EXHIBIT 99.1
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PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN
NEW CENTURY FINANCIAL CORPORATION
AND
U.S. BANCORP
DATED AS OF
OCTOBER 18, 1998
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PREFERRED STOCK PURCHASE AGREEMENT
This PREFERRED STOCK PURCHASE AGREEMENT dated as of October 18, 1998, is
made between New Century Financial Corporation, a Delaware corporation (the
"Company"), and U.S. Bancorp, a Delaware corporation (the "Purchaser").
RECITALS
WHEREAS, the Company wishes to sell, and the Purchaser wishes to purchase,
20,000 shares (the "Shares") of the Series 1998A Convertible Preferred Stock
(the "Preferred Stock") of the Company upon the terms and conditions set forth
herein; and
WHEREAS, concurrent with the closing of the sale of the Shares the
Purchaser and certain shareholders of the Company intend to enter into a
Shareholder Agreement (the "Shareholder Agreement") substantially in the form
attached hereto as Exhibit A; and
WHEREAS, concurrent with the closing of the sale of the Shares the
Purchaser and the Company intend to enter into an agreement regarding the
acquisition of loans by the Purchaser from the Company (the "Flow Agreement")
reflecting substantially the terms listed on Exhibit B to this Agreement; and
WHEREAS, concurrent with the closing of the sale of the Shares the
Purchaser and the Company intend to enter into an agreement regarding the
origination of loans (the "Service Provider Agreement") reflecting substantially
the terms listed on Exhibit C to this Agreement; and
WHEREAS, the Company and the Purchaser wish to set forth in this Agreement
certain other terms and conditions for the sale and purchase of the Shares.
AGREEMENT
NOW, THEREFORE, the Purchaser and the Company hereby agree as follows:
1. AUTHORIZATION OF THE SHARES. The Company has authorized the issuance
and sale of the Shares to the Purchaser. The Preferred Stock will have the
relative rights and preferences set forth in the Certificate of Designations
attached as Exhibit D to this Agreement.
2. SALE OF SHARES. Subject to the terms and conditions of this
Agreement, at the Closing the Company agrees to sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, 20,000 Shares at a purchase price
of $1,000 per Share.
3. CLOSING DATE; DELIVERY.
3.1 CLOSING DATE. The closing (the "Closing") of the purchase and
sale of Shares pursuant to this Agreement will take place at 9:00 a.m. at the
offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, on a day to be mutually agreed upon by the parties which date shall be no
later than the third Business Day after all of the conditions set forth in
Article 7 shall have been satisfied (or waived in accordance with Section 12.7),
or at such other time and place as the Company and the Purchaser may agree (the
date of the Closing is hereinafter referred to as the "Closing Date").
3.2 DELIVERY. At the Closing, the Company will deliver to the
Purchaser a certificate registered in the Purchaser's name representing the
Shares purchased by the Purchaser at the Closing, and the Purchaser will pay the
purchase price for the Shares being purchased by wire transfer.
4. DEFINITIONS. Unless the context otherwise requires, the terms defined
in this Section 4 shall have the meanings herein specified for all purposes of
this Agreement. Certain other capitalized terms used herein are defined
elsewhere in this Agreement.
"Additional Employee Issuance" is defined in Section 8.4(c).
"Affiliate" means any person that directly or indirectly controls or
is controlled by, or is under common control with, another specified person.
"Agreement" means this Preferred Stock Purchase Agreement.
"Applicable Percentage" is defined in Section 8.4(d).
"BHCA" is defined in Section 5.2.
"Basket Amount" is defined in Section 12.12.
"Business Day" means any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in the City of New York are
authorized by law to be closed.
"Closing" is defined in Section 3.1.
"Closing Date" is defined in Section 3.1.
"Commission" means the Securities and Exchange Commission.
"Committee" is defined in Section 8.3(c).
"Common Stock" means the shares of common stock, par value $.01 per
share, of the Company.
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"Company Breach" shall mean a material breach by the Company of its
agreements in Section 8.
"Company Plans" means the following stock-related plans of the
Company, as may be amended from time to time in accordance with Section 8.9:
(a) the 1995 Stock Option Plan, as amended, (b) the Employee Stock Purchase
Plan, (c) the Founding Managers' Incentive Compensation Plan and (d) any other
stock-related plan adopted by the Company after the date of this Agreement.
"Conversion Shares" shall mean the shares of Common Stock issuable
upon the conversion of the Shares.
"Convertible Securities" means options, warrants or similar rights and
indebtedness, shares of stock or other securities that are at any time directly
or indirectly convertible into or exercisable or exchangeable for shares of the
Company's capital stock.
"DGCL" is defined in Section 5.14.
"Disclosure Schedules" is defined in Section 5.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Federal Reserve" means the Board of Governors of the Federal Reserve
System or any agency having regulatory responsibility with respect to the
Purchaser under the BHCA.
"Flow Agreement" is defined in the Recitals to this Agreement.
"Form 10-K Report" is defined in Section 5.4(a).
"Form 10-Q Report" is defined in Section 5.4(a).
"HSR Act" is defined in Section 5.2.
"Latest Balance Sheet" is defined in Section 5.4(b).
"Liabilities" is defined in Section 5.6.
"Losses" is defined in Section 12.12.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, liabilities, results of operations or financial condition of
the Company and the Subsidiaries, taken as a whole, or (b) on the ability of the
Company to perform its obligations under or with respect to, or to consummate
the transactions contemplated by, this Agreement, the Flow Agreement or the
Service Provider Agreement.
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"New Securities" is defined in Section 8.4(c).
"OCC" means the Office of the Comptroller of the Currency or any
agency having regulatory responsibility with respect to any national bank
subsidiary of the Purchaser under the National Bank Act.
"Person" means any natural person, corporation, limited liability
company, association, partnership (general or limited), joint venture,
proprietorship, governmental body, trust, estate, association, custodian,
nominee or any other individual or entity, whether acting in an individual,
fiduciary, representative or other capacity.
"Preferred Stock" is defined in the Recitals to this Agreement.
"Preemptive Rights Issuance" is defined in Section 8.4(b).
"Purchaser Default" shall mean a material breach by Purchaser of its
agreements in Section 10, which breach (a) has occurred at a time when no
Company Default has occurred and is continuing and (b) has not been cured within
30 days of Purchaser's knowledge of such breach.
"Service Provider Agreement" is defined in the Recitals to this
Agreement.
"Related Statements" is defined in Section 5.4(b).
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Shareholder Agreement" is defined in the Recitals to this Agreement.
"Shares" is defined in the Recitals to this Agreement.
"Subscription Notice" is defined in Section 8.4(f).
"Subsidiary" is defined in Section 5.1.
"Subsidiaries" means the entities identified as subsidiaries on
Schedule 5.5.
"Takeover Laws" is defined in Section 5.14.
"Year 2000 Compliant" is defined in Section 5.13.
"Year 2000 Problem" is defined in Section 5.13.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. Except as disclosed in
the Disclosure Schedules attached hereto as Exhibit E (the "Disclosure
Schedules"), the Company hereby represents and warrants to the Purchaser that:
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5.1. ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite corporate power to carry on its
business as now conducted. New Century Mortgage Corporation (the "Subsidiary")
is a corporation duly organized, validly existing and in good standing under the
laws of California and has the requisite corporate power to carry on its
business as now conducted. The copies of the charter and the bylaws of each of
the Company and the Subsidiary which have been provided to Purchaser prior to
the date of this Agreement are correct and complete and reflect all amendments
made thereto through the date hereof. Each of the Company and the Subsidiary is
licensed or qualified to do business in every jurisdiction in which the nature
of its respective business or its ownership of property requires it to be
licensed or qualified, except where the failure to be so licensed or qualified
would not reasonably be expected to have a Material Adverse Effect.
