery of this Agreement by the Acquirer Parties,
constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar Laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to
enforceability (regardless of whether considered in a proceeding at Law or in equity).
Section 4.5
Litigation
.
(a) There
are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or, to the Knowledge of the Company, investigations, which, individually or in the
aggregate, would reasonably be expected to be material to the Company and its Subsidiaries, taken as a whole, pending or, to the Knowledge of the Company, threatened, at Law, in equity, in arbitration
or before any Governmental Authority against the Company or any of its Subsidiaries, other than actions, suits, proceedings, claims, complaints, disputes or arbitrations arising in the ordinary course
of business (including foreclosure proceedings, indemnification claims, claims relating to breaches of representations and warranties) for which the total amount claimed does not on its face, or would
not, based on the Company's good faith estimate, reasonably be expected to exceed $5,000,000.
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(b)
Schedule 4.5(b)
of the Company Disclosure Letter sets forth, as of the date hereof, a true, correct and
complete list of each Claim and Order that within the last three years, (i) resulted in any criminal sanctions to the Company or any of its Subsidiaries or any officer or director of any of
them in their capacity as such, (ii) resulted in an Order requiring payments in excess of $1,500,000 (including by way of penalty, fine, customer reimbursement or disgorgement), in each case by
or against the Company or any of its Subsidiaries or, in their capacity as such, any of their respective officers or directors, (iii) resulted in any injunctive relief with respect to, or that
has required the Company or any of its Subsidiaries to alter, in any material respect, its business practices, other than any injunctive relief that requires the Company and/or its Subsidiaries to
comply with Applicable Law or prohibits the Company and/or its Subsidiaries from violating Applicable Law (but only to the extent that such relief does not cause the Company or any of its Subsidiaries
to alter, in any material respect, its business practices), or (iv) imposed any non-monetary obligations on the Company or any of its Subsidiaries that would continue after the date hereof,
including pursuant to any memorandum of understanding, consent order or similar agreement with a Governmental Authority, other than any such obligations that are not material to the Company or its
Subsidiaries or the Company Business, taken as a whole (clauses (i) through (iv), a "
Material Claim or Order
").
(c) This
Section 4.5
does not relate to intellectual property matters, environmental matters or Tax matters.
Section 4.6
Compliance with Laws
.
(a) Each
of the Company and its Subsidiaries have been since December 31, 2015 and are in compliance in all material respects with all Applicable Laws and all Orders
of any Governmental Authority applicable to the Company or its Subsidiaries, except as would not be reasonably expected to be material to the Company and its Subsidiaries, taken as a whole.
(b) (i)
The Company and each of its Subsidiaries hold all material authorizations, licenses, permits, certificates, easements, exemptions, orders, consents, registrations,
clearances and approvals of any Governmental Authority (collectively, "
Permits
") that are necessary for ownership, leasing, and operation of their properties and assets
and the conduct of their businesses as each such business is being conducted as of the date hereof and (ii) the Company and each of its Subsidiaries are in compliance in all material respects
with the terms of all such Permits.
(c) Since
December 31, 2015, (i) except for indemnification, repurchase and make whole demands made by GSEs in the ordinary course of business, none of the
Company or any of its Subsidiaries has received any written notice from any Governmental Authority that (x) alleges any noncompliance (or that the Company or any of its Subsidiaries is under
investigation or the subject of an inquiry by any such Governmental Authority for such alleged noncompliance) with any Applicable Law, (y) asserts any deficiency in required legal capital or
(z) would be reasonably likely to result in a fine, assessment or cease and desist order, or the suspension, revocation or material limitation or restriction of any Permit, in each of cases
(x), (y) and (z), that is material to the Company or its Subsidiaries, taken as a whole, and (ii) none of the Company or any of its Subsidiaries has entered into any written agreement or
written settlement with any U.S. federal Governmental Authority, any U.S. state Governmental
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Authority (excluding (A) indemnification agreements entered into with GSEs in the ordinary course of business and (B) regular exam close-out letters and
comparable documents that are not material to the Company and its Subsidiaries, taken as a whole) or any other Governmental Authority that is material to the Company and its Subsidiaries, taken as a
whole, with respect to its non-compliance with, or violation of, any Applicable Law.
(d) Since
December 31, 2014, neither the Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any of their directors, officers, employees,
agents, representatives (in each case in their capacity as such) has knowingly offered, given, paid, promised, or authorized the giving of anything of value to any Government Official or any other
Person in order to obtain, retain, or direct business or to secure an improper advantage for the Company or any of its Subsidiaries, or otherwise knowingly violated the Anti-Bribery Laws in any
material respect. Each of the Company and its Subsidiaries has instituted and maintains policies and procedures reasonably designed to ensure compliance with the Anti-Bribery Laws, including
maintaining accurate books and records as required under applicable Anti-Bribery Laws. To the Knowledge of the Company, since December 31, 2014, there has not been any internal investigation,
third-party investigation (including by any Governmental Authority or any state owned or controlled entity), internal or external audit, or internal or external report that involves any allegation or
information concerning possible violations of the Anti-Bribery Laws related to the Company or any of its Subsidiaries, or any of their directors, officers, employees, agents or representatives (in
each case in their capacity as such).
Section 4.7
Capitalization
.
(a) As
of the Capitalization Date, the authorized capital stock of the Company consists solely of (i) 273,910,000 shares of Company Common Stock, of which 32,551,759
shares were issued and outstanding, and (ii) 1,090,000 shares of Company Preferred Stock, none of which were issued and outstanding. As of the Capitalization Date, (i) an aggregate of
901,310 shares of Company Common Stock were subject to or otherwise deliverable in connection with the exercise of outstanding Company Stock Options, (ii) an aggregate of 394,952 shares of
Company Common Stock were subject to or otherwise deliverable in connection with outstanding Company Performance-Based RSUs, of which 332,751 shares are cash-settled and 62,201 shares are
stock-settled, (iii) an aggregate of 607,042 shares of Company Common Stock were subject to or otherwise deliverable in connection with outstanding Company Time-Based RSUs, of which 412,005
shares are cash-settled and 195,037 shares are stock-settled, (iv) an aggregate of 310 shares of Company Common Stock were subject to or otherwise deliverable in connection with outstanding
Company Time-Based RCUs, all of which are cash-settled, and (v) an aggregate of 7,944 Company Restricted Shares were issued and outstanding.
Schedule 4.7(a)(i)
of the Company Disclosure Letter sets forth, as of the Capitalization Date, a correct and complete listing of all outstanding Company Equity
Awards, setting forth (i) the number of shares of Company Common Stock subject to each Company Equity Award, (ii) the date on which the Company Equity Award was granted, (iii) the
number of shares of Company Common Stock subject to each Company Equity Award that are vested and unvested as of such date, (iv) the exercise price of each Company Equity Award, if applicable,
and (v) the expiration date of each Company Equity Award, if applicable. From the Capitalization Date until the date of this Agreement, no options to purchase shares of Company Common Stock or
awards that may be settled in shares of Company Common Stock have been granted and no shares of Company
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Common
Stock have been issued, except for shares of Company Common Stock issued pursuant to the exercise or vesting of Company Stock Options or the vesting of Company RSUs, Company Time-Based RCUs or
Company Restricted Shares, in each case in accordance with the terms of the Company Stock Plans. All of the issued and outstanding shares of Company Capital Stock are duly authorized, validly issued,
fully paid and non-assessable. Each Company Stock Option (i) was granted in compliance with all Applicable Laws and all of the terms and conditions of the Company Stock Plan pursuant to which
it was issued, (ii) has an exercise price per share of Company Common Stock equal to or greater than the fair market value of a share of Company Common Stock on the date of such grant,
(iii) has a grant date identical to the date on which the Company Board or Company Compensation Committee actually awarded such Company Stock Option, as applicable, (iv) qualifies for
the Tax and accounting treatment afforded to such Company Stock Option, as applicable, in the Company's Tax Returns and the Company reports, respectively, and (v) does not trigger any liability
for the holder thereof under Section 409A of the Code.
(b) Except
as set forth in
Section 4.7(a)
, as of the date hereof, there are no outstanding (i) shares of capital stock or voting
securities of the Company, (ii) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (iii) options or other
rights to acquire from the Company, or other obligations of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting
securities of the Company (the items in clauses (i), (ii) and (iii) being referred to collectively as the "
Company Securities
"). As of the date
hereof, there are no outstanding obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of the Company Securities. To the Knowledge of the Company, no
shares of Company Capital Stock are held by any Subsidiary of the Company.
(c)
Schedule 4.7(c)(i)
of the Company Disclosure Letter sets forth for each of the Company's Subsidiaries, as the case may be, a list of
the jurisdiction of organization of such Subsidiary and the capitalization of such Subsidiary of the Company. All of the outstanding interests in such Subsidiaries are duly authorized, validly issued,
fully paid and non-assessable (if applicable), and are owned free and clear of all Liens, except for Permitted Liens. There are no options, warrants, conversion privileges, subscription or purchase
rights or other rights presently outstanding issued or granted by the Company or any of its Subsidiaries to purchase or otherwise acquire any authorized but unissued, unauthorized or treasury shares
of capital stock or other securities of, or any proprietary interest in, any of the Subsidiaries of the Company, and there is no outstanding security of any kind issued or granted by the Company or
any of its Subsidiaries convertible into or exchangeable for such shares or proprietary interest in any such entity.
Schedule 4.7(c)(iii)
of the Company Disclosure
Letter sets forth a list of any entity (other than a Subsidiary) in which the Company or any of its Subsidiaries own a greater than 5% equity or membership interest.
Section 4.8
Company SEC Documents
.
The Company has timely filed all Company SEC Documents. As of their respective filing dates, the Company SEC Documents complied in all material respects with, to the extent in effect at
the time of filing, the requirements of the Securities Act, the Exchange Act and the Sarbanes Oxley Act of 2002 (the "
Sarbanes-Oxley Act
") (including the rules and
regulations promulgated thereunder) applicable to such Company SEC Documents. Except to the extent that information contained in any
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Company
SEC Document has been revised, amended, supplemented or superseded by a later-filed Company SEC Document that has been filed prior to the date of this Agreement, as of their respective filing
dates, none of the Company SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not misleading, which individually or in the aggregate would require an amendment, supplement or correction to such Company SEC
Documents. Each of the financial statements (including the related notes) of the Company included in the Company SEC Documents complied at the time it was filed as to form in all material respects
with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto in effect at the time of such filing, had been prepared in accordance with
U.S. GAAP (except, in the case of unaudited statements, as permitted by the rules and regulations of the SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented in all material respects 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). None of the Subsidiaries of the
Company are, or have at any time since January 1, 2014 been, subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act.
Section 4.9
Material Contracts
.
(a)
Schedule 4.9(a)
of the Company Disclosure Letter sets forth a list as of the date of this Agreement of all Contracts (excluding any
Company Plan), in any case, of the following types, which have not been fully performed and pursuant to which the Company or any of its Subsidiaries has any continuing rights, obligations or
liabilities (to which the Company or any of its Subsidiaries is a party or by which the Company, any of its Subsidiaries or any of their respective Assets is bound) (each Contract, together with any
such Contract entered into after the date hereof that would be a Company Material Contract if entered into as of the date hereof, a "
Company Material Contract
" and
collectively, the "
Company Material Contracts
"):
(i) any
Contract containing a covenant restricting in any material respect the ability of the Company or any of its Subsidiaries (or that, following the Closing, would
restrict the ability of the Surviving Corporation or its Subsidiaries) to compete in any business or with any Person or in any geographic area;
(ii) (A)
any joint venture, partnership, strategic alliance or other similar Contract (including any franchising agreement but in any event excluding introducing broker
agreements and contracts related to PHH Home Loans, LLC or its Subsidiary), and (B) any Contract relating to the acquisition or disposition of any material business or material assets
(whether by merger, sale of stock or assets or otherwise), which acquisition or disposition is not yet complete and would reasonably be expected to result in a payment by or to the Company in excess
of $10,000,000;
(iii) any
Contract pursuant to which the Company or any of its Subsidiaries is granted a right to use information technology that is material to the Company Business and
requiring payments in excess of $2,000,000 annually;
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(iv) any
Contract with any Governmental Authority (other than Contracts with any Governmental Authority as a client or customer entered into in the ordinary course of
business) that imposes any material obligation or restriction on the Company or any of its Subsidiaries;
(v) the
Company Credit Facilities and any other Contract relating to Indebtedness for borrowed money, Trading Indebtedness, letters of credit, capital lease obligations, or
interest rate or currency hedging agreements (including guarantees in respect of any of the foregoing but in any event excluding trade payables, securities transactions, brokerage agreements and other
Contracts arising in the ordinary course of business consistent with past practice, intercompany indebtedness and immaterial leases for telephones, copy machines, facsimile machines and other office
equipment), in any case involving an amount in excess of $2,000,000 as of the date of this Agreement;
(vi) (A)
any Contract containing a so-called "most-favored nation" provision or any similar provision requiring the Company or any of its Subsidiaries to offer a third
party terms or concessions at least as favorable as those offered to one or more other parties or (B) any settlement, non-prosecution or similar agreements involving payments by the Company or
its Subsidiaries in excess of $2,000,000 or involving material future performance or restraints on action by the Company or any of its Subsidiaries;
(vii) the
Subservicing Agreements;
(viii) any
other Contract required to be filed by the Company as a "material contract" pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act;
(ix) any
Contract pursuant to which the Company or any of its Subsidiaries grants or receives any license, sublicense, covenant not to assert or similar rights with respect
to any Intellectual Property Rights that are material to the Company Business, other than non-exclusive license agreements granting the Company or its Subsidiaries rights in Software that is generally
commercially available on standardized terms and requiring payments of no more than $500,000 annually; and
(x) any
Contract requiring the consent or approval of a third party in connection the Company's entry into this Agreement or the consummation of the transactions
contemplated hereby that, were such consent or approval not to be received, would (x) have a material impact on the operations of the Company or any of its Subsidiaries, taken as a whole, or
(y) require (or would reasonably be expected to result in) a payment by the Company or any of its Subsidiaries of a financial penalty, termination penalty, or cash collateral deposit in any
individual case in excess of $1,000,000.
(b) Prior
to the date hereof, the Company has made available to Parent a true and correct copy of each Company Material Contract in effect as of the date hereof, including
any material amendments thereto.
(c) Except
as has not materially impaired or would not reasonably be expected to materially impair, either individually or in the aggregate, the business of the Company and
its Subsidiaries, taken as a whole, (i) each Company Material Contract is a valid
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and
binding obligation of the Company or its Subsidiary that is a party thereto and, to the Knowledge of the Company, the other parties thereto, and is in full force and effect and enforceable against
the Company or its Subsidiary that is a party thereto and, to the Knowledge of the Company, the other parties thereto, in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other Laws relating to or affecting the rights and remedies of creditors generally and to general principles of equity (regardless of whether considered in a proceeding
in equity or at Law), (ii) none of the Company or any of its Subsidiaries is in violation or breach of or default, under (or, to the Knowledge of the Company, is alleged to be in default or
breach in any material respect under) any Company Material Contract nor, to the Knowledge of the Company, is any other party to any such Company Material Contract and (iii) to the Knowledge of
the Company, no event or circumstances has occurred that, with notice or lapse of time or both, would constitute an event of default under or result in the termination of a Company Material Contract
or would cause or permit the acceleration of any right or obligation or the loss of any benefit to the Company or its Subsidiaries.
Section 4.10
No Material Adverse Change
.
(i) Since January 1, 2017 through the date hereof, there has not been any change, event or occurrence that, individually or in the aggregate, has resulted in or would
reasonably be expected to have a Company Material Adverse Effect and (ii) since September 30, 2017, there has not been any action taken or omitted to be taken by the Company or any
Subsidiary thereof that, if taken during the period from the date of this Agreement through the Effective Time, would constitute a breach of Sections
6.1(e)
,
(g)
,
(j)
,
(k)
,
(l)
,
(n)
or
(p)
.
Section 4.11
Taxes
.