5.2. AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION. The
Company has the requisite corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as the enforceability hereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement of
creditors' rights generally and to judicial limitations on the enforcement of
the remedy of specific performance and other equitable remedies and except as
the indemnification provisions of the registration rights described in Exhibit F
may be limited by principles of public policy. Except as set forth on Schedule
5.2, neither the Company nor any of the Subsidiaries is subject to, or obligated
under, any provision of (a) its charter or bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or permit or
(d) subject to obtaining the approvals referred to in the next sentence, any
law, regulation, order, judgment or decree, which would be breached or violated,
or in respect of which a right of termination or acceleration or any encumbrance
on any of its assets would be created, by the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby,
other than any such breaches, violations, terminations, accelerations or
encumbrances which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Other than any approvals or filings
required under the Bank Holding Company Act of 1956, as amended from time to
time, including any regulations or orders of the Federal Reserve thereunder (the
"BHCA"), or the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and assuming the accuracy of the representations of Purchaser
contained in Section 6, no authorization, consent or approval of, or filing
with, any public body, court or authority is necessary on the part of the
Company or the Subsidiary for the consummation by the Company of the
transactions contemplated by this Agreement.
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5.3. CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company as of the date hereof is set forth on Schedule 5.3. All of
the issued and outstanding shares of capital stock of the Subsidiary are owned
by the Company, free and clear of any lien, pledge, security interest,
encumbrance or charge of any kind. The issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive rights.
Except as set forth on Schedule 5.3, there are no options, warrants, conversion
privileges or other rights, agreements, plans, arrangements or commitments
obligating the Company or the Subsidiary to issue, sell, purchase or redeem any
shares of their capital stock or securities or obligations of any kind
convertible into or exchangeable for any shares of their capital stock or of any
of their subsidiaries or affiliates, nor are there any stock appreciation,
phantom or similar rights outstanding based upon the book value or any other
attribute of any of the capital stock of the Company, or the earnings or other
attributes of the Company. The Company has heretofore delivered to Purchaser
true and correct copies of all such agreements, arrangements (including all
stock option and other stock-based plans) or commitments identified on Schedule
5.3.
5.4. EXCHANGE ACT REPORTS; FINANCIAL STATEMENTS.
(a) Prior to the execution of this Agreement, the Company has
delivered or made available to the Purchaser complete and accurate copies of
(a) the Company's Annual Report on Form 10-K for the year ended December 31,
1997, as amended (the "Form 10-K Report"), as filed under the Exchange Act with
the Commission, (b) all proxy statements and annual reports to shareholders of
the Company used in connection with meetings of its shareholders held since
June 25, 1997, and (iii) the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 (the "Form 10-Q Report"), as filed under the
Exchange Act with the Commission. As of their respective dates, such documents
(x) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (y) complied as to form in all material respects with the
applicable laws and rules and regulations of the Commission. Since June 25,
1997, the Company has filed in a timely manner all reports that it was required
to file with the Commission pursuant to the Exchange Act.
(b) The Company has furnished Purchaser with a copy of the
consolidated balance sheet of the Company as of August 31, 1998 (the "Latest
Balance Sheet") and the related statements of operations for the eight-month
period then ended (the "Related Statements"). The Latest Balance Sheet and the
Related Statements have been prepared on a basis consistent with the financial
statements included in the Form 10-K, except for the absence of notes and normal
year end adjustments consistent with past practice. The Latest Balance Sheet and
the Related Statements fairly present the consolidated financial position of the
Company and as of the date thereof and the consolidated results of operations
and, as applicable, changes in shareholders' equity and cash flows for the
period then ended.
5.5. SUBSIDIARY. Except as disclosed on Schedule 5.5, neither the
Company nor the Subsidiary owns any stock, partnership interest, joint venture
interest or any other security issued by any other corporation, organization or
entity. Other than the Subsidiary and PWF
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Corporation, the assets and operations of the entities listed on Schedule
5.5, individually and in the aggregate, are not material to the Company and
the Subsidiary, taken as a whole.
5.6. ABSENCE OF UNDISCLOSED LIABILITIES. All of the obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, and regardless of when asserted, including taxes)
("Liabilities") required to be reflected on the "Latest Balance Sheet" in
accordance with generally accepted accounting principles have been so reflected.
To the best knowledge of the Company and the Subsidiary, neither the Company nor
any of the Subsidiaries has any Liabilities except (a) as reflected on the
Latest Balance Sheet, (b) Liabilities which have arisen after the date of the
Latest Balance Sheet in the ordinary course of business, none of which is an
uninsured liability which could reasonably be expected to have a Material
Adverse Effect, (c) Liabilities which have arisen outside of the ordinary course
of business, none of which is an uninsured liability which could reasonably be
expected to have a Material Adverse Effect or (d) as otherwise disclosed on
Schedule 5.6.
5.7. NO MATERIAL ADVERSE CHANGES. Since the date of the Latest
Balance Sheet, there has been no adverse change in, and no event, occurrence or
development in, the business of the Company or any of the Subsidiaries that,
taken together with other events, occurrences and developments with respect to
such business, has had, or would reasonably be expected to have, a Material
Adverse Effect; PROVIDED THAT, for the purposes of this Section 5.7 only,
general industry trends in the subprime mortgage lending market, including those
set forth on Schedule 5.7, shall not be deemed to be such a change, event,
occurrence or development.
5.8. TAX MATTERS. Neither the Company nor any of the Subsidiaries is
delinquent in the payment of any material foreign, federal, state or local tax
or in the payment of any material assessment or governmental charge. The
Company and each of the Subsidiaries has filed all required foreign, federal,
state or local tax returns or appropriate extension requests on a timely basis,
except for such returns or requests which the failure to file would not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of the Subsidiaries has requested any extension of time within which to
file any tax return that has not since been filed. Neither the Company nor any
of the Subsidiaries has received notice of any tax deficiency proposed or
assessed against it or has executed any waiver of any statute of limitations on
the assessment or collection of any tax.
5.9. LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or, to the best knowledge of the Company and the
Subsidiary, threatened against the Company or any of the Subsidiaries, at law or
in equity, or before or by any federal, state or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect. Set forth on Schedule 5.9 are all of such pending
actions, suits, proceedings, orders or investigations as of the date of this
Agreement.
5.10. COMPLIANCE WITH LAWS; PERMITS. The Company and each of the
Subsidiaries has complied in all respects with all applicable laws and
regulations of foreign, federal, state and local governments and all agencies
thereof which affect the business or any owned or leased properties of the
Company or any of the Subsidiaries and to which the Company
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or any of the Subsidiaries is subject, except where the failure to do so
would not have a Material Adverse Effect. No claims have been filed by such
governments or agencies against the Company or any of the Subsidiaries
alleging failures to comply with any such law or regulation which claims (a)
individually or in the aggregate, if successful, could reasonably be expected
to have a Material Adverse Effect, and (b) have not been resolved to the
satisfaction of such governments or agencies. The Company and each of the
Subsidiaries holds all of the permits, licenses, certificates and other
authorizations of foreign, federal, state and local governmental agencies
required for the conduct of the business, except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect.
5.11. SHARES. The Shares to be sold to the Purchaser at the
Closing, when issued and paid for pursuant to the terms of this Agreement, will
be duly and validly authorized, issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions.
5.12. NO BROKERS OR FINDERS. No Person has or will have, as a
result of any act or omission of the Company, any right, interest or valid claim
against the Company or the Purchaser for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement.
5.13. YEAR 2000 COMPLIANCE. The Company has (a) initiated a
review and assessment of all areas of its business and operations and of each of
its Subsidiaries (including those affected by their respective suppliers,
vendors and customers) that could be adversely affected by the risk that
computer applications used by it or any of the Subsidiaries (or their respective
suppliers, vendors and customers) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999 (the "Year 2000 Problem"), (b) developed a plan and
timetable for addressing the Year 2000 Problem on a timely basis, and (c) to
date, implemented that plan in accordance with that timetable. Based on the
foregoing, the Company believes that all computer applications used by it or any
of the Subsidiaries (or their respective suppliers, vendors and customers) are
reasonably expected on a timely basis to be Year 2000 Compliant (as defined
below), except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect. The costs of all assessment,
remediation, testing and integration related to the Company's plan for becoming
Year 2000 Compliant is not reasonably expected to have a Material Adverse
Effect. As used in this Agreement, the term "Year 2000 Compliant" shall mean
the ability of such computer application to (w) consistently and accurately
handle date information before, during and after January 1, 2000, including but
not limited to accepting date input, providing date output, and performing
calculations on dates or portions of dates; (x) function accurately
substantially in accordance with its specifications and without material
interruption before, during and after January 1, 2000, without any change of
operations associated with the advent of the new century; (y) respond to any
two-digit date input in a way that resolves any ambiguity as to century in a
disclosed, defined and predetermined manner; and (z) store and provide output of
date information in ways that are unambiguous as to century.
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5.14. TAKEOVER LAWS. The Company has taken all action required to
be taken by it, if any, in order to exempt the purchase and sale of the Shares
and the granting to Purchaser of Board representation rights, the right of first
refusal and the preemptive right pursuant to Sections 8.3 and 8.4 of this
Agreement from, and such transactions are exempt from, the requirements of any
"moratorium", "control share", "fair price" or other antitakeover laws and
regulations of the States of Delaware and California (collectively, "Takeover
Laws"), including, without limitation, Section 203 of the Delaware General
Corporation Law ("DGCL").
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser hereby
represents and warrants to the Company that:
6.1 INVESTMENT REPRESENTATIONS. The Shares being acquired by the
Purchaser are being purchased for the Purchaser's own account and not with the
view to, or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act. The Purchaser understands
that neither the Shares nor the Conversion Shares have been registered under the
Securities Act by reason of their contemplated issuance in transactions exempt
from the registration and prospectus delivery requirements of the Securities Act
pursuant to Section 4(2) thereof, and that the reliance of the Company upon this
exemption from such registration is predicated in part upon the representations
and warranties of the Purchaser contained herein. The Purchaser is an
"accredited investor" as that term is defined in Regulation D promulgated under
the Securities Act and has such knowledge and experience in financial and
business matters that the Purchaser is capable of evaluating the merits and
risks of the investment to be made hereunder by the Purchaser.
6.2. ORGANIZATION AND QUALIFICATION. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite corporate power to carry on its
business as now conducted. The Purchaser is registered as a bank holding company
under the BHCA. The Purchaser is licensed or qualified to do business in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be licensed or qualified, except where the failure to be so
licensed or qualified would not reasonably be expected to have a material
adverse effect on (a) the business, assets, liabilities, results of operations
or financial condition of the Purchaser or (b) on the ability of the Purchaser
to perform its obligations under or with respect to, or to consummate the
transactions contemplated by, this Agreement, the Flow Agreement or the Service
Provider Agreement.
6.3. AUTHORITY RELATIVE TO THIS AGREEMENT; NON-CONTRAVENTION. The
Purchaser has the requisite corporate power and authority to enter into this
Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on behalf of the Purchaser and no other corporate
proceedings on the part of the Purchaser are necessary to authorize this
Agreement and such transactions. This Agreement has been duly executed and
delivered by the Purchaser and constitutes a valid and binding obligation of
the Purchaser, enforceable in accordance with its terms, except as the
enforceability hereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or similar laws affecting the enforcement of creditors' rights
generally and to judicial limitations on the enforcement of the
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remedy of specific performance and other equitable remedies and except as
the indemnification provisions of the registration rights described in Exhibit F
may be limited by principles of public policy. The Purchaser is neither subject
to, nor obligated under, any provision of (a) its charter or bylaws, (b) any
agreement, arrangement or understanding, (c) any license, franchise or permit or
(d) subject to obtaining the approvals referred to in the next sentence, any
law, regulation, order, judgment or decree, which would be breached or violated,
or in respect of which a right of termination or acceleration or any encumbrance
on any of its assets would be created, by the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby,
other than any such breaches, violations, terminations, accelerations or
encumbrances which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on (y) the business, assets,
liabilities, results of operations or financial condition of the Purchaser and
its subsidiaries, taken as a whole, or (z) on the ability of the Purchaser to
perform its obligations under or with respect to, or to consummate the
transactions contemplated by, this Agreement, the Flow Agreement or the Service
Provider Agreement.. Other than any approvals or filings required under the
BHCA or the HSR Act, and assuming the accuracy of the representations of the
Company contained in Section 5, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of the
Purchaser for the consummation by the Purchaser of the transactions contemplated
by this Agreement.
6.4 NO BROKERS OR FINDERS. No Person has or will have, as a result
of any act or omission of the Purchaser, any right, interest or valid claim
against the Company or the Purchaser for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement.
6.5 RESTRICTION ON TRANSFER OF SHARES.
(a) The Purchaser acknowledges and agrees that the Shares and the
Conversion Shares are only transferable pursuant to (i) a public offering
registered under the Securities Act, (ii) Rule 144 promulgated by the Commission
under the Securities Act (or any similar rule then in effect) if such rule is
available and (iii), subject to the conditions specified elsewhere in this
Section 6.5, any other legally available means of transfer.
(b) LEGEND. Each certificate representing Shares shall be endorsed
with the following legend:
"The shares represented by this certificate may not be transferred
without (i) an opinion of counsel satisfactory to this corporation
that such transfer may lawfully be made without registration under the
Securities Act of 1933, as amended, and all applicable state
securities laws or (ii) such registration."
Upon the conversion of any Shares, unless the Company receives an opinion of
counsel satisfactory to the Company to the effect that a subsequent transfer of
the Conversion Shares may be made without registration or further restriction or
transfer, or unless such Conversion Shares are being disposed of pursuant to a
registration statement filed under the Securities Act, the same legend shall be
endorsed on each certificate evidencing such Conversion Shares.
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(c) REMOVAL OF LEGEND. Any legend endorsed on a certificate
evidencing Shares or Conversion Shares pursuant to Section 6.5(b) hereof shall
be removed, and the Company shall issue a certificate without such legend to the
holder of such Shares or Conversion Shares, if such Shares or Conversion Shares
are being disposed of pursuant to a registration statement filed under the
Securities Act or pursuant to Rule 144 or any similar rule then in effect or if
such holder provides the Company with an opinion of counsel satisfactory to the
Company to the effect that a transfer of such Shares or Conversion Shares may be
made without registration. In addition, if the holder of such Shares or
Conversion Shares delivers to the Company an opinion of such counsel to the
effect that no subsequent transfer of such Shares or Conversion Shares will
require registration under the Securities Act, the Company will promptly deliver
new certificates evidencing such Shares or Conversion Shares that do not bear
the legend set forth in Section 6.5(b).
7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO PURCHASER'S OBLIGATION. The Purchaser's obligation
to purchase and pay for the Shares is subject to the fulfillment prior to or on
the Closing Date of the following conditions, any of which may be waived in
whole or in part by the Purchaser:
(a) REPRESENTATIONS AND COMPLIANCE. The representations and
warranties of the Company in this Agreement shall have been true and correct as
of the date hereof, and such representations and warranties shall be true and
correct as of the Closing Date as if made at and as of the Closing Date; and the
Company shall have performed in all material respects each obligation and
agreement and complied in all material respects with each covenant to be
performed and complied with by it hereunder at or prior to the Closing Date.
(b) OFFICERS' CERTIFICATE OF THE COMPANY. The Company shall have
furnished to the Purchaser a certificate of the Chief Executive Officer and the
Chief Financial Officer of the Company, dated as of the Closing Date, in which
such officers shall certify on behalf of the Company that (ii) the conditions
set forth in Section 7.1(a) have been fulfilled, and (ii) except as disclosed in
such certificate, Schedule 5.9 is true and correct as of the Closing Date.
(c) SECRETARY'S CERTIFICATE. The Company shall have furnished to
the Purchaser (i) copies of the text of the resolutions by which the corporate
action on the part of the Company necessary to approve this Agreement, the Flow
Agreement and the Service Provider Agreement and the transactions contemplated
hereby and thereby were taken, and (ii) a certificate dated as of the Closing
Date executed on behalf of the Company by its corporate secretary or one of its
assistant corporate secretaries certifying to the Purchaser that such copies are
true, correct and complete copies of such resolutions and that such resolutions
were duly adopted and have not been amended or rescinded.