(a) The
Company and each of its Subsidiaries (i) have prepared in good faith and timely filed, taking into account any extension of time within which to file, all
material Tax Returns required to be filed (or such Tax Returns have been filed on their behalf) with the appropriate Governmental Authority and all such Tax Returns are complete and accurate in all
material respects, (ii) have paid all Taxes required to have been paid by them other than Taxes that are not yet due or that are being contested in good faith in appropriate proceedings and
have been adequately reserved in accordance with U.S. GAAP, and (iii) have withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, stockholder, independent contractor or other third party;
(b) neither
the Company nor any of its Subsidiaries has waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency and there has been no request by a Governmental Authority to execute such a waiver or extension;
(c) to
the Knowledge of the Company, no deficiency with respect to Taxes has been proposed, asserted or assessed against the Company or any of its Subsidiaries, and there
are no pending or threatened in writing disputes, claims, audits, examinations or other proceedings regarding Taxes of the Company and its Subsidiaries or the assets of the Company and its
Subsidiaries;
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(d) there
are no Liens for Taxes upon any property or assets of the Company or any of its Subsidiaries, other than Permitted Liens;
(e) the
Company has made available to Parent copies of all U.S. federal consolidated income and other material Tax Returns filed by the Company and its Subsidiaries for all
open taxable years;
(f) no
claim has ever been made (that has not been resolved) by a Governmental Authority in any jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that the Company or any of its Subsidiaries is or may be subject to taxation by such jurisdiction;
(g) neither
the Company nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an
agreement or arrangement exclusively between or among the Company and its Subsidiaries or such an agreement or arrangement entered into in the ordinary course of business and not relating primarily to
Taxes);
(h) neither
the Company nor any of its Subsidiaries (i) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group
the common parent of which was the Company) or (ii) has any liability for the Taxes of any Person (other than the Company or any of its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of Law), as a transferee or successor or by contract or otherwise;
(i) the
Company has made available to Parent copies of any material private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes
requested or executed in the last six years;
(j) neither
the Company nor any of its Subsidiaries has participated in any "reportable transaction" within the meaning of Treasury Regulations
Section 1.6011-4(b)(1) or any other transaction requiring disclosure under analogous provisions of Tax Law;
(k) neither
the Company nor any of its Subsidiaries has been, within the past two years, or otherwise as part of a "plan (or series of related transactions)" within the
meaning of Section 355(e) of the Code of which this Merger is also a part, a "distributing corporation" or a "controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
Code) in a distribution of stock intended to qualify in whole or in part for tax-free treatment under Section 355 of the Code;
(l) neither
the Company nor any of its Subsidiaries will be required to include any item of income in, or exclude material item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting under Section 481 of the Code (or any similar provision of state,
local or foreign Law), or change in the basis for determining any item referred to in Section 807(c) of the Code, for a taxable period ending on or prior to the Closing Date,
(ii) installment sale or open transaction disposition made on or prior to the Closing Date, (iii) prepaid amount received on or prior to the Closing Date outside of the ordinary course
of business, or (iv) any election under Section 108(i) of the Code; and
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(m) no
amount payable pursuant to this Agreement is subject to withholding under Section 1445 of the Code.
Section 4.12
Labor Relations
.
(a) As
of the date hereof, neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement or other agreement with a labor union or like
organization, and, to the Knowledge of the Company, there are no activities or proceedings by any individual or group of individuals, including representatives of any labor organizations or labor
unions, to organize any employees of the Company or any of its Subsidiaries.
(b) As
of the date hereof, (i) there is no strike, slowdown, lockout, work stoppage, job action, picketing, unfair labor practice or other labor dispute pending or,
to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries; (ii) there is no unfair labor practice charge against the Company or any of its Subsidiaries pending
before the National Labor Relations Board or any comparable labor relations authority, and (iii) there is no pending or, to the Knowledge of the Company, threatened arbitration or grievance,
charge, complaint, audit or investigation by or before any Governmental Authority with respect to any current or former employees of the Company or any of its Subsidiaries.
(c) Each
of the Company and its Subsidiaries is in compliance in all material respects with all applicable Laws respecting labor, employment and employment practices, terms
and conditions of employment, wages and hours, and occupational safety and health.
(d) As
of the date of this Agreement, neither the Company nor any of its Subsidiaries has incurred any liability or obligation under the Worker Adjustment and Retraining
Notification Act and the regulations promulgated thereunder or any similar state or local Law that remains unsatisfied.
Section 4.13
Employee Benefit Plans
.
(a)
Schedule 4.13(a)
of the Company Disclosure Letter sets forth a complete list of each material Company Plan. For purposes of this
Agreement, a "
Company Plan
" means any benefit or compensation plan, program, policy, practice, agreement, contract, arrangement or other obligation, whether or not in
writing and whether or not funded, in each case, which is sponsored or maintained by, or required to be contributed to, or with respect to which any potential liability is borne by the Company or any
of its Subsidiaries. Company Plans include, but are not limited to, "employee benefit plans" within the meaning of Section 3(3) of ERISA ("
ERISA Plans
");
employment, consulting, retirement, profits sharing, severance, retention, termination or change in control plans, programs, policies or agreements; and deferred compensation, equity-based
compensation, incentive, bonus, supplemental retirement, profit sharing, insurance, medical, dental, vision, life, disability or other welfare, fringe or other benefits or remuneration of any kind.
(b) With
respect to each material Company Plan, the Company has made available to Parent accurate and correct copies of (to the extent applicable) (i) the Company
Plan document, including any amendments thereto, and all related trust documents, insurance contracts or other funding vehicles; (ii) a written description of such Company Plan if such plan
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is
not set forth in a written document; (iii) the most recently prepared actuarial report, and (iv) all material correspondence to or from any Governmental Authority received in the last
three years with respect to such Company Plan. In addition, with respect to each ERISA Plan, the Company has made available to Parent, to the extent applicable, accurate and complete copies of
(i) the most recent summary plan description together with any summaries of all material modifications thereto, (ii) the most recent Internal Revenue Service
("
IRS
") determination or opinion letter, and (iii) the two most recent annual reports (Form 5500 or 990 series and all schedules and financial statements
attached thereto).
(c) (i)
Each Company Plan (including any related trusts) has been established, operated and administered in compliance with its terms and Applicable Laws, including,
without limitation, ERISA and the Code, (ii) all contributions or other amounts payable by the Company or a Subsidiary of the Company under each Company Plan in respect of current or prior plan
years have been paid or accrued in accordance with U.S. GAAP, and (iii) there are no pending or, to the Knowledge of the Company, threatened claims (other than routine claims for
benefits) or proceedings by a Governmental Authority by, on behalf of or against any Company Plan or any trust related thereto, in each case, which could reasonably be expected to result in any
material liability to the Company or any of its Subsidiaries.
(d) Each
ERISA Plan that is intended to be qualified under Section 401(a) of the Code received a favorable determination or opinion letter from the IRS or is
entitled to rely upon a favorable opinion issued by the IRS and, to the Knowledge of the Company, nothing has occurred that would adversely affect the qualification or tax exemption of any such
Company Plan. With respect to any ERISA Plan, neither the Company nor any of its Subsidiaries has engaged in a transaction in connection with which the Company or any of its Subsidiaries reasonably
could be subject to either a material civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code.
(e) Neither
the Company nor any of its Subsidiaries has or is expected to incur any material liability under subtitles C or D of Title IV of ERISA with respect to any
ongoing, frozen or terminated "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them or any ERISA Affiliate. With respect to
any Company Plan subject to the minimum funding requirements of Section 412 of the Code or Title IV of ERISA, (i) no such plan is, or is expected to be, in "at-risk" status (within the
meaning of Section 303(i)(4)(A) of ERISA or Section 430(i)(4)(A) of the Code), (ii) as of the last day of the most recent plan year ended prior to the date hereof, the actuarially
determined present value of all "benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA did not exceed the then current value of assets of such Company Plan or, if such
liabilities did exceed such assets, the amount thereof was properly reflected on the financial statements of the Company or its applicable Subsidiary previously filed with the SEC, (iii) no
unsatisfied liability (other than for premiums to the Pension Benefit Guaranty Corporation (the "
PBGC
")) under Title IV of ERISA has been, or is expected to be, incurred
by the Company or any of its Subsidiaries, (iv) the PBGC has not instituted proceedings to terminate any such Company Plan and (v) no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the thirty (30) day notice requirement has been waived under the regulations to Section 4043 of ERISA) has occurred, nor
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has
any event described in Sections 4062, 4063 or 4041 of ERISA occurred during the last six years.
(f) Neither
the Company nor any ERISA Affiliate has maintained, established, participated in or contributed to, or is or has been obligated to contribute to, or has
otherwise incurred any obligation or liability (including any contingent liability) under, any "multiemployer plan" (within the meaning of Section 3(37) of ERISA) or "multiple employer plan"
(within the meaning of Section 4063 or 4064 of ERISA) in the last six years. No Company Plan is a "multiple employer welfare arrangement" (as defined in Section 3(40) of ERISA).
(g) Except
as required by Applicable Law, including, but not limited to, Section 4980B of the Code, no Company Plan provides retiree or post-employment medical,
disability, life insurance or other welfare benefits to any Person, and none of the Company or any of its Subsidiaries has any obligation to provide such benefits. To the extent that the Company or
any of its Subsidiaries sponsors such plans, the Company or the applicable Subsidiary has reserved the right to amend, terminate or modify at any time each Company Plan that provides retiree or
post-employment disability, life insurance or other welfare benefits to any Person.
(h) Each
Company Plan that is a "nonqualified deferred compensation plan" (within the meaning of Section 409A of the Code) is in documentary compliance with, and has
been operated and administered in all material respects in compliance with, Section 409A of the Code and the guidance issued by the IRS provided thereunder.
(i) Neither
the execution nor delivery of this Agreement, shareholder or other approval of this Agreement nor the consummation of the transactions contemplated by this
Agreement could, either alone or in combination with another event (i) entitle any current or former employee, director, officer or independent contractor of the Company or any of its
Subsidiaries to severance pay or any material increase in severance pay; (ii) accelerate the time of payment or vesting, or materially increase the amount of compensation due to any such
employee, director, officer or independent contractor, (iii) directly or indirectly cause the Company to transfer or set aside any assets to fund any material benefits under any Company Plan,
(iv) otherwise give rise to any material liability under any Company Plan, or (v) limit or restrict the right to merge, materially amend, terminate or transfer the assets of any Company
Plan on or following the Effective Time.
(j) Neither
the execution and delivery of this Agreement, shareholder or other approval of this Agreement nor the consummation of the transactions contemplated by this
Agreement could, either alone or in combination with another event, result in the payment of any amount that could, individually or in combination with any other such payment, constitute an "excess
parachute payment" as defined in Section 280G(b)(1) of the Code.
(k) Neither
the Company nor any Subsidiary has any obligation to provide, and no Company Plan or other agreement provides any individual with the right to, a gross up,
indemnification, reimbursement or other payment for any excise or additional taxes, interest or penalties incurred pursuant to Section 409A or Section 4999 of the Code or due to the
failure of any payment to be deductible under of Section 280G of the Code.
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Section 4.14
No Undisclosed Liabilities
.
Neither the Company nor any of its Subsidiaries has any direct or indirect Liabilities, other than (a) Liabilities fully and adequately reflected in or reserved against on the
audited consolidated statement of financial condition of the Company and its Subsidiaries as of December 31, 2016 for the year then ended (the "
Company Year-End Balance
Sheet
"), (b) Liabilities incurred since December 31, 2016 in the ordinary course of business, (c) Liabilities that are permitted by this Agreement in accordance
with the terms hereof, (d) Liabilities that have been discharged or paid off, (e) Liabilities with respect to any Contractual Obligation entered into by the Company or any of its
Subsidiaries (other than any Liabilities for breach of any Contractual Obligation, breach of warranty, tort or infringement by the Company) and (f) Liabilities that would not reasonably be
expected to be material to the Company and its Subsidiaries, taken as a whole.
Section 4.15
Intellectual Property
.
(a)
Schedule 4.15(a)
of the Company Disclosure Letter sets forth a true and complete list of all Registered IP, indicating for each item
the registration or application number, the registration or application date, and the applicable filing jurisdiction.
(b) All
Company IP material to the Company Business is owned exclusively by, or exclusively licensed to, the Company or one of its Subsidiaries, free and clear of any Liens
(other than Permitted Liens). Each item of Registered IP is subsisting and, to the Knowledge of the Company, valid and enforceable, and is not subject to any outstanding order, judgment, decree or
agreement adversely affecting the Company's or its Subsidiaries' ownership or use of, or rights in or to, any such Intellectual Property Rights.
(c) Except
as is not and would not reasonably be expected to be material to the Company Business, (i) each of the Company and its Subsidiaries owns or has a valid
right to use all Intellectual Property Rights that are used in and material to the Company Business, all of which rights shall survive the consummation of the transactions contemplated under this
Agreement substantially unchanged; (ii) to the Knowledge of the Company, the conduct of the Company Business, including the development, manufacture, use, sale, commercialization or other
exploitation of the products and services provided by the Company and its Subsidiaries, does not infringe, misappropriate or otherwise violate, and has not infringed, misappropriated or otherwise
violated in the past three years, any Intellectual Property Rights of any third party; and (iii) to the Knowledge of the Company, no third party is infringing any Company IP.
(d) Except
as is not and would not reasonably be expected to be material to the Company Business, within the past three years, neither the Company nor any of its
Subsidiaries has received any written claim, notice or invitation to receive a license which has not since been resolved (i) alleging or suggesting that the Company, any of its Subsidiaries or
the conduct of the Company Business infringes, misappropriates or otherwise violates the Intellectual Property Rights of any Person, or (ii) challenging the validity, enforceability or
ownership of any Company IP.
(e) The
Company and its Subsidiaries have taken commercially reasonable measures to protect the confidentiality and value of all Trade Secrets (including any source code
included in any Company Software) that are owned, used or held by the Company or any of its
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Subsidiaries
and material to the operation of the Company Business. Except as is not and would not reasonably be expected to be material to the Company Business, no Trade Secrets (including any such
source code) have been disclosed to any Person, or, to the Knowledge of the Company, otherwise discovered or accessed by any Person, in each case, except pursuant to written, valid agreements
containing appropriate terms of confidentiality and non-disclosure which, to the Knowledge of the Company, have not been breached.
(f) Except
as is not and would not reasonably be expected to be material to the Company Business, none of the Company Software sold, licensed, conveyed or distributed by
the Company or any of its Subsidiaries is subject to any obligation or condition under any license identified as an open source license by the Open Source Initiative (www.opensource.org) (each, an
"
Open Source License
") that conditions the distribution of such Software on (i) the disclosure, licensing or distribution of any source code for any portion of such
Software, (ii) the granting to other Persons of the right to make derivative works or other modifications to such Software, (iii) the licensing under terms that permit other Persons,
other than by operation of Law, to reverse engineer, reverse assemble or disassemble such Software or portions thereof or interfaces therefor or (iv) the redistribution of such Software without
payment. Except as is not and would not reasonably be expected to be material to the Company Business, neither the Company nor any of its Subsidiaries is in breach of any Open Source License.
(g) Except
as is not and would not reasonably be expected to be material to the Company Business, the IT Assets used in the operation of the Company Business
(i) operate and perform as required by the Company and its Subsidiaries as presently conducted, (ii) have not materially malfunctioned or failed within the past three years,
(iii) to the Knowledge of the Company, do not contain or make available any disabling codes or instructions, spyware, Trojan horses, worms, viruses or other software routines that permit or
cause unauthorized access to, or disruption, impairment, disablement or destruction of, software, data or other materials, (iv) to the Knowledge of the Company, are otherwise free from any
material bugs or defects, and (v) to the Knowledge of the Company, have not been subject to unauthorized use or access by any Person during the past three years.
(h) Each
of the Company and its Subsidiaries has implemented (i) commercially reasonable measures to protect the confidentiality, integrity and security of its IT Assets
and the information stored or contained therein or transmitted thereby from any unauthorized use, access, interruption or modification by third Persons, and (ii) reasonable backup and disaster
recovery technology processes that are substantially consistent with industry standards.
Section 4.16
Privacy of Personal Information
.
Each of the Company and its Subsidiaries has implemented commercially reasonable policies and procedures governing the collection, use, storage, processing, transfer, disclosure, and
protection of Personal Information, true, correct and complete copies of which have been provided to Parent (each, a "
Company Privacy Policy
"). Except as is not and would
not reasonably be expected to be material to the Company Business, for the past three years, each of the Company and its Subsidiaries has abided by their respective Company Privacy Policies and all
Applicable Laws and contractual obligations with respect to any Personal Information. Except as is not and would not reasonably be expected to be material to the Company Business, the execution,
delivery and performance of
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this
Agreement and the consummation of the Merger do not violate any Company Privacy Policy as it currently exists or as it existed at any time during which any Personal Information was collected or
obtained by the Company or any of its Subsidiaries and, upon the Closing, the Surviving Corporation will own and continue to have the right to use all such Personal Information on substantially the
same terms and conditions as the Company and its Subsidiaries enjoyed immediately prior to the Closing. Except as is not and would not reasonably be expected to be material to the Company Business, no
Claims are pending or, to the Knowledge of the Company, threatened in writing against the Company or any of its Subsidiaries relating to the collection, use, storage, processing, transfer, disclosure,
or protection of Personal Information.
Section 4.17
Environmental Matters
.
The Company and each of its Subsidiaries are in compliance with each Applicable Law relating to: (i) the protection or restoration of the environment, health and safety as it
relates to hazardous substance exposure or natural resource damages and (ii) the handling, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance
(collectively, "
Environmental Laws
"), except where the failure to be in compliance would not reasonably be expected to have a Company Material Adverse Effect. There is no
Claim pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries pursuant to Environmental Laws which would reasonably be expected to have a Company
Material Adverse Effect. To the Knowledge of the Company, there are no present events, conditions, circumstances, activities, practices, incidents, agreements, actions or plans which would reasonably
be expected to give rise to a Company Material Adverse Effect, under, the Environmental Laws.
Section 4.18
Insurance
.
The Company and each of its Subsidiaries maintains insurance coverage against such risks and in such amounts as the Company reasonably believes to be customary for companies of similar
size, in similar geographic regions and in the respective businesses in which the Company and its Subsidiaries operate. As of the date of this Agreement, such policies and binders are valid and
enforceable in accordance with their terms and are in full force and effect, except as would not be material to the Company and its Subsidiaries, taken as a whole. There are no pending
indemnification, breach or insurance claims that are material to the Company and its Subsidiaries, taken a whole.
Section 4.19
Controls
.
The Company has established and maintains disclosure controls and procedures and a system of internal controls over financial reporting (as such terms are defined in
paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act, designed (a) to provide reasonable assurance
that material information required to be disclosed in the Company's periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported on a timely basis to the
individuals responsible for the preparation of the Company's filings with the SEC and other public disclosure documents, and (b) to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Based on its most recent evaluation of internal controls over financial reporting prior
to the date hereof, management of the Company has disclosed to the Company's independent registered public accounting firm and the audit committee of the Company Board (i) any "significant
deficiencies" or "material weaknesses" (as defined by the Public Company Accounting Oversight Board) in the design or operation of the Company's internal controls over
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financial
reporting which would, individually or in the aggregate, reasonably be expected to adversely affect in any material respect the Company's ability to report financial data or (ii) any
fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting and each such deficiency, weakness or
fraud disclosed to auditors, if any, has been disclosed to Parent prior to the date hereof.
Section 4.20
Investment Company
.
None of the Company or any of its Subsidiaries is an "investment company" within the meaning of the Investment Company Act of 1940, as amended.
Section 4.21
Title to Property
.
Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the Company and its Subsidiaries have valid title to, or a valid
leasehold interest in, all of the material personal property that is reflected on the Company Year-End Balance Sheet or that has been acquired or leased since the date of the Company Year-End Balance
Sheet, free and clear of all Liens on such personal property other than Permitted Liens, except for assets disposed of, accounts receivable collected, prepaid expenses realized and Contracts fully
performed, expired or terminated in the ordinary course of business since the date of the Company Year-End Balance Sheet.
Section 4.22
Real Property
.
(a) None
of the Company or any of its Subsidiaries own any real property.
(b)
Schedule 4.22(b)
of the Company Disclosure Letter sets forth each lease, sublease or license with an aggregate annual payment
obligation in excess of $100,000, pursuant to which the Company or any of its Subsidiaries occupies real property as of the date of this Agreement (each, a "
Company Lease
"
and the real property covered by each such lease, a "
Company Leased Facility
"). Except as would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, (i) each Company Lease is valid, binding and enforceable against the Company or its applicable Subsidiary in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles) and is in full force and effect with respect to the Company or its applicable Subsidiary and, to the Knowledge of the Company, with respect to the other parties
thereto; (ii) none of the Company or its Subsidiaries is in breach or violation of, or in default under, any Company Lease, (iii) none of the Company or its Subsidiaries has received any
written notice of default under any Company Lease and (iv) the Company and its Subsidiaries have a valid leasehold interest in all of the Company Leased Facilities free and clear of all Liens
other than Permitted Liens.
Section 4.23
Servicing Matters
.
(a) The
Company and its Subsidiaries have been during the last three years, and are, in compliance in all material respects with all Applicable Requirements applicable to
it, its assets and its conduct of the Company Business. Each of the Company and its Subsidiaries
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have
timely filed, or will have timely filed by the Closing Date, all material reports that any Insurer, Agency or Governmental Authority that it file with respect to the Company Business.
Schedule 4.23(a)
of the Company Disclosure Letter sets forth a true, correct and complete list of each outstanding Servicing Agreement pursuant to which the Company
or any of its Subsidiaries (i) acts as servicer and involving the servicing of mortgage loans with an aggregate unpaid principal balance in excess of $20,000,000 as of the date of this
Agreement or (ii) acts as subservicer and involving the subservicing of at least 1,000 Loans as of the date of this Agreement. The Company has provided to Parent true and correct copies of each
Servicing Agreement set forth in
Schedule 4.23(a)
of the Company Disclosure Letter, including all amendments and supplements thereto, except as set forth on such
Schedule 4.23(a)
.
(b) No
Agency, Investor or Insurer has (i) claimed in writing that the Company or any of its Subsidiaries has violated or has not complied in any material respect
with the representations and warranties applicable with respect to any Loan originated or purchased by the Company or any of its Subsidiaries and subsequently sold, or with respect to any sale of
Servicing Rights or (ii) imposed material restrictions on the activities of the Company or any of its Subsidiaries. No Agency and, to the Knowledge of the Company, no Investor or Insurer has
indicated to the Company or any of its Subsidiaries in writing that it has terminated, or intends to terminate, its relationship with the Company or any of its Subsidiaries for performance, loan
quality or concern with respect to the Company's or any of its Subsidiaries' compliance with Applicable Laws or Applicable Requirements or that the Company or any of its Subsidiaries is in material
default with respect to any Applicable Laws or Applicable Requirements.
(c) No
counterparty to any Servicing Agreement or Subservicing Agreement set forth in
Schedule 4.23(a)
of the Company Disclosure Letter
has provided a written notice of termination or, to the Knowledge of the Company, otherwise indicated that it intends to terminate the applicable Servicing Agreement or Subservicing Agreement.
Section 4.24
Exit and Sale Transactions
.
(a) All
Closings (as the term "Closing" or "Closings" is defined the Asset Sale Transactions Agreements) of the Asset Sale Transactions (other than the portion of the
transactions contemplated by MSR Purchase Agreement that are described on
Schedule 4.24(a)
of the Company Disclosure Letter and the transactions contemplated by the
JV Interests Purchase Agreement) were consummated prior to December 31, 2017.
(b) As
of the date hereof, the Company expects that the Company's exit from its private label solutions ("
PLS
") business (the
"
PLS Exit
") will be substantially completed on or prior to March 31, 2018 (subject only to the transition arrangements described on
Schedule 4.24(b)
of the Company Disclosure Letter), and is not aware of any reason that the PLS Exit will not be completed by such date.
Section 4.25
Broker's, Finder's or Similar Fees
.
Except for Credit Suisse, neither the Company nor any of its Subsidiaries has employed any broker or finder or incurred any liability for any brokerage commissions, finder's fees or
similar fees or commissions payable by the Company or any of its Subsidiaries in connection with the transactions contemplated by this Agreement.
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Section 4.26
Information Supplied
.
None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date the Proxy Statement or
any amendment or supplement thereto is first mailed to the Company's stockholders or at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will
comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder, except that no representation is made by the Company with respect to
statements made or incorporated by reference in the Proxy Statement based on information supplied by any Acquirer Party for inclusion or incorporation by reference therein.
Section 4.27
Required Stockholder Vote
.
The Company Stockholder Approval will be the only vote of the holders of any class or series of Company Capital Stock necessary to approve and adopt this Agreement, the Merger and the
transactions contemplated by this Agreement. No other vote of the holders of any class or series of Company Capital Stock is necessary to approve and adopt this Agreement, the Merger and the
transactions contemplated by this Agreement.
Section 4.28
Anti-Takeover Provisions
.
Assuming that the representations and warranties in
Section 5.7
are true, the Company Board has adopted such resolutions as are necessary to render
inapplicable to this Agreement and the Merger the restrictions on "business combinations" (as defined in Section 3-601 of the MGCL) as set forth in Section 3-603 of the MGCL. The Company
Board has taken all necessary action so that any takeover, anti-takeover, moratorium, "fair price," "control share" or other similar Law enacted under any Law applicable to the Company does not, and
will not, apply to this Agreement, the Merger or the other transactions contemplated hereby. There is no stockholder rights plan, "poison pill" antitakeover plan or similar device in effect to which
the Company or any of its Subsidiaries is subject, party to or otherwise bound.
Section 4.29
Opinion of Financial Advisor
.
Prior to the execution of this Agreement, the Company Board has received the opinion of Credit Suisse Securities (USA) LLC ("
Credit Suisse
") to the
effect that, as of the date of such opinion and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein, the Merger
Consideration to be received by holders of Company Common Stock is fair, from a financial point of view, to such holders. The Company shall make available to Parent a copy of such opinion for
informational purposes only reasonably promptly following receipt thereof by the Company Board;
provided
, that it is agreed and understood that such opinion is for the
benefit of the Company Board and may not be relied on by Parent or Merger Sub. Prior to the date hereof, the Company has made available to Parent a true and correct copy of its engagement letter with
Credit Suisse.
Section 4.30
Related Party Transactions
.
(a) Except
as set forth on
Schedule 4.30(a)
of the Company Disclosure Letter and except for compensation, benefits and advances received
in the ordinary course of business by employees, directors or consultants of the Company or any of its Subsidiaries, as of the date
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of
this Agreement, there are no agreements, arrangements or understandings between the Company or any of its Subsidiaries, on the one hand, and any "related person" (as such term is defined under
Item 404(a) of Regulation S-K under the Securities Act) of the Company, on the other hand, that are of the type that would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act but has not been disclosed in the Company SEC Documents.
(b)
Schedule 4.30(b)
of the Company Disclosure Letter contains a true and complete list of any indemnification, employment or other
similar agreements of the Company or any of its Subsidiaries in effect as of the date hereof that provides for indemnification, advancement of expenses and exculpation from liabilities for acts or
omissions in favor of the current or former directors, officers or employees of the Company or any of its Subsidiaries.
Section 4.31
No Other Representations or Warranties
.
The Company agrees that, except for the representations or warranties expressly set forth in
Article V
, no Acquirer Party nor any of their Affiliates
nor any other person on behalf of any Acquirer Party has made any representation or warranty, expressed or implied, with respect to any Acquirer Party, their respective businesses, operations, assets,
liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions
underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any information regarding any Acquirer Party or any of their Affiliates, and
neither the Company nor any of its Affiliates nor any other person on behalf of the Company has relied on any representation or warranty except for those expressly set forth in
Article V
.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER PARTIES
Except
as disclosed in the Acquirer Disclosure Letter (with specific reference to the Section or subsection of this Agreement to which the information stated in such Acquirer Disclosure
Letter relates;
provided
, that any item on the Acquirer Disclosure Letter in any one or more sections of the Acquirer Disclosure Letter shall be deemed disclosed with
respect to other sections of this Agreement and all other sections or subsections of the Acquirer Disclosure Letter to the extent that the relevance of such disclosure is reasonably apparent on its
face (without the need to examine or understand any underlying document or information) notwithstanding the absence of a specific cross reference) or in the Acquirer SEC Documents filed after
January 1, 2017 and prior to the date hereof to the extent that the relevance of such disclosure is readily apparent on its face (without the need to examine or understand any underlying
document or information) (but excluding, in each case, any disclosures set forth in any risk factor section, in any section relating to forward-looking statements and any other disclosures included in
the Acquirer SEC Documents solely to the extent that they are cautionary, predictive or forward looking in nature, whether or not appearing in such sections), the Acquirer Parties hereby represent and
warrant to the Company as follows:
Section 5.1
Organizational Existence and Power
.
Each of the Acquirer Parties (a) is duly organized or formed, validly existing and in good standing under the Laws of the
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jurisdiction
of its incorporation, (b) has all requisite power (corporate, company, or limited partnership, as the case may be) and authority to own and operate its property, assets or rights,
to lease the property, assets or rights it operates as lessee and to conduct the business in which it is currently engaged and (c) is duly qualified to do business and in good standing (in
jurisdictions where applicable) under the Laws of each jurisdiction in which its ownership, lease or operation of property, assets or rights or the conduct of its business requires such qualification,
except where the failure to be so qualified would not, or would not reasonably be expected to, prevent or materially delay beyond the Outside Date or materially impair the ability of Parent or Merger
Sub to consummate the Merger and the other transactions contemplated by this Agreement (an "
Acquirer Material Adverse Effect
"). Parent has made available to the Company
complete and correct copies of the certificate of formation (or comparable organizational documents) of Parent and Merger Sub, in each case as amended to the date of this Agreement.
Section 5.2
Authorization; No Contravention
.
Each Acquirer Party has all requisite organizational power and authority to enter into this Agreement and to consummate the Merger and the other transactions contemplated hereby. The
execution, delivery and performance by each Acquirer Party of this Agreement and the transactions contemplated hereby have been duly authorized and approved by such Party, and no corporate, company,
limited partnership or other action on its part is necessary. Assuming the accuracy of the representations and warranties of the Company in
Article IV
, the
execution, delivery and performance by each Acquirer Party of this Agreement and the transactions contemplated hereby, assuming that the consents, approvals and filings referred to in
Section 5.3
are duly obtained and/or made, (a) do not and will not violate, conflict with or result in any breach, default or contravention of (or with due
notice or lapse of time or both would result in any breach, default or contravention of), or give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or the creation of any material Lien under, (i) any Contractual Obligation of any Acquirer Party, (ii) any organizational document thereof or (iii) any Applicable
Law, and (b) except for expiration or early termination, as the case may be, of all applicable waiting periods under the HSR Act, do not and will not violate any Orders of any Governmental
Authority against, or binding upon, Parent or any of its Subsidiaries, other than, in the case of clauses (a) and (b) (excluding subclause (ii) of clause (a)), any such
violation, conflict, breach, default, contravention, termination, cancellation or acceleration that would not reasonably be expected to have, individually or in the aggregate, an Acquirer Material
Adverse Effect.
Section 5.3
Governmental Approvals
.
Except for (a) such filings and notifications as may be required by the HSR Act, (b) the filing of the Articles of Merger with the SDAT, and (c) any approval,
consent, authorization or filing that if not obtained would not be material to the Acquirer Parties, taken as a whole, and (d) as set forth in
Schedule 5.3
of the Acquirer Disclosure Letter, no approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with, any applicable Governmental Authority having
jurisdiction or supervision over Parent or any of its Subsidiaries, no consent or approval of any Governmental Authority and no lapse of a waiting period under Applicable Law, is necessary or required
in connection with the execution, delivery or performance by the Acquirer Parties of this Agreement or the transactions contemplated hereby, except for any such consent, approval, order,
authorization, registration, declaration or filing the failure of which to make or obtain would not reasonably be expected to have an Acquirer Material Adverse Effect.
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Section 5.4
Binding Effect
.
This Agreement has been duly executed by the Acquirer Parties and, assuming due and valid authorization, execution and delivery of this Agreement by the Company, constitutes the legal,
valid and binding obligation of each Acquirer Party, enforceable against such Acquirer Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar Laws affecting the enforcement of creditors' rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at Law or in equity).
Section 5.5
Litigation
.
As of the date hereof, there are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or, to the Knowledge of Parent, investigations, pending, or, to the Knowledge
of Parent, threatened at Law, in equity, in arbitration or before any Governmental Authority against any Acquirer Party, and no Order has been issued by any court or other Governmental Authority
against any Acquirer Party or to which any of their respective assets or properties is subject or bound, in each case that would reasonably be expected to have, individually or in the aggregate, an
Acquirer Material Adverse Effect.
Section 5.6
Capitalization
.
As of the date hereof, the authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock, par value $0.10 per share, all of which are validly issued and
outstanding. All of the issued and outstanding capital stock of Merger Sub is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly-owned Subsidiary of Parent. Merger Sub
was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has not conducted or engaged in any business activities prior to the date hereof and has, and prior to
the Effective Time will have, no assets, liabilities or obligations of any nature other than those assets, liabilities and obligations incident to its formation and those assets, liabilities and
obligations pursuant to this Agreement and the Merger and the other transactions contemplated by this Agreement.
Section 5.7
Ownership of Company Common Stock
.
As of the date hereof, none of Parent, Merger Sub or their respective Affiliates owns (directly or indirectly, beneficially or of record) any shares of Company Common Stock and none of
Parent, Merger Sub or their respective Affiliates holds any rights to acquire or vote any shares of Company Common Stock, except pursuant to this Agreement. None of Parent, Merger Sub or any of their
"affiliates" or "associates" is or has been, within three years of the date hereof, an "interested stockholder" of the Company, as those terms are defined in Section 3-601 of the MGCL, or has
taken any action that would cause any anti-takeover statute under the MGCL to be applicable to this Agreement or any of the transactions contemplated hereby. There are no contracts between Parent or
Merger Sub, on the one hand, and any member of the Company's management or directors, on the other hand, that relate in any way to the Company or the transactions contemplated hereby.
Section 5.8
Broker's, Finder's or Similar Fees
.
Neither Parent nor any of its Subsidiaries or Affiliates has employed any broker or finder or incurred any liability for any brokerage commissions, finder's fees or similar fees or
commissions payable by any Acquirer Party in connection with the transactions contemplated by this Agreement.
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Section 5.9
Financing
.
Assuming the accuracy of the representations and warranties of the Company set out in Article IV, the performance by the Company of its obligations under this Agreement, and the
satisfaction of the closing conditions set forth in
Article VIII
(including
Section 8.3(c)
), upon the Closing, Parent will,
taking into account the amount of Available Cash at the Company, have sufficient cash, available lines of credit or other sources of immediately available funds to enable it to pay the Merger
Consideration at the Closing and to satisfy the other obligations of Parent, the Company and their respective subsidiaries due and payable upon the Closing. In no event will the receipt of any funds
or financings by Parent or any of its Affiliates be a condition to any of Parent's or Merger Sub's obligations hereunder, including the consummation of the transactions contemplated hereby.
Section 5.10
Information Supplied
.
None of the information supplied or to be supplied by Parent or Merger Sub specifically for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first
mailed to the Company's stockholders or at the time of the Company Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. No representation is made by Parent or Merger Sub with respect to
statements made or incorporated by reference in the Proxy Statement based on information supplied by the Company for inclusion or incorporation by reference therein.
Section 5.11
Solvency
.
Assuming that the conditions to the obligation of Parent and Merger Sub to consummate the Merger have been satisfied or waived, then immediately following the Effective Time and after
giving effect to all of the transactions contemplated hereby, the payment of the Merger Consideration, funding any obligations of the Surviving Corporation or its Subsidiaries which become due or
payable by the Surviving Corporation and its Subsidiaries in connection with, or as a result of the Merger, any required refinancings or repayments of existing Indebtedness of the Company or any of
its Subsidiaries and payment of all related fees and expenses, none of Parent or any of its Subsidiaries (including the Surviving Corporation) will be insolvent (either because its financial condition
is such that the sum of its debts, including contingent and other liabilities, is greater than the fair market value of its assets or because the fair saleable value of its assets is less than the
amount required to pay its probable liability on its existing debts, including contingent and other liabilities, as the mature).