(d) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall have been no adverse change in, and no event, occurrence or development
in, the business of the Company or the Subsidiary that, taken together with
other events, occurrences and developments with respect to such business, would
have or would reasonably be expected to have a Material Adverse Effect.
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(e) PROCEEDINGS. All corporate proceedings and actions taken by
the Company in connection with the transactions contemplated by this
Agreement (including the authorization of the Shares through the filing of
the Certificate of Designations in the State of Delaware) and all
certificates, agreements, instruments and other documents referenced herein
or incident to any such transaction shall be reasonably satisfactory in form
and substance to the Purchaser.
(f) SERVICE PROVIDER AGREEMENT. The Company shall have executed and
delivered to the Purchaser the Service Provider Agreement reflecting
substantially the terms listed on Exhibit C to this Agreement.
(g) FLOW AGREEMENT. The Company shall have executed and delivered to
the Purchaser the Flow Agreement reflecting substantially the terms listed on
Exhibit B to this Agreement.
(h) REGISTRATION RIGHTS AGREEMENT. The Company shall have executed
and delivered to the Purchaser the Registration Rights Agreement substantially
in the form attached hereto as Exhibit F.
(i) EMPLOYMENT AGREEMENTS. The Company and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ shall have executed and
delivered to the Purchaser employment/noncompete agreements with terms ending on
December 31, 2002 and otherwise on the same terms as each of their existing
employment/noncompete agreements or on such other terms as may be approved by
the Purchaser prior to or at the Closing. The parties acknowledge and agree that
any amendments to such agreements after the Closing Date shall be subject to the
approval of the Compensation Committee of the Company; provided that the
nonsolicit and noncompete provisions of such agreement shall not be amended
without the consent of the Purchaser.
(j) SHAREHOLDER AGREEMENT. Each of ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ shall have executed and delivered to the
Purchaser the Shareholder Agreement substantially in the form attached hereto as
Exhibit A.
(k) ABSENCE OF UNDISCLOSED LIABILITIES As of the Closing Date,
neither the Company nor any of the Subsidiaries has any Liabilities except
(a) as reflected on the Latest Balance Sheet, (b) Liabilities which have arisen
after the date of the Latest Balance Sheet in the ordinary course of business,
none of which is an uninsured liability which could reasonably be expected to
have a Material Adverse Effect, (c) Liabilities which have arisen outside of the
ordinary course of business, none of which is an uninsured liability which could
reasonably be expected to have a Material Adverse Effect or (d) as otherwise
disclosed on Schedule 5.6.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to issue and sell the Shares to the Purchaser is subject to the
fulfillment prior to or on the Closing Date of the following conditions, any of
which may be waived in whole or in part by the Company:
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(a) REPRESENTATIONS AND COMPLIANCE. The representations and
warranties of the Purchaser in this Agreement shall have been true and correct
as of the date hereof, and such representations and warranties shall be true and
correct as of the Closing Date as if made at and as of the Closing Date; and the
Purchaser shall have performed in all material respects each obligation and
agreement and complied in all material respects with each covenant to be
performed and complied with by it hereunder at or prior to the Closing Date.
(b) OFFICERS' CERTIFICATE OF THE PURCHASER. The Purchaser shall have
furnished to the Company a certificate of a senior executive officer of the
Purchaser, dated as of the Closing Date, in which such officer shall certify, on
behalf of the Purchaser, that the conditions set forth in Section 7.2(a) have
been fulfilled.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall have been no adverse change in, and no event, occurrence or development
in, the business of the Purchaser that, taken together with other events,
occurrences and developments with respect to such business, would have or would
reasonably be expected to have a material adverse effect on the ability of the
Purchaser to perform its obligations under or with respect to, or to consummate
the transactions contemplated by, this Agreement, the Flow Agreement or the
Service Provider Agreement.
(d) PROCEEDINGS. All corporate proceedings and actions taken by the
Purchaser in connection with the transactions contemplated by this Agreement and
all certificates, agreements, instruments and other documents referenced herein
or incident to any such transaction shall be reasonably satisfactory in form and
substance to the Company.
(e) SERVICE PROVIDER AGREEMENT. The Purchaser shall have executed
and delivered to the Company the Service Provider Agreement reflecting
substantially the terms listed on Exhibit C to this Agreement.
(f) FLOW AGREEMENT. The Purchaser shall have executed and delivered
to the Company the Flow Agreement reflecting substantially the terms listed on
Exhibit B to this Agreement.
(g) REGISTRATION RIGHTS AGREEMENT. The Purchaser shall have executed
and delivered to the Company the Registration Rights Agreement substantially in
the form attached hereto as Exhibit F.
(h) CONSENT AND AMENDMENT. The Company shall have received the
required consent and amendment to its credit facility set forth on Schedule 5.2.
7.3 MUTUAL CONDITIONS. The obligation of either of the parties
hereto to consummate the transactions contemplated hereby is subject to the
fulfillment prior to or on the Closing Date of the following conditions, any of
which may be waived in whole or in part only by the party against whom
enforcement of this Agreement is sought:
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(a) REGULATORY APPROVAL. All necessary regulatory or governmental
filings, authorizations or approvals required to consummate the transactions
contemplated by this Agreement, the Flow Agreement or the Service Provider
Agreement shall have been duly made or obtained and shall remain in full force
and effect and all statutory waiting periods in respect thereof shall have
expired. None of such approvals shall contain any conditions or restrictions
that will materially restrict or limit the business or activities of the
Purchaser, the Company or the Subsidiary or have a material adverse effect on,
or would be reasonably likely to have a material adverse effect on, the
business, operations or financial condition of the Purchaser and its
subsidiaries, taken as a whole, on the one hand, or the Company and the
Subsidiary, taken as a whole, on the other hand.
(b) NO INJUNCTION. No injunction or other order entered by a state
or federal court of competent jurisdiction shall have been issued and remain in
effect which would impair the consummation of the transactions contemplated
hereby and by the Flow and Service Provider Agreements.
(c) NO PROHIBITIVE CHANGE OF LAW. There shall have been no law,
statute, rule or regulation, domestic or foreign, enacted or promulgated which
would materially impair the consummation of the transactions contemplated hereby
and by the Flow and Service Provider Agreements.
(d) GOVERNMENTAL ACTION. There shall not be any action taken, or any
statute, rule, regulation, judgment, order or injunction proposed, enacted,
entered, enforced, promulgated, issued or deemed applicable to the transactions
contemplated hereby and by the Flow and Service Provider Agreements by any
federal, state or other court, government or governmental authority or agency,
which would reasonably be expected to result, directly or indirectly, in
restraining or prohibiting the consummation of the transactions contemplated
hereby and thereby or obtaining material damages from the Company or any of the
Subsidiaries, or the Purchaser or any of Purchaser's subsidiaries, in connection
with the transactions contemplated hereby or thereby.
8. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
Purchaser that:
8.1 FURNISHING OF INFORMATION AND ACCESS. The Company will:
(a) furnish the Purchaser with copies of all registration statements,
proxy materials, reports, financial statements and other documents filed by the
Company with the Commission or with any securities exchange or automated
quotation system, or sent by the Company to its shareholders; and
(b) make available to the Purchaser with reasonable promptness at
the sole expense of the Purchaser such information and data with respect to
the Company and the Subsidiary, and such access to the executive officers and
independent accountants of the Company and the Subsidiary, as the Purchaser
may from time to time reasonably request for the purpose of monitoring the
Purchaser's investment in the Company. Purchaser acknowledges that the
information and data of the Company to which Purchaser may have access from
time to time
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may constitute material non-public information. Purchaser hereby agrees that
it will refrain from trading in the Company's securities when it has or is
aware of such material non-public information. Purchaser agrees that any
information obtained by the Purchaser pursuant to this Section 8.1(b) which
is, or would reasonably be perceived to be, proprietary to the Company or
otherwise confidential, will not be disclosed to any third parties without
the prior written consent of the Company, will not be used for any purpose
other than monitoring the Purchaser's investment in the Company, and will not
be used, directly or indirectly, against the Company for any competitive
purpose.