Section 5.12
No Other Representations or Warranties
.
The Acquirer Parties agree that, except for the representations or warranties expressly set forth in
Article IV
, neither the Company nor any of its
Affiliates nor any other person on behalf of the Company has made any representation or warranty, expressed or implied, with respect to the Company, its respective businesses, operations, assets,
liabilities, financial condition, results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions
underlying such estimates, projections, forecasts, plans or prospects) or with respect to the accuracy or completeness of any information regarding the Company, and neither the Acquirer Parties nor
any of their Affiliates nor any other person on behalf of the Acquirer Parties has relied on any representation or warranty except for those expressly set forth in
Article IV
.
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ARTICLE VI
COVENANTS
Section 6.1
Conduct of Business of the Company
.
During
the period from the date of this Agreement to the earlier of the Effective Time or termination of this Agreement in accordance with its terms, and except (i) as expressly
contemplated or required by this Agreement, (ii) with the prior written consent of Parent (not to be unreasonably withheld, conditioned or delayed) or (iii) as set forth on
Schedule 6.1
of the Company Disclosure Letter, (A) the Company will (and will cause each of its Subsidiaries to) conduct its and its Subsidiaries' operations
only in the ordinary course of business consistent with past practice and will (and will cause each of its Subsidiaries to) use its reasonable best efforts to preserve intact the business organization
of the Company and its Subsidiaries and to preserve the goodwill of customers, suppliers and all other Persons having business relationships with the Company and its Subsidiaries and (B) the
Company will not (and will cause each of its Subsidiaries not to) do any of the following without the prior written consent of Parent (not to be unreasonably withheld, conditioned or delayed):
(a) except
as required by Applicable Law, adopt or propose any change in its organizational documents;
(b) issue,
reissue, sell, grant, pledge, dispose of, transfer, otherwise encumber, purchase or repurchase or authorize the issuance, reissuance, sale, grant, pledge,
disposition, transfer, other encumbrance, purchase or repurchase of shares of Company Capital Stock (other than the issuance of shares in respect of Company Equity Awards outstanding as of the date of
this Agreement in accordance with their terms and, as applicable, the Company Stock Plans as in effect on the date of this Agreement), or securities convertible into capital stock of any class of the
Company, or any rights, warrants or options to acquire any convertible securities or capital stock of the Company;
(c) except
as required pursuant to the terms of any Company Plan in effect as of the date hereof, or as otherwise required by Applicable Law, (i) increase in any
manner the compensation or consulting fees, bonus, pension, welfare, fringe or other benefits, severance or termination pay of any director, officer or employee of the Company or any of its
Subsidiaries, except for (1) with respect to employees who are not officers, increases in annual salary or wage rate in the ordinary course of business consistent with past practice that do not
exceed 5% individually or 3% in the aggregate and (2) if applicable, the payment of annual bonuses for completed periods on a time frame consistent with the payment of annual bonuses with
respect to 2016, based on actual performance and in the ordinary course of business consistent with past practice, (ii) become a party to, establish, adopt, amend, commence participation in or
terminate any Company Plan or any arrangement that would have been a Company Plan had it been entered into prior to this Agreement, (iii) grant any new awards, or amend or modify the terms of
any outstanding awards, under any Company Plan, (iv) take any action to accelerate the vesting or lapsing of restrictions or payment, or fund or in any other way secure the payment, of
compensation or benefits under any Company Plan, (v) change any actuarial or other assumptions used to calculate funding obligations with respect to any Company Plan that is
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required
by Applicable Law to be funded or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by
U.S. GAAP, (vi) forgive any loans or issue any loans (other than routine travel advances issued in the ordinary course of business) to any director, officer or employee of the Company or
any of its Subsidiaries, (vii) hire any employee or engage any independent contractor (who is a natural person) with an annual salary or wage rate or consulting fees and target cash bonus
opportunity in excess of $200,000, (viii) terminate the employment of any executive officer other than for cause, or (ix) grant or amend any rights to indemnification, advancement of
expenses or exculpation of liabilities in favor of any director, officer or employee of the Company or any of its Subsidiaries, except for entry by new directors, officers
or employees into indemnification, employment or other similar agreements on substantially the same terms and conditions as agreements that are in effect as of the date hereof for similarly situated
directors, officers or employees.
(d) become
a party to, establish, adopt, amend, commence participation in or terminate any collective bargaining agreement or other agreement with a labor union, works
council or similar organization;
(e) except
for transactions (i) pursuant to Contractual Obligations existing as of the date hereof and listed on
Schedule 6.1(e)
of the Company Disclosure Letter or (ii) in the ordinary course of business consistent with past practice, sell, lease, encumber or otherwise surrender, dispose of, transfer, or license,
mortgage any Assets, properties or rights (including the capital stock of its Subsidiaries) to any Person (excluding the Company or any Subsidiary of the Company), in each case for consideration in
excess of $500,000;
(f) (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 the Company Capital Stock,
(ii) adjust, split, combine or reclassify any of its capital stock or issue or propose or authorize the issuance of any other securities (including options, warrants, or any similar security
exercisable for or convertible into, such other security) in respect of, in lieu of or in substitution for shares of its capital stock or (iii) purchase, repurchase, redeem or otherwise acquire
any shares of its capital stock or the capital stock of any of its Subsidiaries or any other securities thereof (including the Company Notes) or any rights, warrants, options to acquire any such
shares or other securities (including the Company Securities), except for purchases, redemptions or other acquisitions of capital stock or other securities pursuant to an existing restricted stock
purchase agreement with current or former employees;
(g) except
as required by Applicable Law, make, change or revoke any material Tax election, file any material amended Tax Return, settle or compromise any material claim,
action, proceeding or assessment for Taxes, change any method of Tax accounting, enter into any closing agreement with respect to Taxes, make or surrender any material claim for a refund of Taxes, or
consent to any extension or waiver of the limitations period applicable to any Tax claim or assessment, in each case except as is consistent with past practice;
(h) take
any action or omit to take any action or enter into any transaction which, to the Knowledge of the Company, has, or would reasonably be expected to have, the
effect of materially delaying or materially impeding or preventing the consummation of the
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transactions
contemplated by any of the Asset Sale Transaction Agreements pursuant to the terms existing on the date of this Agreement;
(i) (i)
modify or amend any Company Material Contract in a manner adverse in any material respect to the Company Business, or terminate any Company Material Contract,
(ii) enter into any successor agreement to an expiring Company Material Contract that changes the terms of the expiring Company Material Contract in a manner adverse in any material respect to
the Company Business or (iii) enter into any new agreement that would have been considered a Company Material Contract if it were entered into at or prior to the date hereof, other than
Subservicing Agreements entered into in the ordinary course on terms substantially consistent with existing agreements;
(j) incur
any Indebtedness for borrowed money in excess of $1,000,000 in the aggregate or issue any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for or cancel, the Indebtedness of any Person (other than the Company or any of the Company's Subsidiaries) or make or authorize any material loan to any Person (in
each case other than loans or advances made to the Company or by the Company or any of its Subsidiaries);
(k) merge
or consolidate with any other Person or acquire a material amount of assets or equity of another Person (other than immaterial acquisitions of assets in the
ordinary course of business consistent with past practice);
(l) except
as required by Applicable Law, change any significant method of accounting or accounting principles or practices by the Company or any of its Subsidiaries,
except for such changes required by U.S. GAAP;
(m) terminate,
cancel, or materially amend or modify any material insurance policies maintained by it covering the Company or any of its Subsidiaries or their respective
properties which is not replaced by an amount of insurance coverage that the Company deems appropriate for its size and business;
(n) adopt
a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries;
(o) abandon,
allow to lapse, encumber, or grant a license, covenant not to assert or similar right with respect to any material Company IP, in each case, other than in the
ordinary course of business consistent with past practice;
(p) except
as required by Applicable Law, materially change any of the architecture or infrastructure of the Company's or any of its Subsidiaries' network or information
technology infrastructure systems or any material component thereof or any other IT Assets currently used in and material to the Company Business, other than maintenance or upgrades to any product
provided by any existing vendor of the Company or such Subsidiary or otherwise in the ordinary course of business consistent with past practice;
(q) subject
to
Section 7.11
, institute, compromise, settle or agree to settle any Claim (i) involving amounts that exceed the
Company's reserve therefor on the date hereof by
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more
than $7,500,000 in the aggregate or (ii) that would impose any non-monetary obligation on the Company or any of its Subsidiaries that would continue after the Effective Time, other than
any obligation to comply with Applicable Law or refrain from violating Applicable Law; or
(r) authorize
or enter into any agreement or otherwise make any commitment to do any of the foregoing.
Nothing
contained in this Agreement gives, or is intended to give the Acquirer Parties, directly or indirectly, the right to control or direct the operations of the Company or any of
its Subsidiaries prior to the Effective Time. Prior to the Effective Time, the Company shall
exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and its Subsidiaries' operations.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1
Preparation of the Proxy Statement; Stockholders Meeting
.
(a) As
promptly as reasonably practicable, and in any event within 30 Business Days following the date of this Agreement, the Company will prepare and cause to be filed
with the SEC a preliminary proxy statement (together with any amendments or supplements thereto, the "
Proxy Statement
") to be sent to holders of shares of Company Common
Stock (the "
Company Stockholders
") relating to the meeting of Company Stockholders (the "
Company Stockholder Meeting
") to be held for the
purpose of considering and taking action on the adoption of this Agreement. The Acquirer Parties will furnish all information concerning the Acquirer Parties and their Affiliates to the Company, and
provide such other assistance, as may be reasonably requested in connection with the preparation, filing and distribution of the Proxy Statement. The Company will promptly notify Parent upon the
receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Proxy Statement, and will provide Parent with copies of all correspondence between it and its
representatives, on the one hand, and the SEC, on the other hand. The Company will use its reasonable best efforts to resolve as promptly as reasonably practicable any comments from the SEC with
respect to the Proxy Statement. Notwithstanding the foregoing, prior to filing or mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with
respect thereto, the Company will (i) provide Parent with a reasonable opportunity to review and comment on the Proxy Statement or response (including the proposed final version of the Proxy
Statement or response), (ii) consider in good faith all comments reasonably proposed by Parent, and (iii) except in connection with any Company Adverse Recommendation Change, not file or
mail such document or respond to the SEC prior to receiving the approval of Parent, which approval shall not be unreasonably withheld, conditioned or delayed.
(b) If
prior to the Effective Time, any event occurs with respect to Parent, or any change occurs with respect to other information supplied by the Acquirer Parties for
inclusion in the Proxy Statement, which is required to be described in an amendment of, or a supplement to, the Proxy Statement, Parent will promptly notify the Company of such event, and the Company
and the Acquirer Parties will cooperate in the prompt filing by the Company with
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the
SEC of any necessary amendment or supplement to the Proxy Statement and, if required by Law, in disseminating the information contained in such amendment or supplement to the Company's
stockholders.
(c) If
prior to the Effective Time, any event occurs with respect to the Company, or any change occurs with respect to other information supplied by the Company for
inclusion in the Proxy Statement, which is required to be described in an amendment of, or a supplement to, the Proxy Statement, the Company will promptly notify Parent of such event, and the Company
and the Acquirer Parties will cooperate in the prompt filing by the Company with the SEC of any necessary amendment or supplement to the Proxy Statement and, if required by Law, in disseminating the
information contained in such amendment or supplement to the Company's stockholders.
(d) The
Company will, as soon as reasonably practicable after the date of this Agreement, duly call, give notice of, convene and hold the Company Stockholder Meeting for
the purpose of seeking the Company Stockholder Approval. The Company will use its reasonable best efforts to (i) cause the Proxy Statement to be mailed to the Company Stockholders and to hold
the Company Stockholder Meeting as promptly as reasonably practicable and (ii) subject to
Section 7.4
, solicit the Company Stockholder Approval. The Company
will, through the Company Board, recommend to its stockholders that they give the Company Stockholder Approval (the "
Company Board Recommendation
") and will include such
Company Board Recommendation in the Proxy Statement. The Company may only adjourn, postpone or recess the Company Stockholder Meeting in order to obtain a quorum or solicit additional votes (so long
as such meeting is not adjourned, postponed or recessed to a date on or after the Outside Date).
Section 7.2
Regulatory Actions; Reasonable Best Efforts
.
(a) Subject
to the terms and conditions of this Agreement, each of the Parties agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated hereby, including the Merger, and to
cooperate with the other in connection with the foregoing, including using its reasonable best efforts, in each case in connection with the consummation of the transactions contemplated by this
Agreement, (i) to obtain all consents, approvals, rulings or authorizations that are required to be obtained under any Applicable Law (including any Required Governmental Approvals),
(ii) to obtain any consents required from third parties, (iii) to lift or rescind any injunction or restraining order or other Order adversely affecting the ability of the Parties hereto
to consummate the transactions contemplated hereby, including the Merger, and (iv) to effect as promptly as practicable all necessary registrations, filings and responses to requests for
additional Information or documentary material from a Governmental Authority, if any;
provided
, that the Company shall not make any such registration, filing or response
relating to the Required Governmental Approvals without the prior written consent of Parent (which consent shall not be unreasonably withheld, conditioned or delayed), it being agreed that, if Parent
has not responded to a request for consent within 3 Business Days, such consent will be deemed granted. Notwithstanding the foregoing, the Company shall be able to respond to questions, information
requests and other inquiries from any Governmental Authority without Parent's prior written
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consent as long as such responses do not contain any commitments or agreements that would be binding upon Parent or the Surviving Corporation or is otherwise material to the
transactions contemplated hereby that Parent has not consented to previously. Without limiting the generality of the foregoing, Parent will use reasonable best efforts to take, or cause to be taken,
all actions and do, or cause to be done, all things that any Governmental Authority indicates would be required in order to obtain any Required Governmental Approvals or avoid any Injunction or Law
with the effect referred to in
Section 8.1(c)
of this Agreement;
provided
that, nothing contained in this Agreement shall be deemed to
require any of the Acquirer Parties or permit the Company to take any action, or commit to take any action or agree to any restraint, restriction, limitation, term, requirement, provision or condition
that would, individually or in the aggregate, reasonably be expected to, impair in any material respect the business or financial condition of Parent and its Subsidiaries (including the Surviving
Corporation and its Subsidiaries), taken as a whole (each, a
"
Burdensome Condition
");
provided
,
further
, that nothing contained in this Agreement shall be construed to
require any Party to take any action in violation of Applicable Law or commence any litigation with any Governmental Authority to oppose any enforcement action by any Governmental Authority or remove
any regulatory Orders impeding the Parties' ability to consummate the Merger.
(b) Further,
and subject to Applicable Laws relating to the exchange of information, Parent shall have the right to direct all matters with any Governmental Authority to
the extent relating to the Required Governmental Approvals consistent with its obligations hereunder;
provided
that, without limiting the generality of the rest of this
Section 7.2
, each of the Parties will promptly (i) furnish to the other such necessary Information and reasonable assistance as the other Party may request
in connection with the foregoing, (ii) inform the other of any material communication from any Governmental Authority regarding any of the transactions contemplated hereby, and
(iii) subject to Applicable Laws relating to the exchange of information, provide counsel for the other Party with copies of all material filings made by such Party, and all material
correspondence between such Party (and its advisors) with any Governmental Authority and any other material Information supplied by such Party and such Party's Subsidiaries to a Governmental Authority
or received from such a Governmental Authority in connection with the transactions contemplated hereby and as necessary to comply with contractual arrangements. Notwithstanding the foregoing, the
Company shall be able to make filings, responses and other submissions to any Governmental Authority in accordance with
Section 7.2(a)
. Except with the prior
written consent of Parent, the Company shall not commence, or publicly announce the intent to commence, any litigation with any Governmental Authority to oppose any enforcement action by any
Governmental Authority or remove any regulatory Orders impeding the Parties' ability to consummate the Merger and, if Parent consents to do so or if the Parties mutually agree to do so, the Parties
will reasonably assist each other in litigating or otherwise contesting any objections to or proceedings or other actions challenging the consummation of the Merger and the other transactions
contemplated by this Agreement.
(c) At
Parent's request and expense, the Company agrees to take all actions Parent reasonably deems prudent in order to obtain or assist Parent in obtaining any actions,
consents, undertakings, approvals or waivers by or from any Person for or in connection with the consummation of the Merger and the other transactions contemplated by this Agreement;
provided
,
however
, that nothing in this
Section 7.2(c)
will obligate the Company to take any
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action that is not (i) conditioned on the consummation of the Merger and the other transactions contemplated by this Agreement and/or (ii) at the expense of
Parent.
Section 7.3
Access to Information; Confidentiality
.
(a) Upon
reasonable notice and subject to Applicable Laws relating to the exchange of information, the Company will, and will cause each of its Subsidiaries to, afford to
the officers, employees, accountants, counsel and other representatives of the Acquirer Parties access, during normal business hours during the period prior to the Effective Time or the termination of
this Agreement, to all its properties, books, contracts, commitments and records, and to its officers, employees, accountants, counsel and other representatives, in each case in a manner not
unreasonably disruptive to the operation of the business of the Company and its Subsidiaries as Parent may reasonably request. During the period prior to the Effective Time, the Company shall deliver
to Parent (i) if prior to the Determination Date, no later than the 15th day of each month, a report containing the Company's most current estimate of the Company Net Worth and the
Available Cash, in each case as of the last day of the full calendar month immediately preceding the date of such report, and (ii) if following the Determination Date, no later than the
Wednesday of each calendar week, a report containing the Company's most current estimate of the Available Cash as of the last day of the calendar week immediately preceding the date of such report.
Neither the Company nor any of its Subsidiaries will be required to provide access to or to disclose information where such access or disclosure would jeopardize any attorney-client privilege, violate
any contract or agreement or contravene any Law; and in any such event, the Parties hereto will make appropriate substitute disclosure arrangements.
(b) All
information and materials provided pursuant to this Agreement will be subject to the provisions of the letter agreement entered into between the Company and Parent,
dated as of April 28, 2016 (the "
Confidentiality Agreement
").
(c) No
investigation by any of the Parties or their respective representatives shall constitute a waiver of or otherwise affect the representations, warranties, covenants
or agreements of the others set forth herein.
Section 7.4
No Solicitation by the Company; the Company Board Recommendation
.
(a) Except
as otherwise contemplated by this
Section 7.4
, the Company shall not, and shall use reasonable best efforts to cause its
Subsidiaries or any of its or their respective officers, directors, employees, agents, controlled Affiliates and representatives (including any investment bankers, attorneys or accountants retained by
it or any of its Affiliates) (collectively, "
Representatives
") not to, directly or indirectly, (i) solicit or initiate, or knowingly encourage, knowingly induce or
knowingly facilitate (including by way of providing information) any Company Takeover Proposal or any inquiry or proposal that constitutes or would reasonably be expected to result in a Company
Takeover Proposal, (ii) participate in any discussions or negotiations with any Person regarding, or furnish to any Person any information with respect to, or cooperate in any way with any
Person (whether or not a Person making a Company Takeover Proposal) with respect to any Company Takeover Proposal or any inquiry or proposal that would reasonably be expected to result in a Company
Takeover Proposal, (iii) approve or recommend
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any Company Takeover Proposal, (iv) approve or recommend, or execute or enter into, any letter of intent, agreement in principle, memorandum of understanding, merger
agreement, asset or share purchase or share exchange agreement, option agreement or other similar agreement related to any Company Takeover Proposal (an "
Acquisition
Agreement
"), (v) enter into any agreement or agreement in principle requiring the Company to abandon, terminate or fail to consummate the transactions contemplated hereby or
breach its obligations hereunder, or (vi) propose or agree to do any of the foregoing. The Company shall, and shall cause its Representatives to, immediately cease and cause to be terminated
all existing discussions or negotiations with any Person conducted heretofore with respect to any Company Takeover Proposal, or any inquiry or proposal that would reasonably be expected to result in a
Company Takeover Proposal, request the prompt return or destruction of all confidential information previously furnished and immediately terminate all physical and electronic data room access
previously granted to any such Person or its Representatives.
(b) Notwithstanding
the foregoing, in response to an unsolicited
bona fide
written Company Takeover Proposal, which did not
result from any material breach of this
Section 7.4
, the Company may, subject to compliance with
Section 7.4(g)
, prior to (but
not after) the adoption of this Agreement by the holders of shares of Company Common Stock in accordance with Section 3-105 of the MGCL, contact the Person making such Company Takeover Proposal
to ascertain facts and/or clarify terms for the sole purpose of understanding such Company Takeover Proposal, and, to the extent that the Company Board concludes in good faith (and following
consultation with its outside legal and financial advisors) that such Company Takeover Proposal constitutes or is reasonably likely to result in a Superior Company Proposal, take any action described
in clauses (x) and (y) below: (x) furnish information with respect to the Company and any of its Subsidiaries to the Person making such Company Takeover Proposal (and its
Representatives and any financing sources) pursuant to an Acceptable Confidentiality Agreement, so long as any material non-public information provided under this clause has previously been provided
to the Acquirer Parties or is provided to the Acquirer Parties substantially concurrently with the time it is provided to such Person, and (y) participate in discussions regarding the terms of
such Company Takeover Proposal and the negotiation of such terms with the Person making such Company Takeover Proposal (and such Person's Representatives and any financing sources);
provided
, that the Company shall within 24 hours provide Parent with any information with respect to the Company and any of its Subsidiaries provided to such Person
which was not previously provided to Parent (or its representatives). The Company agrees that neither it nor any of its Subsidiaries shall terminate, waive, amend, modify or fail to enforce any
existing standstill or confidentiality obligations owed by any Person to the Company or any of its Subsidiaries, in each case except to the extent necessary to permit the Company to take an action it
is otherwise permitted to take under this
Section 7.4(b)
in full compliance with such provision;
provided
, that the Company (on behalf
of itself and any of its Subsidiaries) shall have the right to waive any such standstill obligation to the extent necessary to permit a Person otherwise covered by such standstill to submit a
confidential unsolicited
bona fide
written Company Takeover Proposal to the Company Board. For purposes of clarification, the taking of any of the
actions contemplated by clause (x) or (y) of this
Section 7.4(b)
shall not be deemed to be a Company Adverse Recommendation Change.
(c) Except
as set forth in
Section 7.4(d)
, neither the Company Board nor any committee thereof shall (i) (A) withdraw (or modify
in any manner adverse to Parent), or
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propose to withdraw (or modify in any manner adverse to Parent), the Company Board Recommendation, (B) approve, recommend or declare advisable, or propose publicly to
approve, recommend or declare advisable, any Company Takeover Proposal, (C) approve, recommend or declare advisable, or propose to approve, recommend or declare advisable, or allow the Company
or any of its Subsidiaries to execute or enter into, any Acquisition Agreement (other than an Acceptable Confidentiality Agreement), (D) enter into any agreement, letter of intent, or agreement
in principle requiring the Company to abandon, terminate or fail to consummate the transactions contemplated hereby or breach its
obligations hereunder, (E) subject to
Section 7.4(h)
, fail to recommend against any Company Takeover Proposal subject to Regulation 14D under the
Exchange Act in a Solicitation/Recommendation Statement on Schedule 14D-9 within 10 Business Days after the commencement of such Company Takeover Proposal, (F) fail to include the
Company Board Recommendation in the Proxy Statement or re-affirm such Company Board Recommendation within 10 Business Days following Parent's written request (provided that Parent may not make such
request more than twice in connection with any Company Takeover Proposal) or (ii) resolve or agree to do any of the foregoing (each being referred to as a "
Company Adverse
Recommendation Change
").
(d) Notwithstanding
the foregoing provisions, the Company Board may (subject to the requirements of
Section 7.4(f)
), prior to (but not
after) the adoption of this Agreement by the holders of shares of Company Common Stock in accordance with Section 3-105 of the MGCL, make a Company Adverse Recommendation Change and/or, to the
extent provided and subject to the conditions contained in
Section 9.1(f)
, terminate this Agreement in response to an unsolicited
bona
fide
written Company Takeover Proposal, if the Company Board determines (after consultation with its outside legal and financial advisors) that such unsolicited
bona fide
written
Company Takeover Proposal constitutes a Superior Company Proposal and following consultation with outside legal counsel, that failure
to make a Company Adverse Recommendation Change or terminate this Agreement is reasonably likely to violate its fiduciary duties to the stockholders of the Company under Applicable Law;
provided
,
however
, that the Company shall not be entitled to exercise its right to make such Company Adverse Recommendation Change or
terminate this Agreement until after the fifth Business Day (the "
Superior Proposal Notice Period
") following Parent's receipt of written notice (a "
Company
Notice of Superior Proposal
") from the Company advising Parent that the Company Board intends to take such action, including the details of the terms and conditions of any Superior
Company Proposal that is the basis of the proposed action by the Company Board and the identity of the party making such Superior Company Proposal, and, if applicable, shall have contemporaneously
provided a copy of all of the relevant proposed transaction agreements and any other material documents provided by, or material correspondence with, the party making such Superior Company Proposal,
including the then-current form of the definitive agreements with respect to such Superior Company Proposal (it being understood and agreed that any amendment to any material term of such Superior
Company Proposal shall require a new Company Notice of Superior Proposal and trigger a new Superior Proposal Notice Period, except that any such new Superior Proposal Notice Period shall be three
Business Days instead of five Business Days). The Company Board may not make a Company Adverse Recommendation Change in respect of a Superior Company Proposal if any such Superior Company Proposal
resulted from a breach by the Company of this
Section 7.4
.
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(e)
In addition, notwithstanding anything in this Agreement to the contrary, the Company Board may (subject to the requirements of
Section 7.4(f)
), prior to (but not after) the adoption of this Agreement by the holders of shares of Company Common Stock in accordance with Section 3-105 of
the MGCL, make a Company Adverse Recommendation Change in response to a Company Intervening Event if the Company Board determines (after consultation with its outside legal counsel) that failure to
make a Company Adverse Recommendation Change is reasonably likely to violate its fiduciary duties to the stockholders of the Company under Applicable Law;
provided
,
however
, that the Company shall not be entitled to exercise its right to make such Company Adverse Recommendation Change until after the fifth Business Day (the
"
Intervening Event Notice Period
") following Parent's receipt of written notice (a "
Company Notice of Intervening Event
") from the Company
advising Parent that the Company Board intends to take such action, including the material facts and circumstances of the Company Intervening Event.
(f) Notwithstanding
the foregoing provisions, the Company Board may not (i) make a Company Adverse Recommendation Change or terminate this Agreement pursuant to
Section 7.4(d)
unless at the end of the last Superior Proposal Notice Period, the Company Board determines (after consultation with its outside legal and financial
advisors) that the Company Takeover Proposal (after giving effect to any amendments thereto) continues to constitute a Superior Company Proposal, or (ii) make a Company Adverse Recommendation
Change pursuant to
Section 7.4(e)
unless at the end of the last Intervening Event Notice Period, the Company Board determines (after consultation with its outside
legal counsel) that failure to make a Company Adverse Recommendation Change is reasonably likely to violate its fiduciary duties to the stockholders of the Company under Applicable Law. Further, in
determining whether to make a Company Adverse Recommendation Change or terminate this Agreement pursuant to
Section 7.4(d
) or
Section 7.4(e)
, the Company Board shall take into account any changes to the terms of this Agreement committed to in writing by Parent in response to a Company
Notice of Superior Proposal, Company Notice of Intervening Event or otherwise;
provided
, that if requested by Parent, the Company shall, and shall use its reasonable best
efforts to cause its financial and legal advisors to, during the Superior Proposal Notice Period or Intervening Event Notice Period (as applicable), negotiate with Parent in good faith (to the extent
Parent also seeks to negotiate) to make such adjustments in the terms and conditions of this Agreement so that this Agreement results in a transaction that (A) in the case of a Company Takeover
Proposal, is no less favorable to the stockholders of the Company than such Company Takeover Proposal that would be deemed to constitute a Superior Company Proposal in the absence of such adjustments
or (B) in the case of a Company Intervening Event, enables the Company Board to determine (after consultation with its outside legal counsel) that failure to make a Company Adverse
Recommendation Change is not reasonably likely to violate its fiduciary duties to the stockholders of the Company under Applicable Law; it being understood and agreed that, in the event Parent agrees
to make such adjustments as set forth in clause (A) and (B), as applicable, no Company Adverse Recommendation Change shall be made. The Company agrees that any violation of this
Section 7.4
by any Representative of the Company or any of its Subsidiaries who is (i) a director or officer of the Company or any of its Subsidiaries,
(ii) a senior-level employee (i.e., a managing director (or similar title) or more senior) of any financial advisor to the Company or any of its Subsidiaries or (iii) a partner of
any outside legal counsel to the Company or any of its Subsidiaries shall be deemed a breach of this
Section 7.4
by the Company.
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(g)
In addition to the forgoing obligations of the Company set forth in this
Section 7.4
, the Company shall,
within 24 hours of the receipt thereof, advise Parent orally of any Company Takeover Proposal, the material terms and conditions of any such Company Takeover Proposal (including any changes
thereto) and the identity of the Person making any such Company Takeover Proposal. The Company shall (x) keep Parent informed in all material respects and on a reasonably current basis (and in
no event later than 24 hours from the occurrence or existence of any material event, fact or circumstance) of any change in the status or material terms of any Company Takeover Proposal, and
(y) provide to Parent as soon as practicable after receipt or delivery thereof copies of all material correspondence and other written material documentation exchanged between the Company or
any of its Subsidiaries and any Person that describes any of the terms or conditions of any Company Takeover Proposal.
(h) Nothing
contained in this Agreement shall prohibit the Company from complying with Rules 14a-9, 14d-9, 14e-2 and Item 1012(a) of Regulation M-A
promulgated under the Exchange Act, or from issuing a "stop, look and listen" statement pending disclosure of its position thereunder or making any required disclosure to the Company's stockholders;
provided
, that any such statement that would be a Company Adverse Recommendation Change shall be in accordance with
Section 7.4(d)
and
Section 7.4(e)
.
(i) For
purposes of this Agreement:
"
Company
Intervening Event
" means any material development or change in circumstances relating to the Company or any of its Subsidiaries occurring or
arising after the date of this Agreement that (i) was not known by nor reasonably foreseeable to the Company Board as of the date of this Agreement, and (ii) does not relate to or
involve any Company Takeover Proposal;
provided
,
however
, that in no event shall any of the following be deemed, either alone or in
combination, to constitute a Company Intervening Event: (A) changes in the market price or trading volume of the Company Common Stock, in and of themselves, (B) the timing of any
Required Governmental Approval, (C) the dismissal or any other resolution of the CFPB Litigation or (D) the fact that, in and of itself, the Company exceeds internal or published
projections.
"
Company
Takeover Proposal
" means any proposal or offer (whether or not in writing), with respect to any (i) merger, consolidation, share exchange,
other business combination or similar transaction involving the Company or any of its Subsidiaries representing 20% or more of the assets of the Company and its Subsidiaries, taken as a whole,
(ii) direct or indirect acquisition of more than 20% of the outstanding shares of Company Common Stock or voting power of
the Company, (iii) sale, lease, contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, other business combination, partnership,
joint venture, sale of capital stock of or other equity interests in the Company or any of its Subsidiaries or otherwise) of any business or assets of the Company or any of its Subsidiaries
representing 20% or more of the consolidated revenues, net income or assets of the Company and its Subsidiaries, taken as a whole, (iv) issuance, sale or other disposition, directly or
indirectly, to any Person (or the stockholders of any Person) or group of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities)
representing 20% or more of the voting power of the Company, (v) any
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tender offer or exchange offer as a result of which any Person or group shall acquire, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, of 20% or more of the
voting power of the Company or (vi) any combination of the foregoing (in each case, other than the Merger).
"
Superior
Company Proposal
" means any
bona fide
written Company Takeover Proposal made by a third party or
group pursuant to which such third party (or, in a parent-to-parent merger involving such third party, the stockholders of such third party) or group would acquire, directly or indirectly, more than
50% of the voting power of the Company or substantially all of the assets of the Company and its Subsidiaries, taken as a whole, on terms which the Company Board determines in good faith (after
consultation with its legal and financial advisors) (i) to be superior to the holders of Company Common Stock from a financial point of view than the transactions contemplated by thus Agreement
(taking into account any changes proposed by Parent to the terms of this Agreement) including the Merger (including the Merger Consideration), taking into account all the terms and conditions of such
proposal and the Person making the proposal (including all financial, regulatory, legal conditions to consummation and other aspects of such proposal), and (ii) is reasonably capable of being
consummated on the terms proposed and (iii) for which financing, if a cash transaction (whether in whole or in part), is not a condition to closing.
Section 7.5
Public Announcements
.
Parent and the Company will consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other written public statements
with respect to the transactions contemplated by this Agreement, including the Merger, and will not issue any such press release or make any such public statement prior to such consultation, except
with respect to any press release or other public statements made or proposed to be made (a) by the Company in connection with a Company Takeover Proposal or a Company Adverse Recommendation
Change or any action pursuant thereto (provided that such release or statement is made in accordance with the terms of this Agreement), or by Parent in response thereto, (b) in connection with
any dispute regarding this Agreement or the transactions contemplated hereby, (c) in any periodic reports filed with the SEC or in any investor presentation or other written communication to
the extent such statements are generally consistent with prior public statements regarding the transactions contemplated by this Agreement that were issued following consultation with the other Party,
or (d) as a Party may reasonably conclude may be required by Applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange or national
securities quotation system. Parent and the Company agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement will be in the form heretofore
agreed to by the Parties.
Section 7.6
Notification of Certain Matters
.
Subject to Applicable Law, Parent will give prompt notice to the Company and the Company will give prompt notice to Parent of the occurrence, or failure to occur, of any event whose
occurrence or failure to occur would cause (a) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect or (b) a material failure of
Parent or Merger Sub, on the one hand, or the Company, on the other hand, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement;
provided
,
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however
, that no such notification will affect the representations and warranties of any of the Parties or the conditions to the performance by the
Parties hereunder; and
provided, further
, that the failure to comply with this covenant shall not result in a non-satisfaction of
Article VIII
.
Section 7.7
Indemnification; Directors' and Officers' Insurance
.