8.2 USE OF PROCEEDS. The proceeds from the sale of the Shares
shall be used for working capital and general corporate purposes (other than
dividends and extraordinary disbursements).
8.3 BOARD REPRESENTATION.
(a) On or prior to, and effective as of, the Closing Date, and within
30 days after June 30, September 30 and December 31 each year, the Company's
Board of Directors shall take all action necessary (i) to expand the Company's
Board of Directors, if necessary, and (ii) to appoint one or more individuals
selected by the Purchaser to serve on the Company's Board of Directors as the
Purchaser's representatives such that the proportion of the Board that is made
up of representatives of the Purchaser as of the Closing Date, or as of the
prior June 30, September 30 or December 31, as the case may be, shall equal the
proportion of the Company's outstanding shares of Common Stock represented by
the shares of Common Stock owned by the Purchaser as of that date (assuming for
this purpose the conversion of the Shares and any other Convertible Securities);
PROVIDED THAT, if such proportion would cause one-half or less of a director (in
addition to one or more whole directors) to be appointed to the Board as a
representative of the Purchaser then such proportion shall be rounded down to
the nearest whole number, and if such proportion would cause more than one-half
of a director (in addition to one or more whole directors) to be appointed to
the Board then such proportion shall be rounded up to the nearest whole number;
PROVIDED FURTHER THAT, notwithstanding the foregoing, so long as this Section
8.3 is in effect, the Purchaser shall be entitled to at least one representative
on the Company's Board of Directors. If more than one individual is to be
appointed to the Board of Directors pursuant to this Section 8.3(a), such
individuals shall be distributed as evenly as possible among the three classes
of Directors with the first such individual being appointed to Class I, the
second to Class II and the third to Class III.
(b) Commencing with its 1999 annual meeting of shareholders and in
connection with each annual meeting of shareholders thereafter, the Company
shall take all reasonable action necessary to nominate and support (in the
same manner as it supports the other nominees to its Board at that meeting)
one or more individuals for election to the Board of Directors as
representatives of the Purchaser such that the proportion of the Board that
is made up of representatives of the Purchaser serving on the Company's Board
of Directors after such annual meeting of shareholders (assuming the election
of the persons so nominated) shall, subject to the two provisos in Section
8.3(a), equal the proportion of the Company's outstanding shares of Common
Stock owned by the Purchaser as of the end of the Company's last fiscal year
(assuming for this purpose the conversion of the Shares and any other
Convertible Securities). In
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the event that the shareholders of the Company shall fail to elect enough
persons to serve as representatives of the Purchaser on the Company's Board of
Directors to satisfy the proportional requirements of this Section 8.3, the
Board of Directors of the Company shall take any actions necessary to appoint to
the Board a different set of individuals selected by the Purchaser to serve as
its representatives on the Board such that the proportional requirements are
satisfied. Purchaser agrees that it will not select any person to serve as its
representative on the Company's Board of Directors pursuant to this Section 8.3
if (i) such person is not reasonably experienced in business, financial or
mortgage banking matters, (ii) such person has been convicted of, or has pled
nolo contendere to, a felony, (iii) the election of such person would violate
any law, or (iv) any event required to be disclosed pursuant to Item 401(f) of
Regulation S-K under the Exchange Act has occurred with respect to such person.
Purchaser shall use its reasonable efforts to afford the directors of the
Company a reasonable opportunity to meet any individual that Purchaser is
considering selecting as one of its representative on the Company's Board of
Directors.
(c) For so long as the Purchaser has at least one representative on
the Company's Board of Directors, (i) the representative will be entitled to
receive notice of and attend all meetings of the Board of Directors of the
Company, to receive any materials distributed to the directors in their capacity
as such and otherwise to be treated the same as the other directors of the
Company, (ii) the Company will give the Purchaser written notice of each
regularly scheduled meeting of any duly constituted committee of the Board of
Directors (a "Committee") as far in advance as such notice is required to be
delivered to the directors (but at least one Business Day prior to the date of
each special meeting of any Committee); (iii) the Purchaser will be entitled to
receive all written materials and other information (including, without
limitation, copies of meeting minutes and press releases) given to directors in
connection with such Committee meetings at the same time such materials and
other information are given to the directors; (iv) if the Company proposes to
take any action by written consent in lieu of a meeting of any Committee of its
Board of Directors, the Company will give prompt written notice thereof to the
Purchaser prior to the effective date of such consent describing in reasonable
detail the nature and substance of such consent; (v) the Company shall maintain
a provision in its bylaws providing for the indemnification of its directors to
the full extent permitted by the Delaware General Corporation Law; (vi) the
Board of Directors of the Company shall consist of no fewer than 8 members; and
(vii) if the Board of Directors is to be expanded, then additional
representatives of the Purchaser shall be appointed to the Board as necessary to
maintain the then required proportion of representatives of the Purchaser on the
Board; PROVIDED, HOWEVER, THAT, notwithstanding clauses (ii), (iii) and (iv)
above, the Purchaser shall not be entitled to the rights thereunder if and to
the extent that such Committee relates to the Company's relationship with the
Purchaser or any transaction in which the Purchaser has an interest other than
as a shareholder of the Company.
(d) The Purchaser may, at its sole discretion at any time and from
time to time, elect to waive its right to some or all of the representatives on
the Company's Board to which it is entitled under this Section 8.3, and the
exercise of any such waiver shall not cause the Purchaser's right to such
representatives to terminate.
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(e) The Purchaser hereby agrees that, in the event that the
proportion of the Company's outstanding shares of Common Stock owned by the
Purchaser as of any June 30, September 30 or December 31 as described above
would indicate that the Purchaser should have fewer representatives on the Board
than it has at that time, then the Purchaser will cause one or more of its
representatives to resign so that the Purchaser has the number of Board
representatives to which it is entitled under this Section 8.3.
8.4 RIGHT OF FIRST REFUSAL; PREEMPTIVE RIGHT.
(a) If, after the date hereof, the Company should decide to issue any
New Securities (as defined in subparagraph (c) below) for cash, the Company
shall, in accordance with this Section 8.4, first offer to issue all of such New
Securities to the Purchaser upon substantially the same terms and conditions as
the Company is proposing to issue such New Securities to others. Purchaser's
right to purchase New Securities pursuant to this Section 8.4(a) shall not be
exercisable in connection with any issuance as to which the Purchaser elects to
exercise its right under Section 8.4(b).
(b) If, after the date hereof, the Company should decide to issue any
New Securities, the Company shall, in accordance with this Section 8.4, also
concurrently offer to issue to the Purchaser, upon substantially the same terms
and conditions as the Company is proposing to issue such New Securities to
others, a sufficient number of such New Securities so that the Purchaser's
Applicable Percentage (as defined in subparagraph (d) below) will, if such New
Securities are purchased by the Purchaser and such others, remain unchanged
following the proposed issuance of New Securities (any such issuance is referred
to herein as a "Preemptive Rights Issuance"). Purchaser's right to purchase New
Securities pursuant to this Section 8.4(b) shall not be exercisable in
connection with any issuance as to which the Purchaser elects to exercise its
right under Section 8.4(a).