(a) Each
of the Surviving Corporation and Parent agrees that all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions
occurring at or prior to the Effective Time in favor of the current or former directors, officers or employees of the Company or any of its Subsidiaries as provided in their respective certificates of
incorporation or by-laws (or comparable organizational documents) or in any indemnification, employment or other similar agreements of the Company or any of its Subsidiaries will survive the Merger
and continue in full force and effect in accordance with their terms. For a period of six years after the Closing Date, to the fullest extent permitted by applicable Law, Parent shall cause the
certificate of incorporation, by-laws and other organizational documents of the Surviving Corporation and its Subsidiaries to contain provisions no less favorable with respect to exculpation and
indemnification of and advancement of expenses to the Company Indemnified Parties (as defined below) than are set forth as of the date of this Agreement in the respective certificate of incorporation,
by-laws or other organizational documents of the Company and its Subsidiaries. From and after the Effective Time, the Surviving Corporation will, and Parent will cause the Surviving Corporation to,
indemnify and hold harmless each individual who is as of the date of this Agreement, or who becomes prior to the Effective Time, a director or officer of the Company or any of its Subsidiaries or who
is as of the date of this Agreement, or who thereafter commences prior to the Effective Time, serving at the request of the Company of any of its Subsidiaries as a director or officer of another
Person (all of the foregoing, collectively, the "
Company Indemnified Parties
"), against all claims, losses, liabilities, damages, judgments, inquiries, fines and
reasonable fees, costs and expenses, including attorneys' fees and disbursements ("
Losses
"), incurred or arising in connection with any claim, action, investigation, suit
or proceeding, whether civil, criminal, regulatory, administrative or investigative (including with respect to matters existing or occurring or alleged to have existed or occurred at or prior to the
Effective Time (including this Agreement and the transactions and actions contemplated hereby)), arising out of or pertaining to the fact that the Company Indemnified Party is or was an officer or
director of the Company or any of its Subsidiaries or is or was serving at the request of the Company or any of its Subsidiaries as a director or officer of another Person or any act or omission by
such Company Indemnified Party while serving in such capacity, whether asserted or claimed prior to, at or after the Effective Time, to the fullest extent permitted under Applicable Law.
(b) In
the event that (i) Parent or the Surviving Corporation or any of their successors or assigns (A) consolidates with or merges into any other Person and
is not the continuing or Surviving Corporation or entity of such consolidation or merger or (B) transfers or conveys all or substantially all of its properties and assets to any Person, or
(ii) the Surviving Corporation or any of its successors or assigns undertakes any complete or partial liquidation, dissolution or winding up, then, and in each such case, Parent and the
Surviving Corporation will cause proper provision to be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, or in the case of any event referred to in
clause (ii), Parent, will assume the obligations set forth in this
Section 7.7
.
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(c)
For a period of six years from and after the Effective Time, the Surviving Corporation will, and Parent will cause the Surviving Corporation to,
(i) cause to be maintained in effect the current policies of directors' and officers' liability insurance and fiduciary liability insurance maintained by the Company or its Subsidiaries or
(ii) provide substitute polices for the Company and its current and former directors and officers (and any individual who becomes an officer or director prior to the Effective Time) who are
currently (or prior to the Effective Time become) covered by the directors' and officers' and fiduciary liability insurance coverage currently maintained by the Company or its Subsidiaries in either
case, of not less than the amount of existing coverage and have other terms and from carriers not less favorable to the insured persons than the directors' and officers' liability insurance and
fiduciary liability insurance coverage currently maintained by the Company with respect to claims arising from facts or events that occurred on or before the Effective Time, except that in no event
will the Surviving Corporation be required to pay with respect to such insurance policies in respect of any one policy year more than 250% of the annual premium payable by the Company for such
insurance for the year ended December 31, 2017 (such 250% amount, the "
Maximum Amount
"), and if the Surviving Corporation is unable to obtain the insurance required
by this
Section 7.7
it will obtain as much comparable insurance as possible for the years within such six-year period for an annual premium equal to the Maximum
Amount, in respect of each policy year within such period. In lieu of such insurance, prior to the Closing Date, the Company may, upon prior written notice to Parent, purchase a "tail" directors' and
officers' liability insurance policy and fiduciary liability insurance policy for the Company and its current and former directors and officers (and any individual who becomes an officer or director
prior to the Effective Time) who are currently (or prior to the Effective Time become) covered by the directors' and officers' and fiduciary liability insurance coverage currently maintained by the
Company. In the event the Company purchases such tail coverage, the Surviving Corporation will cease to have any obligations under the first sentence of this
Section 7.7(c)
.
(d) The
provisions of this
Section 7.7
(i) will survive consummation of the Merger, (ii) are intended to be for the
benefit of, and will be enforceable by, each indemnified or insured party (including the Company Indemnified Parties), his or her heirs and representatives and (iii) are in addition to, and not
in substitution for, any other rights to indemnification or contribution that any such Person may have by contract or otherwise.
Section 7.8
Takeover Laws
.
The Parties hereto and their respective boards of directors or other governing bodies will (i) use reasonable best efforts to ensure that no state takeover Law or similar Law is
or becomes applicable to this Agreement, the Merger or any of the other transactions contemplated by this Agreement, and (ii) if any state takeover Law or similar Law becomes applicable to this
Agreement, the Merger or any of the other transactions contemplated hereby, use reasonable best efforts to ensure that the Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to minimize the effect of such Law on this Agreement, the Merger and the other transactions
contemplated by this Agreement.
Section 7.9
Exemption from Liability Under Section 16(b)
.
Prior to the Effective Time, the Company will take all such steps as may be necessary or appropriate to cause any disposition or acquisition by the Company's directors and officers of
shares of Company Capital Stock or conversion of any derivative securities in respect of such shares of Company
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Capital Stock in connection with the consummation of the transactions contemplated by this Agreement to be exempt under Rule 16b-3 promulgated under the Exchange Act,
including any such actions specified in the applicable SEC No-Action Letter dated January 12, 1999.
Section 7.10
Transaction Litigation
.
The Company and Parent will each give the other Party the opportunity to participate at its own expense, to the extent practicable and subject to Applicable Laws relating to the exchange
of information and in a manner that does not result in any waiver or loss of attorney-client privilege, in the defense or settlement of any litigation relating to the transactions contemplated by this
Agreement, including any shareholder litigation against the Company and/or its directors or any litigation by any holder of Company Notes or lenders under the Company Credit Facilities, and the
Company will not agree to any such settlement without Parent's prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).
Section 7.11
CFPB Litigation
.
From the execution and delivery of this Agreement until the Effective Time, the Company will (a) reasonably consult with Parent at regular intervals regarding the status of the
CFPB Litigation and in advance of any meeting with the CFPB with respect to the CFPB Litigation, (b) provide Parent with a reasonable opportunity to review and comment on material developments
in the CFPB Litigation, and (c) consider in good faith all comments reasonably proposed by Parent with respect to the CFPB Litigation;
provided
, that the Company
will not, without Parent's prior consent (not to be unreasonably withheld, conditioned or delayed), (i) file or otherwise commence any Appeal in connection with the CFPB Litigation or
(ii) settle or agree to settle the CFPB Litigation if such settlement (1) exceeds the amount set forth in
Schedule 7.11
of the Company Disclosure
Letter, (2) imposes any restriction on Parent's ability to operate the Company Business (as conducted as of the date hereof) after the Effective Time (excluding (x) any restrictions on
the Company Business that are in effect as of the date hereof and (y) any restrictions on the PLS business or any business that the Company no longer owns or conducts as of the date hereof),
(3) imposes any monetary penalty or other obligation on Parent or its Subsidiaries (excluding the Surviving Corporation and its Subsidiaries) or (4) contains any admission of fault or
any non-standard or unusual release language.
Section 7.12
Company Indebtedness
.
(a) Parent
will execute and deliver, or cause to be executed and delivered, by or on behalf of Merger Sub or Parent, at or prior to the Effective Time, any supplements,
amendments or other instruments required for the due assumption of outstanding Company Notes by the Surviving Corporation or Parent, and other agreements to the extent required by the terms of the
Company Notes.
(b) The
Company will use reasonable best efforts to (i) obtain customary payoff letters from the lenders with respect to the Company Credit Facilities, in form and
substance reasonably satisfactory to Parent, and (ii) deliver or cause to be delivered such payoff letters on or prior to the Closing;
provided
that the Company's
obligations under this
Section 7.12(b)
shall be conditioned on and subject to the occurrence of the Closing.
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(c)
The Company will use reasonable best efforts to (i) obtain customary payoff letters with respect to any outstanding obligations of the
PHH Service Advance Receivables Trust 2013-1 with respect to the Series 2015-1 variable funding notes, in form and substance reasonably satisfactory to Parent, and (ii) deliver or cause
to be delivered such payoff letters on or prior to the Closing;
provided
that the Company's obligations under this
Section 7.12(c)
shall be conditioned on and subject to the occurrence of the Closing.
Section 7.13
Integration Planning
.
Following the expiration of the waiting period and any extension thereof applicable to the transactions contemplated by this Agreement under the HSR Act, the Company and its
Representatives shall, at Parent's cost and expense (limited to reasonable out-of-pocket costs of the Company and its Representatives), assist and cooperate with Parent in integration planning,
including with respect to systems integration and implementing risk controls across the businesses of the Company and Parent to be combined following the Merger.
Section 7.14
Post-Closing Reorganization
.
The Company agrees that, upon the reasonable request of Parent, the Company shall use its commercially reasonable efforts, at Parent's cost and expense, to assist Parent with Parent's
preparations for the reorganization of Parent's and the Surviving Corporation's corporate structure, capital structure, business, operations or assets or any other corporate transaction in connection
with any reorganization contemplated by Parent to occur following the Closing;
provided
that nothing in this
Section 7.14
shall require
the Company or any of its Subsidiaries to take (a) any action or omit to take any action in violation of Applicable Law or (b) any action (other than providing information) that is not
conditioned upon the occurrence of the Closing.
Section 7.15
Further Assurances
.
(a) Parent
will cause Merger Sub to (i) comply with all of its obligations related to this Agreement and (ii) as the sole stockholder of Merger Sub, on the
date hereof and immediately after the execution and delivery of this Agreement, deliver a written consent approving this Agreement and the transactions contemplated by this Agreement, including the
Merger.
(b) After
the date of this Agreement and prior to the Closing, subject to Applicable Laws relating to competition, Parent and the Company will cooperate with each other in
good faith in connection with communications with the Company's clients or prospective clients regarding the transactions contemplated by this Agreement.
Section 7.16
Employee Matters
.
(a) Parent
agrees that each employee of the Company and its Subsidiaries at the Effective Time who continues to remain employed with the Company or any of its Subsidiaries
(collectively, the "
Continuing Employees
") shall, from the Effective Time through December 31, 2018 (the "
Continuation Period
"), be
provided with (i) an annual base salary or base wage and target annual incentive compensation opportunities (excluding equity and long-term incentive compensation) that are, in each case, no
less than those provided to such Continuing Employee immediately prior to the Effective Time and (ii) employee benefits that are
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substantially similar in the aggregate to the employee benefits provided to the Continuing Employees immediately prior to the Effective Time. Notwithstanding anything contained
herein to the contrary, from the Effective Time until the one year anniversary of the Closing Date, Parent shall continue to maintain or cause to be maintained, without amendment, the Company Plans
set forth in
Schedule 7.16(a)
of the Company Disclosure Letter and shall provide, or cause to be provided, to each Continuing Employee in accordance with the terms
thereof, the payments and benefits specified therein.
(b) Following
the Closing Date, Parent shall use reasonable best efforts to cause any employee benefit plans sponsored or maintained by Parent or the Surviving Corporation
or their Subsidiaries in which the Continuing Employees are eligible to participate following the Closing Date (collectively, the "
Post-Closing Plans
") to (i) waive
any pre-existing conditions or limitations and eligibility waiting periods under any such Post-Closing Plans that are group health plans of Parent or its Affiliates with respect to the Continuing
Employees and their eligible dependents, (ii) give each Continuing Employee credit for the plan year in which the Effective Time occurs towards applicable co-payments, deductibles and annual
out-of-pocket limits for medical expenses incurred prior to the Effective Time for which payment has been made, and (iii) give each Continuing Employee service credit for such Continuing
Employee's employment with the Company and its Subsidiaries for purposes of vesting, level of benefits and eligibility to participate under each applicable Post-Closing Plan, as if such service had
been performed with Parent (except for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits, or to the extent it would result in a
duplication of benefits).
(c) If
requested in writing by Parent at least ten (10) Business Days prior to the Effective Time to the extent permitted by Applicable Law and the terms of the
applicable plan or arrangement, the Company will cause the Company's Employee Savings Plan and the PHH Home Loans Savings Plan (the "
Company 401(k) Plans
") to be
terminated effective immediately prior to the Effective Time. In the event that Parent requests that the Company 401(k) Plans be terminated, (i) the Company shall provide Parent with evidence
that such plans have been terminated (the form and substance of which shall be subject to review and approval by Parent) not later than three (3) days immediately preceding the Effective Time
and (ii) Parent shall permit each eligible Continuing Employee to, as of the Effective Time, become a participant in a Parent 401(k) plan constituting an "eligible retirement plan" (within the
meaning of Section 401(a)(31) of the Code) (the "
Parent 401(k) Plan
") and make rollover contributions of "eligible rollover distributions" (within the meaning of
Section 401(a)(31) of the Code, including, to the extent permitted by the relevant Parent 401(k) Plan, all participant loans) in cash or notes (in the case of participant loans and to the
extent permitted by the Parent 401(k) Plan) in an amount equal to the eligible rollover distribution portion of the account balance distributed to each such Continuing Employee from such Company
401(k) Plans to the Parent 401(k) Plan.
(d) Following
the Closing Date, Parent shall provide credit to each Continuing Employee for accrued unused sick leave and/or accrued unused paid time off
("
PTO
") in the amount available to such Continuing Employee immediately prior to the Effective Time, in accordance and subject to the terms of the applicable sick leave
and/or PTO policy of the Company.
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(e)
Nothing contained in this Agreement is intended to (i) be treated as an amendment of any particular Company Plan, (ii) prevent
Parent, the Surviving Corporation or any of their Affiliates from amending or terminating any of their benefit plans or, after the Effective Time, any Company Plan in accordance with their terms,
(iii) prevent Parent, the Surviving Corporation or any of their Affiliates, after the Effective Time, from terminating the employment of any Continuing Employee, or (iv) create any
third-party beneficiary rights in any director, officer or employee of the Company or any of its Subsidiaries, any beneficiary or dependent thereof, or any collective bargaining representative
thereof, with respect to the compensation, terms and conditions of employment and/or benefits that may be provided to any Continuing Employee by Parent, the Surviving Corporation or any of their
Affiliates or under any benefit plan which Parent, the Surviving Corporation or any of their Affiliates may maintain.
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.1
Conditions to Each Party's Obligation to Effect the Merger
.
The respective obligations of Parent and the Company to consummate the Merger are subject to the fulfillment or, to the extent permitted by Applicable Law, waiver by Parent and the
Company of each of the following:
(a)
Company
Stockholder Approval
. The Company Stockholder Approval shall have been obtained.
(b)
Required
Governmental Approvals
. All of the Required Governmental Approvals shall have been obtained and shall remain in full
force and effect, and no such Required Governmental Approval shall have resulted in the imposition of a Burdensome Condition. The waiting period and any extension thereof applicable to the
transactions contemplated by this Agreement under the HSR Act shall have been terminated or shall have expired.
(c)
No
Injunctions or Restraints; Illegality
. No (i) order, injunction, ruling, decree or judgment issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition (an "
Injunction
") restraining, enjoining or otherwise preventing the consummation of the Merger or
any of the other transactions contemplated by this Agreement shall be in effect and (ii) Law shall have been enacted, entered, promulgated or enforced by any Governmental Authority that
prohibits or makes illegal consummation of the Merger or any of the other transactions contemplated by this Agreement.
Section 8.2
Conditions to the Company's Obligation to Effect the Merger
.
The obligation of the Company to consummate the Merger is subject to the fulfillment or, to the extent permitted by Applicable Law, waiver by the Company of each of the following:
(a)
Representations
and Warranties
. The representations and warranties of the Acquirer Parties set forth in this Agreement shall
be true and correct, except where the failure of any such representation or warranty to be so true and correct would not, individually or in the aggregate, constitute an Acquirer Material Adverse
Effect, in each case made as if none of such
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representations
or warranties contained any qualification or limitation as to materiality or Acquirer Material Adverse Effect in each cases as of the date of the Agreement and as of the Closing Date
as if made on and as of the Closing Date (except to the extent that any such representation or warranty, by its terms, is expressly limited to a specific date, in which case, as of such specific
date).
(b)
Covenants
and Agreements
. The covenants and agreements of each of Parent and Merger Sub to be performed on or before the
Closing Date in accordance with this Agreement shall have been duly performed in all material respects.
(c)
Officer's
Certificate
. The Company shall have received a certificate from Parent, dated as of the Closing Date and signed on
behalf of Parent by an executive officer of Parent, stating that the conditions specified in
Section 8.2(a)
and
Section 8.2(b)
,
have been satisfied.
Section 8.3
Conditions to the Acquirer Parties' Obligation to Effect the Merger
.
The obligation of Merger Sub to consummate the Merger is subject to the fulfillment or, to the extent permitted by Applicable Law, waiver by Parent of each of the following:
(a)
Representations
and Warranties
. (i) Each of the representations and warranties of the Company set forth in this Agreement that
are qualified by Company Material Adverse Effect shall be true and correct, (ii) each of the representations and warranties of the Company set forth in this Agreement that are not so qualified
shall be true and correct, except where the failure of any such representation or warranty to be so true and correct would not, individually or in the aggregate, constitute a Company Material Adverse
Effect and (iii) notwithstanding anything to the contrary set forth in (i) and (ii) of this
Section 8.3(a)
, (x) the representations and
warranties of the Company set forth in clauses (a) and (b) of
Section 4.1
(Corporate Existence and Power), the first sentence of
Section 4.2
(Authorization; No Contravention),
Section 4.4
(Binding Effect) and
Section 4.25
(Broker's Finder's or Similar Fees) shall be true and correct in all material respects, (y) the representations and warranties of the Company set forth in the first and second sentences of
Section 4.7(a)
and the first sentence of
Section 4.7(b)
(Capitalization) and clause (ii) of
Section 4.10
(No Material Adverse Change), shall be true and correct, except for any
de minimis
inaccuracies, and
(z) the representations and warranties of the Company set forth in clause (i) of
Section 4.10
(No Material Adverse Change) shall be true and correct
in all respects, in each case of clause (x), (y) and (z) made as if none of such representations or warranties contained any qualification or limitation as to materiality or
Company Material Adverse Effect, in each cases (i), (ii) and (iii), as of the date of the Agreement and as of the Closing Date as if made on and as of the Closing Date (except to the extent
that any such representation or warranty, by its terms, is expressly limited to a specific date, in which case, as of such specific date).
(b)
Covenants
and Agreements
. The covenants and agreements of the Company to be performed on or before the Closing Date in
accordance with this Agreement shall have been duly performed in all material respects.
(c)
No
Material Adverse Effect
. Since the date of this Agreement, there shall not have occurred any change, event, circumstance,
development or effect that has had or would
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reasonably
be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(d)
Officer's
Certificate
. Parent shall have received a certificate from the Company, dated as of the Closing Date and signed on
behalf of the Company by an executive officer of the Company, stating that the conditions specified in
Section 8.3(a)
through
Section 8.3(c)
have been satisfied.
(e)
Asset
Sale Transactions
. All Closings (as the term "Closing" or "Closings" is defined the Asset Sale Transactions Agreements)
of the Asset Sale Transactions (other than the transactions contemplated by the MSR Purchase Agreement) shall have occurred.
(f)
PLS
Exit
. The PLS Exit shall have been completed, subject only to the transition arrangements set forth
Schedule 4.24(b)
of the Company Disclosure Letter. For purposes of this Agreement (including this
Section 8.3(f
)) and
Section 4.24(b)
), the PLS Exit shall be deemed completed if there are less than 100 loans remaining that are being originated by the Company and its Subsidiaries
for their private label solutions clients.
Section 8.4
Frustration of Closing Conditions
.
Neither the Company, on the one hand, nor the Acquirer Parties, on the other hand, may rely, either as a basis for not consummating the Merger or for terminating this Agreement and
abandoning the Merger, on the failure of any condition set forth in
Section 8.1
,
Section 8.2
or
Section 8.3
, as the case may be, to be satisfied if such Party's breach of any provision of this Agreement or failure to use its reasonable best efforts to
consummate the Merger and the other transactions contemplated by this Agreement, as required by and subject to the terms of this Agreement, including
Section 7.2
,
has been the primary cause of or resulted in the failure of such condition to be satisfied.
ARTICLE IX
TERMINATION
Section 9.1
Termination
.
This Agreement may be terminated at any time prior to the Effective Time, whether prior to or after receipt of the Company Stockholder Approval as follows:
(a) by
mutual written consent of Parent and the Company;
(b) by
either Parent or the Company, if:
(i) the
Closing shall not have occurred on or before September 27, 2018 (the "
Outside Date
");
provided
,
that if on such date, the conditions to the Closing set forth in
Section 8.1(b)
shall not have been satisfied, but all other conditions to the Closing shall have
been satisfied (or in the case of conditions that by their terms are to be satisfied at the Closing, shall be capable of being satisfied on such date, then the Outside Date shall be extended to
December 27, 2018;
provided
,
further
, that the right to terminate this Agreement under this
Section 9.1(b)(i)
shall not be available to any Party to this Agreement whose breach of any representation, warranty, covenant or agreement contained in this
Agreement has been the
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primary
cause of or resulted in the failure of the transactions contemplated by this Agreement to occur on or before Outside Date;
(ii) any
Injunction permanently restrains, enjoins or prohibits or makes illegal the consummation the Merger or any of the transactions contemplated by this Agreement, and
such Injunction becomes effective (and final and nonappealable) or any Law becomes enacted, entered, promulgated or enforced by any Governmental Authority that prohibits or makes illegal consummation
of the Merger or any of the other transactions contemplated by this Agreement;
provided
, that the terminating Party shall have complied in all material respects with its
obligations under
Section 7.2
; or
(iii) the
Company Stockholder Approval is not obtained at the Company Stockholder Meeting duly convened (unless such Company Stockholder Meeting has been postponed or
adjourned, in which case at the final postponement or adjournment thereof);
(c) by
the Company, if (i) there has been a material breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub contained in
this Agreement, which breach (x) would give rise to the failure of a condition set forth in
Section 8.2(a)
or
Section 8.2(b)
and (y) by its nature is not curable or has not been cured within the earlier of (A) thirty (30) days of written notice to
Parent or Merger Sub, as applicable, of such breach and (B) the Outside Date and (ii) the Company is not then in breach of any representation, warranty, covenant or agreement contained
in this Agreement such that it would give rise to the failure of a condition set forth in
Section 8.3(a)
or
Section 8.3(b)
;
(d) by
Parent, if (i) there has been a material breach of any representation, warranty, covenant or agreement (including
Section 10.11
hereof) on the part of the Company contained in this Agreement, which breach (x) would give rise to the failure of a condition set forth in
Section 8.3(a)
or
Section 8.3(b)
and (y) by its nature is not curable or has not been cured within the earlier of
(A) thirty (30) days of written notice to the Company of such breach and (B) the Outside Date and (ii) Parent is not then in breach of any representation, warranty,
covenant or agreement contained in this Agreement such that it would give rise to the failure of a condition set forth in
Section 8.2(a)
or
Section 8.2(b)
;
(e) by
Parent prior to the Company Stockholder Meeting if the Company Board shall have effected a Company Adverse Recommendation Change;
(f) by
the Company prior to the receipt of the Company Stockholder Approval, in order to enter into an Acquisition Agreement with respect to a Company Takeover Proposal;
provided
that the Company shall have complied in all material respects with
Section 7.4
and shall have paid or shall concurrently pay
the Company Termination Fee in accordance with
Section 9.3(b)
.
Section 9.2
Notice of Termination
.
In the event of termination of this Agreement by either or both of Parent and the Company pursuant to
Section 9.1
, written notice of such termination
shall be given by the terminating Party to the other Party to this Agreement.
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Section 9.3
Effect of Termination
.
(a) In
the event of termination of this Agreement by either or both of Parent and the Company pursuant to
Section 9.1
, this Agreement
shall terminate and become void and have no effect, and the transactions contemplated by this Agreement shall be abandoned without further action by the Parties to this Agreement, other than the last
sentence of
Section 7.3(b)
(Confidentiality), this
Section 9.3
and
Article X
, which
provisions shall survive the termination of this Agreement;
provided
,
however
, that notwithstanding anything to the contrary in this
Agreement, in no event shall the termination of this Agreement release any Party from any Liability arising out of or relating to any Willful Breach or fraud.
(b) The
Company shall pay to Parent an amount equal to $12,600,000 (the "
Company Termination Fee
") if:
(i) the
Company terminates this Agreement pursuant to
Section 9.1(f)
;
(ii) Parent
terminates this Agreement pursuant to
Section 9.1(e)
;
(iii) (A)
prior to the Company Stockholder Meeting, a Company Takeover Proposal shall have been publicly made to the Company or otherwise communicated or made known to the
Company's senior management or the Company Board and shall not have been withdrawn or repudiated prior to such Company Stockholder Meeting (in the event this Agreement is terminated pursuant to
Section 9.1(b)(iii)
) or prior to the termination of this Agreement (in the event this Agreement is terminated pursuant to
Section 9.1(d)
or
Section 9.1(b)(i)
) by the Person making such Company Takeover Proposal, (B) this Agreement is
terminated pursuant to (I)
Section 9.1(b)(iii)
, (II)
Section 9.1(d)
or
(III)
Section 9.1(b)(i)
and (C) within 12 months of such termination, the Company enters into a definitive Acquisition Agreement to consummate
a Company Takeover Proposal (provided that such Company Takeover Proposal is subsequently consummated) or a Company Takeover Proposal is consummated;
provided
,
however
, that for purposes of this
Section 9.3(b)(iii)
only, each reference to "20%" in the definition of Company Takeover Proposal
shall be deemed to be a reference to "50%"; or
(iv) this
Agreement is terminated pursuant to
Section 9.1(b)(iii)
but, at the time of such termination, Parent would have been permitted
to terminate this Agreement pursuant to a provision that would give rise to a Company Termination Fee in accordance with
Section 9.3(b)(ii)
), in which case this
Agreement shall be deemed terminated pursuant to such provision.
(v) Any
Company Termination Fee due under this
Section 9.3(b)
shall be paid by wire transfer of same-day funds (x) in the case of
clause (i) above, prior to or on the date of termination of this Agreement, (y) in the case of clauses (ii) above, within two Business Days following the date of termination of
this Agreement, and (z) in the case of clause (iii) above, within two Business Days following the consummation of the Company Takeover Proposal referred to in
clause (iii)(C) above. In no event shall the Company be obligated to pay more than one Company Termination Fee.
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(c) The
Company acknowledges and agrees that the agreements contained in
Section 9.3(b)
are an integral part of the transactions
contemplated by this Agreement, that, without these agreements, Parent would not enter into this Agreement, and that any amount payable pursuant to this
Section 9.3(b)
does not constitute a penalty. Accordingly, if the Company fails promptly to pay the amount due pursuant to
Section 9.3(b)
, and, in order to obtain such payment, Parent commences a suit, action or other proceeding that results in a judgment in its favor for such payment,
the Company shall also pay to Parent its costs and expenses (including attorneys' fees and expenses) in connection with such suit, action or other proceeding, together with interest from the date such
payment is due until the date paid at a rate equal to the prime rate as published in
The Wall Street Journal
,
Eastern
Edition
in effect on the date of such payment.
(d) Notwithstanding
anything to the contrary in this Agreement, in the event the Company fails to effect the Closing or otherwise breaches this Agreement or fails to
perform hereunder, then, except for an injunction or an order of specific performance as and only to the extent expressly permitted by
Section 10.6
, the Acquirer
Parties' sole and exclusive remedy (whether at law, in equity, in contract, in tort or otherwise) against the Company or any of its Subsidiaries and any of their respective, direct or indirect,
former, current or future general or limited partners, stockholders, managers, members, directors, officers, Affiliates, employees, agents, other Representatives or assignees (such Persons
collectively the "
Company Related Parties
") in respect of this Agreement, any Contract executed in connection herewith (other than the Confidentiality Agreement) and the
transactions contemplated hereby and thereby shall be to terminate this Agreement in accordance with this
Article IX
and collect, if due, the Company Termination
Fee, and upon payment of such amounts in accordance with this
Section 9.3
, (A) no Company Related Party shall have any further Liability or obligation
relating to or arising out of this Agreement, any Contract executed in connection herewith or the transactions contemplated hereby or thereby, (B) none of the (i) Acquirer Parties, and
(ii) any of their respective, direct or indirect, former, current or future general or limited partners, stockholders, managers, members, directors, officers, Affiliates, employees, agents,
other Representatives or assignees (such Persons referenced in clauses (i) and (ii), collectively the "
Acquirer Related Parties
") shall be entitled to bring or
maintain any Claim against the Company or any Company Related Party arising out of or in connection with this Agreement, any Contract executed in connection herewith, any of the transactions
contemplated hereby or thereby (or the abandonment or termination thereof) or any matters forming the basis for such termination, and (C) Parent shall use its reasonable best efforts to cause
any legal proceedings pending in connection with this Agreement, any Contract executed in connection herewith or any of the transactions contemplated hereby or thereby, to the extent maintained by an
Acquirer Party or another Acquirer Related Party against the Company, its Subsidiaries or any Company Related Party, to be dismissed with prejudice promptly following the payment of any such amounts.
For the avoidance of doubt, under no circumstances shall the Acquirer Parties be (x) entitled to collect the Company Termination Fee on more than one occasion or (y) permitted or
entitled to receive both a grant of specific performance of the obligation to close contemplated by
Section 10.6
and any money damages, including all or any portion
of the Company Termination Fee.
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ARTICLE X
MISCELLANEOUS
Section 10.1
Nonsurvival of Representations and Warranties and Agreements
.
None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This
Section 10.1
shall not limit
Section 9.3
or any covenant or agreement of the Parties which by its terms contemplates performance
after the Effective Time.
Section 10.2
Amendment and Waiver
.
(a) This
Agreement may not be modified or amended and no waiver, consent or approval by or on behalf of the Company, Parent or Merger Sub may be granted except by an
instrument or instruments in writing signed by, in the case of any modification or amendment, each Party to this Agreement or, in the case of any waiver, consent or approval, such Party, except that
following satisfaction of the condition set forth in
Section 8.1(a)
, there shall be no amendment or change to the provisions hereof which by Applicable Law or in
accordance with the rules of the NYSE or this Agreement requires further approval by such stockholders without such further approval, nor shall there be any amendment or change not permitted under
Applicable Law. No failure or delay on the part of Parent, Merger Sub or the Company in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.
(b) Any
amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure by
Parent, Merger Sub or the Company from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by, in the case of any modification
or amendment, each Party to this Agreement or, in the case of any waiver, consent or approval, such Party and (ii) only in the specific instance and for the specific purpose for which made or
given. Except where notice is specifically required by this Agreement, no notice to or demand on Parent, Merger Sub or the Company in any case shall entitle Parent, Merger Sub or the Company,
respectively, to any other or further notice or demand in similar or other circumstances.
(c) Waiver
by any Party of any default by any other Party of any provision hereof shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor
shall it prejudice the rights of such other Party.
Section 10.3
Notices
.
All notices and other communications to be given to any Party hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or overnight
delivery service, or by email and shall be directed to the address set forth below (or at such other address as such Party shall designate by like notice):
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if
to Parent or Merger Sub:
|
|
|
Ocwen Financial Corporation
1661 Worthington Road, Suite 100
West Palm Beach, Florida 33409
|
Attention:
|
|
General Counsel
|
|
|
Chief Financial Officer
|
Email:
|
|
timothy.hayes@ocwen.com
|
|
|
michael.bourque@ocwen.com
|
|
|
michael.stanton@ocwen.com
|
with
a copy (which shall not constitute notice) to:
|
|
|
Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
|
Attention:
|
|
H. Rodgin Cohen;
Jared M. Fishman
|
E-mail:
|
|
cohenhr@sullcrom.com;
fishmanj@sullcrom.com
|
if
to the Company:
|
|
|
PHH Corporation
3000 Leadenhall Road
Mt. Laurel, New Jersey 08054
|
Attention:
|
|
General Counsel
Chief Financial Officer
Assistant General Counsel
|
Email:
|
|
madeline.flanagan@phh.com
mike.bogansky@mortgagefamily.com
ryan.melcher@phh.com
|
with
a copy (which shall not constitute notice) to:
|
|
|
Jones Day
250 Vesey Street
New York, New York 10281
|
Attention:
|
|
Jeffrey Symons
Claire Sheng
|
E-mail:
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jsymons@jonesday.com
csheng@jonesday.com
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Latham & Watkins
885 Third Avenue
New York, New York 10022
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Attention:
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Thomas W. Christopher
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E-mail:
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thomas.christopher@lw.com
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All
such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by
commercial courier service; when received, if mailed by certified or registered mail or emailed. Any Party may by notice given in accordance with this
Section 10.3
designate another address or Person for receipt of notices hereunder.
Section 10.4
Successors and Assigns; Third-Party Beneficiaries
.
(a) This
Agreement shall be binding upon and inure to the benefit of the Parties and their successors and permitted assigns, but neither this Agreement nor any rights,
interests and obligations hereunder shall be assigned by any Party, in whole or in part (whether by operation of Law or otherwise), without the prior written consent of each of the other Parties and
any attempt to make any such assignment without such consent shall be null and void.
(b) Except
(i) as provided in
Section 7.7
or (ii) for the provisions of
Article III
(which, from and after the Effective Time, shall be for the benefit of holders of Company Common Stock as of the Effective Time), the Acquirer Parties and the Company hereby agree that their
respective representations, warranties, covenants and agreements set forth herein are solely for the benefit of the other Party hereto, in accordance with and subject to the terms of this Agreement,
and this Agreement is not intended to, and does not, confer upon any Person other than the parties hereto any rights or remedies hereunder, including the right to rely upon the representations and
warranties set forth herein, except that the Non-Recourse Parties are made third-party beneficiaries to
Section 10.4(b)
,
Section 10.7
and
Section 10.11
.
Section 10.5
Counterparts
.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Facsimile
or portable document format (PDF) signatures shall be treated as original signatures for all purposes hereunder.
Section 10.6
Specific Performance
.
The Parties hereto acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed (including failing to take such
actions as are required of it hereunder in order to consummate the transactions contemplated by this Agreement) in accordance with their specific terms or were otherwise breached, and that monetary
damages, even if available, would not be an adequate remedy therefor. It is accordingly agreed that, prior to the valid termination of this Agreement pursuant to
Section 9.1
, the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the performance of
terms and provisions of this Agreement in any court referred to in
Section 10.7
below, without proof of actual damages (and each Party hereby waives any requirement
for the securing or posting of any bond in connection with such remedy), this being in addition to any other remedy to which they are entitled at Law or in equity. The Parties further agree not to
assert that a
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remedy
of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, nor to assert that a remedy of monetary damages would provide an adequate remedy for any such
breach.
Section 10.7
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial
.