(c) For purposes of this Agreement, "New Securities" means any
additional shares of capital stock of the Company, whether or not currently
authorized, and any Convertible Securities; provided that "New Securities"
shall not include: (a) shares of Common Stock issued upon conversion of the
Shares or to the Purchaser, (b) shares of the Company's capital stock or
other securities issued in connection with the acquisition of any other
corporation or business entity, in whole or in part, directly or indirectly,
by the Company, (c) shares of the Company's capital stock issued in
connection with any stock split, stock divided or recapitalization of the
Company, (d) shares of the Company's capital stock issued upon exercise,
conversion or exchange of Convertible Securities described on Schedule 5.3
hereto or pursuant to any other arrangement or agreement as of the date
hereof described on Schedule 5.3 hereto, including without limitation shares
of the Company's capital stock authorized or available for issuance under any
Company Plan as described on Schedule 5.3, (e) shares of the Company's
capital stock issued upon exercise, conversion or exchange of Convertible
Securities if the issuance of such Convertible Securities permitted Purchaser
to purchase New Securities in accordance with this Section 8.4, (f) up to
1,000,000 shares of the Company's capital stock or Convertible Securities
issued pursuant to any Additional Employee Issuance (as defined herein), and
(g) shares of the Company's capital stock issued upon exercise, conversion or
exchange of any Convertible Securities which did not constitute "New
Securities" upon their issuance by virtue of subsection
-17-
(f) above. For purposes of this Agreement the terms "Additional Employee
Issuance" means any of the following: (i) any stock-related plan for the
benefit of the Company's or its subsidiaries' employees, officers, directors
or consultants adopted by the Company after the date of this Agreement; (ii)
a repricing or a regrant of any Convertible Securities issued pursuant to any
Company Plan; or (iii) an increase in the number of shares authorized and
available for issuance pursuant to any Company Plan.
(d) For purposes of this Agreement, the Purchaser's "Applicable
Percentage" shall be equal to the number of outstanding shares of Common Stock
held by the Purchaser (assuming for this purpose the conversion of the Shares
and any other Convertible Securities held by the Purchaser, and including only
shares of Common Stock received pursuant to any such conversion and any other
shares acquired by the Purchaser from the Company) divided by the total number
of outstanding shares of Common Stock (assuming for this purpose the conversion
of the Shares and any other Convertible Securities).
(e) In the event that the Company is required to make an offer of
New Securities to the Purchaser pursuant to subparagraph (a) or (b) above, it
shall give the Purchaser written notice of such offer, describing the type of
New Securities, the estimated price and the terms upon which the Company
proposes (or is obligated) to issue the same, including for an offer of New
Securities pursuant to subparagraph (b) above, the number of New Securities
offered to the Purchaser for the Purchaser to maintain the Purchaser's
Applicable Percentage (the "Subscription Notice"). The Purchaser shall have
ten Business Days from the date of receipt of any Subscription Notice to
subscribe to purchase such New Securities (and, in the case of subparagraph
(a) above, all, but not less than all of such New Securities) for the price
and upon the terms specified in the Subscription Notice by giving written
notice to the Company, which subscription by Purchaser shall be binding and
irrevocable subject only to the making of any necessary regulatory or
governmental filings, the receipt of any necessary regulatory or governmental
authorizations and approvals, and the expiration of all statutory waiting
periods in respect thereof. The closing of the sale of the New Securities to
the Purchaser pursuant to subparagraph (a) above shall take place within the
later of (i) ten Business Days after the delivery of such notice to the
Company, or (ii) three Business Days after all necessary shareholder,
regulatory or governmental filings, authorizations or approvals required to
consummate such purchase shall have been duly made or obtained and all
statutory waiting periods in respect thereof shall have expired, PROVIDED
THAT if such closing has not occurred within 90 days after the date of
delivery of such notice to the Company, the Purchaser's right to purchase
such issue of New Securities pursuant to subparagraph (a) above shall
terminate. The closing of the sale of the New Securities to the Purchaser
pursuant to subparagraph (b) above shall take place within the later of (i)
ten Business Days after the occurrence of the Preemptive Rights Issuance, or
(ii) three Business Days after all necessary shareholder, regulatory or
governmental filings, authorizations or approvals required to consummate such
purchase shall have been duly made or obtained and all statutory waiting
periods in respect thereof shall have expired; PROVIDED THAT the Purchaser
shall have no right to purchase New Securities under subparagraph (b) above
unless and until the applicable Preemptive Rights Issuance has occurred;
PROVIDED FURTHER THAT if such closing has not occurred within 90 days after
the occurrence of the Preemptive Rights Issuance to the Company, the
Purchaser's right to purchase such issue of New Securities pursuant to
subparagraph (b) above shall terminate. The Purchaser and the Company
mutually agree that they will each use all
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reasonable efforts to make, and to assist with the making of, any such filing
and to obtain, and to assist with obtaining, any such authorization or
approval as promptly as practicable.
(f) In the event and to the extent that the Purchaser fails to
subscribe for any New Securities offered to it pursuant to subparagraph (a) or
(b) above within ten Business Days after the date of receipt of the Subscription
Notice, the Company shall have 120 days thereafter to sell the New Securities at
a price which is not less than 95% of the price specified in the Subscription
Notice and upon terms otherwise no more favorable to the purchasers thereof than
the terms specified in the Subscription Notice. In the event the Company has
not sold the New Securities within such 120 day period, the Company shall not
thereafter issue any New Securities without first offering such New Securities
to the Purchaser as required by this Section 8.4.
(g) The provisions of Section 8.4(a) shall terminate and no longer be
of any effect as of the earlier of (i) 24 months after the Closing Date, or (ii)
the receipt by the Company of gross proceeds totaling $30 million from the sale
of shares of capital stock of the Company or Convertible Securities, other than
pursuant to a Company Plan, after the Closing Date.
(h) In the event that the proposed issuance which gives rise to an
offer pursuant to subparagraph (a) or (b) above is a registered public offering
by the Company, then the parties agree that (i) the Subscription Notice shall be
given upon commencement of preparations for the offering; (ii) for purposes of
an offer pursuant to subparagraph (a) above, the purchase price shall be equal
to the average closing sale price of the Common Stock for the ten trading days
immediately preceding delivery of the Subscription Notice; (iii) for purposes of
an offer pursuant to subparagraph (b) above, the purchase price shall be equal
to the price at which the shares are sold in the public offering, and (iv) if
the Purchaser fails to subscribe for any New Securities offered to it pursuant
to subparagraph (a) or (b) above, then, for the purposes of subparagraph (f)
above, the Company shall have 150 days thereafter to sell the New Securities in
a registered public offering at any price.
8.5 NO NEGOTIATIONS, ETC. The Company will not, and will cause
the Subsidiary and the Company's and the Subsidiary's respective officers,
directors, employees, agents or affiliates, not to, directly or indirectly,
solicit, authorize, initiate or encourage submission of, any proposal, offer,
tender offer or exchange offer from any person or entity (including any of
its or their officers or employees) relating to any liquidation, dissolution,
recapitalization, merger, consolidation or acquisition or purchase of all or
a material portion of the assets of, or any material equity interest in, the
Company or the Subsidiary or other similar transaction or business
combination involving the Company or the Subsidiary, or, unless the Company
shall have determined, based on the advice of counsel to the Company, that
the Board of Directors of the Company has a fiduciary duty to do so, (a)
participate in any negotiations in connection with or in furtherance of any
of the foregoing or (b) permit any person other than the Purchaser and its
representatives to have any access to the facilities of, or (c) furnish to
any person other than the Purchaser and its representatives any information
with respect to, the Company or the Subsidiary in connection with or in
furtherance of any of the foregoing. The Company shall promptly notify the
Purchaser if any such proposal or offer, or any inquiry from or contact with
any person with respect thereto, is made, and shall promptly provide the
Purchaser with such information regarding such proposal, offer, inquiry or
contact as the
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Purchaser may request. Notwithstanding the foregoing, this Section 8.5 shall
not be deemed to prohibit the Company or its officers, directors, employees,
agents and affiliates from initiating, encouraging, negotiating and entering
into any acquisition or purchase of a business or assets using shares of the
Company's Common Stock as consideration for the acquisition or purchase so
long as the number of shares of Common Stock to be issued in the transaction
(assuming the exercise or conversion of any Share Acquisition Rights or
Convertible Securities to be issued in the transaction) does not exceed 20%
of the shares of Common Stock then outstanding.