(a) This
Agreement (other than
Articles II
and
III
and the provisions relating to the fiduciary duties of
the Company Board) and all disputes or controversies arising out of or relating to this Agreement (other than
Articles II
and
III
and
the provisions relating to the fiduciary duties of the Company Board) shall be governed by and construed in accordance with the internal Laws of the State of Delaware, without regard to the
conflicts-of-law principles of such State.
Articles II
and
III
of this Agreement and the provisions of this Agreement relating to
fiduciary duties of the Company Board, and all claims or causes of action based upon, arising out of, or related to such provisions, will be governed by, and construed in accordance with, the Laws of
the State of Maryland, without regard to the conflicts-of-law principles of such State.
(b) Each
of the parties hereto irrevocably and unconditionally submits to the exclusive jurisdiction of the Delaware Court of Chancery (and if the Delaware Court of
Chancery shall be unavailable, any Delaware State court and the Federal court of the United States of America sitting in the State of Delaware) for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby, whether in law or in equity, whether in contract or in tort or otherwise (and agrees that no such action, suit or proceeding
relating to this Agreement shall be brought by it or any of its subsidiaries except in such courts). Each of the Parties further agrees that, to the fullest extent permitted by Applicable Law, service
of any process, summons, notice or document by U.S. registered mail to such Person's respective address set forth above shall be effective service of process for any action, suit or proceeding in
Delaware with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each of the Parties hereto irrevocably and unconditionally
waives (and agrees not to plead or claim) any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, whether in law or in equity, whether in contract or in
tort or otherwise, in the Delaware Court of Chancery (and if the Delaware Court of Chancery shall be unavailable, in any Delaware State court or the Federal court of the United States of America
sitting in the State of Delaware) or that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.
(c) EACH
PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 10.8
Severability
.
If any term, provision, covenant or restriction of this Agreement is held 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
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way
be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a
determination, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible. The Parties intend that the remedies and limitations
thereon contained in this Agreement (including in
Section 9.3(c)
,
Section 9.3(d)
and
Section 10.11
) be construed as integral provisions of this Agreement and that such remedies and limitations shall not be severable in any manner that increases a
Party's liability or obligations hereunder.
Section 10.9
Entire Agreement
.
This Agreement, together with the exhibits and schedules hereto, is intended by the Parties as a final expression of their agreement and intended to be a complete and exclusive statement
of the agreement and understanding of the Parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits and schedules hereto, supersedes all prior agreements and understandings between
the Parties with respect to such subject matter. No representation, warranty, inducement, promise, understanding or condition not set forth in this Agreement has been made or relied upon by any of the
parties to this Agreement. No representation, warranty, inducement, promise, understanding or condition not set forth in this Agreement has been made or relied upon by any of the parties to this
Agreement.
Section 10.10
Expenses
.
Except as expressly provided otherwise in this Agreement, including in
Section 7.2
or
Section 9.3
hereof, all
costs and expenses incurred by any Party to this Agreement or on its behalf in connection with this Agreement, the Merger and the other transactions contemplated hereby
("
Expenses
") shall be paid by the Party incurring such expense whether or not the Merger is consummated, except that Expenses incurred in connection with printing and
mailing of the Proxy Statement and in connection with notices or other filings with any Governmental Authorities under any Laws shall be shared equally by Parent and the Company.
Section 10.11
Non-Recourse
.
All claims, obligations, liabilities or causes of action (whether in contract or in tort, in law or in equity, or granted by statute) that may be based upon, in respect of, arise under,
out or by reason of, be connected with, or relate in any manner to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or warranty made in, in
connection with, or as an inducement to, this Agreement) may be made only against (and are those solely of) the entities that are expressly identified as parties to this Agreement in the Preamble to
this Agreement. No other Person, including any director, officer, employee, incorporator, member, partner, manager, stockholder, affiliate, agent, attorney or representative of, or any financial
advisor or lender to, any Party to this Agreement or any director, officer, employee, incorporator, member, partner, manager, stockholder, affiliate, agent, attorney or representative of, or any
financial advisor or lender to any of the foregoing (each such other Person, a "
Non-Recourse Party
") shall have any liabilities (whether in contract or in tort, in law or
in equity, or granted by statute) for any claims, causes of action, obligations or liabilities arising under, out of, in connection with or related in any manner to this Agreement or based on, in
respect of or by reason of this Agreement or its negotiation, execution, performance or breach.
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Section 10.12
Representations and Warranties
.
The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such
representations and warranties are subject to waiver by the parties hereto in accordance with the terms of this Agreement without notice or liability to any other person. In some instances, the
representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties
hereto. Consequently, persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date
of this Agreement or as of any other date.
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to be executed, this
Agreement and Plan of Merger on the date first written above.
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OCWEN FINANCIAL CORPORATION
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By:
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/s/ Ronald M. Faris
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Name:
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Ronald M. Faris
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Title:
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President and Chief Executive Officer
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POMS CORP
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By:
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/s/ John V. Britti
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Name:
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John V. Britti
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Title:
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President and Chief Executive Officer
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PHH CORPORATION
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By:
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/s/ Robert Crowl
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Name:
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Robert Crowl
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Title:
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President and Chief Executive Officer
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Table of Contents
ANNEX B
Opinion of Credit Suisse Securities (USA) LLC
February 27,
2018
Board
of Directors
PHH Corporation
3000 Leadenhall Road
Mt. Laurel, New Jersey 08054
Board
of Directors:
You
have asked us to advise you in your capacity as the Board of Directors of PHH Corporation ("PHH") with respect to the fairness, from a financial point of view, to holders of the common stock, par
value $0.01 per share ("PHH Common Stock"), of PHH of the Merger Consideration (as defined below) to be received by such holders pursuant to the terms of an Agreement and Plan of Merger (the "Merger
Agreement") to be entered into among Ocwen Financial Corporation ("Ocwen"), POMS Corp, a direct wholly owned subsidiary of Ocwen ("Merger Sub"), and PHH. The Merger Agreement provides for, among other
things, the merger of Merger Sub with and into PHH (the "Merger"), with PHH as the surviving entity of the Merger, pursuant to which each outstanding share of PHH Common Stock will be converted into
the right to receive $11.00 in cash (the "Merger Consideration"), subject to certain adjustments (as to which we express no opinion) specified in the Merger
Agreement. The terms and conditions of the Merger are set forth more fully in the Merger Agreement.
In
arriving at our opinion, we have reviewed an execution version, provided to us on February 27, 2018, of the Merger Agreement and certain publicly available business and financial information
relating to PHH. We also have reviewed certain other information relating to PHH provided to or discussed with us by the management of PHH, including financial forecasts and estimates relating to PHH
provided to or discussed with us by the management of PHH, and we have met with the management of PHH to discuss the businesses and prospects of PHH. We also have considered certain financial and
stock market data of PHH, and we have compared that data with similar data for companies with publicly traded equity securities in businesses we deemed relevant. We also considered such other
information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant.
In
connection with our review, we have not independently verified any of the foregoing information and, with your consent, we have assumed and relied upon such information being complete and accurate
in all material respects. With respect to the financial forecasts and estimates for PHH (including, without limitation, as to PHH's projected net worth and available and distributable cash) that we
have been directed to utilize in our analyses, the management of PHH has advised us, and we have assumed, with your consent, that such financial forecasts and estimates have been reasonably prepared
in good faith on bases reflecting the best currently available estimates and judgments of such management as to the future financial performance of PHH and the other matters covered thereby and are
appropriate for our use and reliance for purposes of our analyses and this opinion. We express no opinion as to any financial forecasts or estimates or the assumptions on which they are based. We have
relied, with your consent and
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Board
of Directors
PHH Corporation
February 27, 2018
Page 2
without
independent verification, upon the assessments of the management of PHH as to, among other things, (i) the pending sale of PHH's mortgage servicing rights and other asset sales and
dispositions, and the exiting of certain businesses, reorganizations, restructurings and other corporate transactions undertaken by PHH (collectively, the "Disposition Transactions"), including with
respect to the timing thereof and expected amount of distributable cash therefrom, (ii) the potential impact on PHH of certain market, competitive, cyclical and other trends in and prospects
for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the residential mortgage and real estate markets and related credit and financial markets, including with
respect to interest rates and conditions in the housing market, (iii) the annual portfolio growth and recapture rates of PHH and (iv) recent events and other aspects relating to PHH's
key clients, vendors and other commercial relationships. We have assumed, with your consent, that there will be no developments with respect to any such matters or any adjustments to the Merger
Consideration that would be meaningful in any respect to our analyses or this opinion.
In
connection with our opinion, we have not been requested to make, and we have not made, an independent evaluation or appraisal of the assets or liabilities (contingent, accrued, derivative,
off-balance sheet or otherwise) of PHH or any other entity, nor have we been furnished for purposes of our analyses or this opinion with any such evaluations or appraisals, and our analyses should not
be construed as such. We are not experts in the evaluation of, and we express no opinion with respect to, loan portfolios or individual credit files or the adequacy or sufficiency of allowances for
credit losses with respect to loans or any other matters. We also have not been requested to make, and we have not made, an evaluation of the solvency or fair value of PHH under any state, federal or
other laws relating to bankruptcy, insolvency or similar matters or any potential or actual litigation, regulatory action or governmental investigation or possible unasserted claims or other
contingent liabilities to which PHH or any other entity is or may be a party or is or may be subject or any reserves therefor, and we have assumed, with your consent, that the outcome of such matters
would not be meaningful in any respect to our analyses or this opinion.
We
have assumed, with your consent, that, in the course of obtaining any regulatory or third-party consents, approvals, agreements or waivers in connection with the Merger, no delay, limitation,
restriction or condition, including any divestiture requirements or
amendments or modifications, will be imposed or occur that would have an adverse effect on the Merger or that otherwise would be meaningful in any respect to our analyses or this opinion and that the
Merger will be consummated in accordance with the terms of the Merger Agreement and in compliance with all applicable laws, documents and other requirements without waiver, modification or amendment
of any material term, condition or agreement thereof. Representatives of PHH have advised us, and we also have assumed, with your consent, that the terms of the Merger Agreement, when executed, will
conform in all material respects to the terms reflected in the execution version reviewed by us. We are not expressing any opinion with respect to accounting, tax, regulatory, legal or similar
matters, including, without limitation, any opinion with respect to changes in, or the impact of, tax laws, regulations and governmental and legislative policies on the Merger, PHH or any other
participant in the Merger, and have assumed that PHH has or will obtain such advice or opinions from appropriate professional sources, and we have relied, with your consent, upon the assessments of
representatives of PHH as to such matters.
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Board
of Directors
PHH Corporation
February 27, 2018
Page 3
Our
opinion addresses only the fairness, from a financial point of view and as of the date hereof, of the Merger Consideration (to the extent expressly specified herein), without regard to individual
circumstances of specific holders with respect to any rights or aspects which may
distinguish such holders or the securities of PHH held by such holders, and does not address any other terms, aspects or implications of the Merger, including, without limitation, the form or
structure of the Merger, any adjustments to the Merger Consideration, the financial or other terms or consequences of any Disposition Transaction or related distributions or any post-closing
reorganizations or other agreement, arrangement or understanding to be entered into in connection with, related to or contemplated by the Merger or otherwise. In addition, our opinion does not address
the fairness of the amount or nature of, or any other aspect relating to, any compensation or other consideration to any officers, directors, employees or securityholders of any party to the Merger or
any related entities, or class of such persons, relative to the Merger Consideration or otherwise. The issuance of this opinion was approved by our authorized internal committee.
Our
opinion is necessarily based upon information made available to us as of the date hereof and financial, economic, market and other conditions as they exist and can be evaluated on the date hereof.
It should be understood that subsequent developments may affect this opinion, and we do not have any obligation to update, revise, reaffirm or withdraw this opinion. We are not expressing any opinion
as to the prices or range of prices at which PHH Common Stock or other securities will trade or be transferable at any time, including following announcement of the proposed Merger. Our opinion does
not address the relative merits of the Merger as compared to alternative transactions or strategies that might be available to PHH, nor does it address the underlying business decision of the Board of
Directors of PHH or PHH to proceed with the Merger.
We
have acted as financial advisor to PHH in connection with the Merger and will receive a fee for our services, a portion of which is contingent upon consummation of the Merger. We also are entitled
to receive a fee upon the rendering of our opinion and received an advisory fee which was paid in 2017. In addition, PHH has agreed to reimburse our expenses and to indemnify us and certain related
parties for certain liabilities and other items arising out of or related to our engagement. As you are aware, we and our affiliates in the past have provided and currently are providing investment
banking and other financial services to PHH unrelated to the Merger, for which we and our affiliates have received and would expect to receive compensation, including, during the past two years,
having acted or acting as financial advisor to PHH in connection with a series of strategic alternative transactions, including certain asset sales or other disposition transactions, and as dealer
manager for a share repurchase and a senior notes tender offer. As you also are aware, we and our affiliates in the past have provided and currently are providing investment banking and other
financial services to Ocwen, for which we and our affiliates have received and would expect to receive compensation, including, during the past two years, having acted or acting as joint dealer
manager for a bond exchange offer for Ocwen and as a joint bookrunner for certain financings, and as joint lead arranger, joint bookrunner and co-documentation agent for, and as a lender under,
certain credit facilities, of Ocwen and certain of its affiliates. We and our affiliates may provide investment banking or other financial services to PHH, Ocwen and their respective affiliates in the
future, for which we and our affiliates would expect to receive compensation. We are a full service securities firm engaged in securities trading
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Board
of Directors
PHH Corporation
February 27, 2018
Page 4
and
brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, we and our affiliates may acquire, hold or sell, for our and our
affiliates' own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of PHH, Ocwen or any other entity that
may be involved in the Merger and certain of their respective affiliates, as well as provide investment banking and other financial services to such entities.
It
is understood that this letter is for the information of the Board of Directors of PHH (in its capacity as such) in connection with its consideration of the Merger and does not constitute advice or
a recommendation to any securityholder as to how such securityholder should vote or act on any matter relating to the proposed Merger or otherwise.
Based
upon and subject to the foregoing, it is our opinion that, as of the date hereof, the Merger Consideration to be received by holders of PHH Common Stock pursuant to the Merger Agreement is fair,
from a financial point of view, to such holders.
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Very truly yours,
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CREDIT SUISSE SECURITIES (USA) LLC
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B-4
If you would like to reduce the costs incurred by our company in mailing proxy 1234567 VOTE BY MAIL 123,456,789,012.12345 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR the following proposals: For 0 Against 0 Abstain 0 1. To approve the merger of POMS Corp, a wholly-owned subsidiary of Ocwen Financial Corporation (Ocwen), with and into PHH Corporation with PHH Corporation surviving the merger and becoming a wholly-owned subsidiary of Ocwen in an all cash transaction valued at approximately $360 million, or $11.00 per share on a fully-diluted basis (the Merger), on the terms and conditions of that certain Agreement and Plan of Merger, dated February 27, 2018 (the Merger Agreement) by and among Ocwen, POMS Corp and PHH Corporation attached as Annex A to the proxy statement and as more fully described in the proxy statement. 0 0 0 0 0 0 2. To approve an advisory resolution concerning the compensation of our named executive officers based on or that otherwise relates to the Merger and the Merger Agreement. To grant discretionary authority to each of the proxy holders named on the reverse side of this proxy card to adjourn or postpone the special meeting to another date, time or place if necessary or appropriate, to solicit additional proxies for the foregoing proposals in the event that there are insufficient votes at the time of the special meeting or any adjournment thereof. 3. NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 02 0000000000 1 OF 1 1 2 0000381404_1 R1.0.1.17 SHARES CUSIP # JOB #SEQUENCE # VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 John Sample 234567P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. 1234567 Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. NAME THE COMPANY NAME INC. - COMMON THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D THE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPA N Y NAME INC. - 401 K CONTROL # SHARES123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 x PAGE1 OF 2 PHH CORPORATION 3000 LEADENHALL ROAD MOUNT LAUREL, NJ 08054 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 8 8 8 1 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 234567 234567 234567 234567
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting: The Notice and Proxy Statement are available at www.proxyvote.com PHH CORPORATION Special Meeting of Stockholders June 11, 2018 10:00 AM EDT This proxy is solicited by the Board of Directors The undersigned hereby (1) acknowledges receipt of the Notice of Special Meeting to be held on June 11, 2018 starting at 10:00 a.m., local time at PHH Corporation's offices located at 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054 and the accompanying Proxy Statement, and (2), appoints Robert B. Crowl and Ryan Melcher and each of them (with full power to act alone) as proxies, with the powers the undersigned would possess if personally present and with full power of substitution to vote all shares of common stock of PHH Corporation held by the undersigned as indicated on the reverse side hereof at the Special Meeting and at any adjournment(s) or postponement(s) thereof, and with discretionary authority as to any other matters that may properly come before the Special Meeting, all in accordance with, and as described in the accompanying Notice of Special Meeting and Proxy Statement, copies of which have been received by the undersigned. The undersigned hereby revokes any proxy heretofore given to vote or act with respect to the common stock of PHH Corporation and hereby ratifies and confirms all that the trustee, proxies, their substitutes, or any of them may lawfully do by virtue hereof. Please date, sign exactly as your name appears on the form and promptly mail this proxy in the enclosed envelope. No postage is required. If a signed proxy card is not returned and received by 11:59 p.m. Eastern Daylight Time on June 10, 2018, the proxies shall not vote such shares. This proxy, when properly executed, will be voted in the manner directed herein. If properly executed, but no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. Continued and to be signed on reverse side 0000381404_2 R1.0.1.17