8.6 UNDERTAKING TO COOPERATE IN SALES OF SHARES. In the event that
the Purchaser determines to reduce its ownership interest in the Company, the
Company will use reasonable efforts to cooperate with and assist the Purchaser
(at Purchaser's expense) in connection with sales of shares of the Company's
capital stock whether through private placements, market transactions pursuant
to Rule 144 or registered offerings pursuant to the Registration Rights
Agreement. For so long as the Purchaser continues to hold any Shares (or shares
of Common Stock acquired upon conversion thereof which do not qualify for sale
pursuant to Rule 144(k)), the Company shall use reasonable efforts to file all
annual, quarterly and other reports required to be filed by the Company under
Section 13 or 15(d) of the Exchange Act and the rules and regulations
thereunder, as amended from time to time. The Company shall cooperate with the
Purchaser (at Purchaser's expense), in such manner as the Purchaser may
reasonably request, so as to enable any such sales to be made in accordance with
applicable laws, rules and regulations, the requirements of the Company's
transfer agent and the reasonable requirements of any broker through which such
sales are proposed to be executed.
8.7 UNDERTAKING TO COOPERATE IN PURCHASES OF SHARES. Subject to
Section 10 hereof and to any confidentiality and other contractual or legal
restrictions applicable to the Company, the Company will, if requested to do so
by the Purchaser, cooperate with and use its best efforts to assist the
Purchaser in identifying existing shareholders of the Company who may be
interested in selling shares of Common Stock, and, once any such potential
seller is identified, will cooperate with the Purchaser (at Purchaser's
Expense), in such manner as the Purchaser may reasonably request, so as to
enable such purchases to be made in accordance with applicable laws rules and
regulations, the requirements of the Company's transfer agent and the reasonable
requirements of any broker through which such purchases are proposed to be
executed.
8.8 REGULATORY COMPLIANCE.
(a) As long as the Shares or the Conversion Shares are owned and
controlled by the Purchaser or by a nonbank subsidiary of the Purchaser, the
Company shall (i) conduct its current activities in conformity with the Federal
Reserve's regulations and orders under the BHCA governing such activities, (ii)
not engage in any new activities (A) that are impermissible for any bank holding
company under the BHCA and (B) until the Purchaser has provided prior notice to
the Federal Reserve, if required, under the BHCA of the Purchaser's intent to
engage in such activities and, if required, obtained the prior approval of the
Federal Reserve under the BHCA to engage in such activities through the Company,
and (iii) be subject to supervision and examination by the Federal Reserve;
PROVIDED, HOWEVER, THAT the Company need not comply with this Section 8.8(a) in
the event (i) that the Shares or the Conversion Shares represent less than 5% of
any "class of voting shares" (as such term is defined in the Federal Reserve's
regulations
-20-
and orders) of the Company or (ii) that the Purchaser ceases to be regulated
as a bank holding company under the BHCA.
(b) Following the assignment and transfer of the Shares or the
Conversion Shares to a national bank subsidiary of the Purchaser and, following
such assignment and transfer, for as long as the Shares or the Conversion Shares
are owned and controlled by a national bank subsidiary of the Purchaser, the
Company shall (i) conduct its current activities in conformity with the OCC's
regulations and orders under the National Bank Act governing such activities,
(ii) not engage in any new activities (A) that are impermissible for any
national bank under the National Bank and (B) until the Purchaser has provided
prior notice to the OCC, if required, under the National Bank Act of the
Purchaser's intent to engage in such activities and, if required, obtained the
prior approval of the OCC under the National Bank Act to engage in such
activities through the Company, and (iii) be subject to supervision and
examination by the OCC; provided, however, that the Purchaser shall not assign
or transfer the Shares or the Conversion Shares to a national bank subsidiary of
the Purchaser, unless and until the Purchaser determines, in its reasonable
discretion, that the Company would be deemed to be an "affiliate" of Purchaser
for purposes of Section 23A of the Federal Reserve Act as a result of
Purchaser's ownership of the Shares or the Conversion Shares or any shares of
Common Stock of the Company which Purchaser may acquire in its discretion in
accordance with the terms of this Agreement or as a result of Purchaser's
representation on the Company's Board of Directors or as otherwise as required
by Section 23A of the Federal Reserve Act.
8.9 RESTRICTION ON COMPANY PLANS. Without the prior written consent
of Purchaser, the Company shall not (i) increase the number of shares available
for issuance under, any of the Company Plans, (ii) adopt any other stock-related
plans not listed on Schedule 5.3 hereto, (iii) grant additional restricted stock
awards other than pursuant to the Founding Managers' Incentive Compensation Plan
or (iv) take any action to reprice or regrant any Convertible Securities issued
pursuant to any Company Plan; PROVIDED THAT, notwithstanding the foregoing, the
Company may take such actions in connection with an Additional Employee
Issuance, so long as the aggregate number of shares of capital stock which are
issued or issuable pursuant to any Additional Employee Issuance shall not exceed
1,000,000 shares of Common Stock (including no more than 250,000 shares of
Common Stock pursuant to restricted stock awards not made under the Founding
Managers' Incentive Compensation Plan).
8.10 TERMINATION OF CERTAIN COVENANTS. Subject to any earlier
termination provided for therein, the covenants of the Company in Section 8
(other than Section 8.8) and the proviso in the last sentence of Section 7.1(i)
will terminate and no longer be of any force or effect on the earliest to occur
of (a) December 31, 2002, (b) the date on which the Purchaser owns less than 5%
of the Company's outstanding shares of Common Stock (assuming for this purpose
the conversion of the Shares and any other Convertible Securities) or (c) a
Purchaser Default. The covenants of the Company in Sections 8.4, 8.5, 8.7 and
8.9 will also terminate (a) upon the closing of an acquisition of the Purchaser
if the Purchaser is acquired in a transaction pursuant to which the acquiror
obtains the right to dictate a substantial majority of the Board of Directors of
Purchaser; or (b) if the Purchaser sells more than 20% of its shares of Common
Stock of the Company during any 90-day period, PROVIDED THAT sales of shares of
Common Stock for this
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purpose shall not include any shares sold by the Purchaser because it was
necessary or desirable to do so for regulatory reasons.
9. MUTUAL COVENANTS
9.1 REGULATORY APPROVALS. The Purchaser and the Company will use
all reasonable efforts and will cooperate with each other in the preparation
and filing, as soon as practicable, of all notices, applications or other
documents required to obtain the regulatory approvals and consents necessary
to satisfy the condition set forth in Section 7.3(a), and will provide copies
of the non-confidential portions of such applications, filings and related
correspondence to the other party. Prior to filing each application,
registration statement or other document with the applicable regulatory
authority, each party will provide the other party with an opportunity to
review and comment on the non-confidential portions of each such application,
registration statement or other document. Each party will use all reasonable
efforts and will cooperate with the other party in taking any other actions
necessary to obtain such regulatory or other approvals and consents,
including participating in any required hearings or proceedings. Subject to
the terms and conditions herein provided, each party will use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement and the Flow and Service Provider Agreements. Notwithstanding any
provision to the contrary contained herein, no later than five days after the
execution of this Agreement (a) the Purchaser and the Company shall file with
the Federal Trade Commission and the Department of Justice the appropriate
documents pursuant to the rules and regulations promulgated under Title II
of the HSR Act reporting the sale of the Shares to the Purchaser, and (b) the
Purchaser shall file with the Federal Reserve the applicable notices,
applications and other documents required to obtain the approval and consent
of the Federal Reserve to the sale of the Shares to the Purchaser.
9.2 BROKERS AND FINDERS FEES. Each of the parties hereto will
indemnify and hold the other party harmless against any and all liability to any
Person with respect to any commission, fee or other compensation as a finder or
broker, or in any similar capacity, that may be payable or is determined to be
payable in connection with the transactions contemplated by this Agreement by
reason of any act or omission of the indemnifying party.
9.3 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
notice to the other parties of (a) the occurrence or failure to occur of any
event or the discovery of any information, which occurrence, failure or
discovery would be likely to cause any representation or warranty on its part
contained in this Agreement to be untrue or inaccurate when made, at the Closing
Date or at any time prior to the Closing Date, and (b) any failure of such party
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder.
9.4 TAKEOVER LAWS. No party shall take any action that would cause
the purchase and sale of the Shares or the granting to Purchaser of Board
representation rights, the right of first refusal and the preemptive right
pursuant to Sections 8.3 and 8.4 of this Agreement to be subject to requirements
imposed by any Takeover Law and each party shall take all
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necessary steps within its control to exempt (or ensure the continued
exemption of) the transactions listed above, or if necessary challenge the
validity or applicability of, any applicable Takeover Law, as now or
hereafter in effect, including, without limitation, Section 203 of the DGCL,
or any other Takeover Laws that purport to apply to this Agreement, or the
transactions contemplated hereby.
9.5 NEGOTIATION. Each party agrees that it will use its best efforts
and negotiate in good faith to resolve any issues that arise during the drafting
and negotiation of the Flow Agreement and the Service Provider Agreement.
10. PURCHASER'S STANDSTILL AGREEMENT. Unless such action shall have been
consented to in writing by the Board of Directors of the Company, Purchaser
agrees that neither it nor any of its affiliates will, either directly or
indirectly, (a) acquire over 50% of the Company's outstanding capital stock;
(b) effect or propose (whether publicly or otherwise) to effect, participate in
or cause (i) any tender or exchange offer or merger or other business
combination involving the Company, (ii) any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to the
Company or (iii) any "solicitation" of "proxies" (as such terms are used in
proxy rules of the Commission) or consents to vote any voting securities of the
Company, (c) form, join or in any way participate in a "group" (as defined under
the Exchange Act), or (d) take any action which might force the Company to make
a public announcement regarding any of the types of matters set forth in (a),
(b) or (c) above. The covenant of the Purchaser in this Section 10 will
terminate and no longer be of any force or effect on the earlier of December 31,
2002 and the date on which the Purchaser and its Affiliates in the aggregate own
less than 5% of the Company's outstanding shares of Common Stock (assuming for
this purpose the conversion of the Shares and any other Convertible Securities).
11. TERMINATION.
11.1 METHODS OF TERMINATION. Prior to Closing, this Agreement may
be terminated as follows:
(a) by the mutual consent of the parties hereto;
(b) by either the Purchaser or the Company if there has been a
misrepresentation, breach of warranty or breach of covenant on the part of the
other party under this Agreement;
(c) by either the Purchaser or the Company, if any of the conditions
to such party's obligation to consummate the transactions contemplated in this
Agreement shall have become impossible to satisfy;
(d) by either the Purchaser or the Company if the Closing shall not
have been consummated by December 31, 1998; PROVIDED that, neither the Company
nor the Purchaser will be entitled to terminate this Agreement pursuant to this
Section 12.1(d) if such party's willful breach of this Agreement has prevented
the consummation of the transactions contemplated hereby; or
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(e) by the Purchaser if, between the date hereof and the Closing
Date, there shall have been any occurrence that has resulted or could reasonably
be expected to result in a Material Adverse Effect.
11.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 11.1, this Agreement shall become void (other
than Section 12.15 which shall remain in full force and effect) and there shall
be no liability on the part of any party hereto, or their respective
stockholders, officers, or directors.
12. MISCELLANEOUS.
12.1 PRESS RELEASES AND ANNOUNCEMENTS. No party hereto shall issue
any press release (or make any other public announcement) related to this
Agreement or the transactions contemplated hereby without prior written approval
of the other party hereto, except as may be necessary, in the opinion of counsel
to the party seeking to make disclosure, to comply with any applicable laws,
including securities laws. If any such press release is so required, the party
making such disclosure shall, to the extent practicable, consult with the other
party prior to making such disclosure, and the parties shall use all reasonable
efforts, acting in good faith, to agree upon a text for such disclosure which is
satisfactory to all of the parties.
12.2 ENTIRE AGREEMENT. This Agreement (including the exhibits,
schedules and other documents referred to herein), the Flow Agreement, the
Service Provider Agreement and the Registration Rights Agreement contain the
entire understanding between the parties hereto with respect to the subject
matter hereof and thereof and supersede any prior understandings, agreements or
representations, written or oral, relating to the subject matter hereof and
thereof.
12.3 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which will be an original and all of which taken together
shall constitute one and the same agreement, and any party hereto may execute
this Agreement by signing any such counterpart.
12.4 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule, the
validity, legality and enforceability of the other provisions of this Agreement
will not be affected or impaired thereby.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives and, to the extent permitted by Section 12.6, successors and
assigns.
12.6 ASSIGNMENT. This Agreement and the rights and obligations of the
parties hereunder shall not be assignable, in whole or in part, by either party
without the prior written consent of the other party.
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12.7 MODIFICATION, AMENDMENT, WAIVER OR TERMINATION. No provision of
this Agreement may be modified, amended, waived or terminated except by an
instrument in writing signed by the parties to this Agreement. No course of
dealing between the parties will modify, amend, waive or terminate any provision
of this Agreement or any rights or obligations of any party under or by reason
of this Agreement.
12.8 NOTICES. All notices, consents, requests, instructions,
approvals or other communications provided for herein shall be in writing and
delivered by personal delivery, overnight courier, mail or electronic facsimile
addressed to the receiving party at the address set forth herein. All such
communications shall be effective when received.
NOTICES TO THE PURCHASER: WITH A COPY TO:
------------------------- ---------------
U.S. Bancorp ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. Mitau, Esq. Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
NOTICES TO THE COMPANY: WITH A COPY TO:
----------------------- ---------------
New Century Financial Corporation O'Melveny & ▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ 610 Newport Center Drive, 17th Floor
Irvine, California 92612 ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇ Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Any party may change the address set forth above by notice to each other party
given as provided herein.
12.9 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12.10 GOVERNING LAW. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
the internal laws of the state of Delaware, without giving effect to any
choice of law provisions thereof.
12.11 THIRD-PARTY BENEFIT. Nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights, remedies,
obligations or liabilities of any nature whatsoever.
12.12 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding
any investigation made by either of the parties hereto and notwithstanding
the Closing or any actions taken after the execution hereof, the
representations and warranties made in this Agreement shall survive for 18
months after the Closing Date, except for the representation and warranty in
Section 5.11 which shall survive the Closing indefinitely. Purchaser shall
not assert a claim
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against the Company for a breach or breaches of the representations and
warranties made in this Agreement unless and until Purchaser has a claim or
claims for damages, liabilities, losses or expenses arising from or relating
to such breach or breaches ("Losses") in excess of $300,000 in the aggregate
(the "Basket Amount"); provided that once Purchaser has a claim or claims for
aggregate Losses in excess of the Basket Amount it shall be entitled to
assert a claim against the Company for the entire amount of Purchaser's
aggregate Losses.
12.13 JURISDICTION AND VENUE. This Agreement may be enforced in
any federal court or state court sitting in California, and each party
consents to the jurisdiction and venue of any such court and waives any
argument that venue in such forum is not convenient. If any party commences
any action under any tort or contract theory arising directly or indirectly
from the relationship created by this Agreement in another jurisdiction or
venue, the other party to this Agreement shall have the option of
transferring the case to the above-described venue or jurisdiction or, if
such transfer cannot be accomplished, to have such case dismissed without
prejudice.
12.14 REMEDIES. The parties agree that money damages may not be
an adequate remedy for any breach of the provisions of this Agreement and
that any party may, in its discretion, apply to any court of law or equity of
competent jurisdiction for specific performance and injunctive relief in
order to enforce or prevent any violations this Agreement, and any party
against whom such proceeding is brought hereby waives the claim or defense
that such party has an adequate remedy at law and agrees not to raise the
defense that the other party has an adequate remedy at law.
12.15 EXPENSES. Except as otherwise expressly provided for
herein, each party will pay its own expenses (including attorneys' and
accountants' fees) incurred in connection with the negotiation of this
Agreement, the performance of its respective obligations hereunder and the
consummation of the transactions contemplated by this Agreement (whether
consummated or not).
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized representatives as of
the day and year first above written.
NEW CENTURY FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Its: Chairman and CEO
----------------------------
U.S. BANCORP
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Its: Executive Vice President
and CFO
----------------------------
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