XXXXXXX 0
XXXX XXXXXXXX AGREEMENT
BY AND AMONG
HAWTHORNE FINANCIAL CORPORATION
AND
EACH OF THE PURCHASERS REFERRED TO HEREIN
DATED AS OF OCTOBER 10, 1995
TABLE OF CONTENTS
Page
----
Article I. Definitions 1
Section 1.1 Definitions 1
Article II. Purchase and Sale of Units 6
Section 2.1 Purchase and Sale of Units 6
Section 2.2 Closing 6
Section 2.3 Price Allocation 6
Article III. Representations and Warranties 7
Section 3.1 Representations and Warranties of the
Company 7
Section 3.2 Representations and Warranties of the
Purchasers 14
Article IV. Conditions Precedent to Closing 19
Section 4.1 Conditions to Obligations of the Parties 19
Section 4.2 Conditions to Obligations of the
Purchasers 20
Section 4.3 Conditions to Obligations of the Company 22
Article V. Covenants 23
Section 5.1 Shareholder Meeting; Exemption 23
Section 5.2 Applications 24
Section 5.3 Investigation and Confidentiality 24
Section 5.4 Press Releases 25
Section 5.5 No Solicitation 25
Section 5.6 Use of Proceeds 26
Section 5.7 Current Information 26
Section 5.8 Listing of Additional Shares of Common
Stock 26
Section 5.9 Rights of First Refusal 27
Section 5.10 Rule 144 and Rule 144A Reporting 31
Section 5.11 Purchases of Securities 31
Section 5.12 Stock Options 32
Section 5.13 Exchange of Securities 32
Section 5.14 Acquisition of Common Stock 32
Article VI. Miscellaneous 33
Section 6.1 Survival of Provisions 33
Section 6.2 Termination 33
Section 6.3 Waiver; Amendments 33
Section 6.4 Communications 34
Section 6.5 Costs, Expenses and Taxes 34
Section 6.6 Execution in Counterparts 35
Section 6.7 Binding Effect; Assignment 35
Section 6.8 Governing Law 35
Section 6.9 Severability of Provisions 35
Section 6.10 Headings and Gender 36
Section 6.11 Integration 36
Exhibit A List of Purchasers
Exhibit B Form of Senior Note
Exhibit C Form of Certificate of Designations
Exhibit D Form of Warrant
Exhibit E Form of Security Agreement
Exhibit F Form of Director Agreement
Exhibit G Form of Registration Rights Agreement
Exhibit H Matters to be covered by Opinion of Counsel
to the Company and the Bank
UNIT PURCHASE AGREEMENT
Unit Purchase Agreement, dated as of October 10, 1995 (the
"Agreement"), by and among Hawthorne Financial Corporation, a Delaware
corporation, and the other parties named on the signature pages hereof
(each of which is acting severally and not jointly and as to itself only).
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" means this Unit Purchase Agreement, as amended,
supplemented or modified from time to time.
"Bank" means Hawthorne Savings, F.S.B., a federally-chartered savings
bank, together with its successors.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the city of Los Angeles, California are
authorized by law to close.
"Capital Securities" of any Person means Capital Stock of the Person
and Stock Equivalents of the Person.
"Capital Stock" of any Person means any and all shares or other equity
interest of such Person.
"Certificate of Designations" means the Certificate of Designations
and Preferences relating to the Series A Preferred Stock, substantially in
the form of Exhibit C hereto, as amended, supplemented or otherwise
modified from time to time.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor statute in effect from time to time), and the rules and
regulations promulgated thereunder.
"Commission" means the Securities and Exchange Commission and any
successor thereto.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Company" means Hawthorne Financial Corporation, a Delaware
corporation, together with its successors.
"Confidential Memorandum" means the Private Placement Memorandum,
dated August 22, 1995, with respect to the Units referred to therein, as
amended or supplemented at any time prior to the Closing.
"Director Agreements" means the Director Agreements to be entered into
by the Company and each of Value Partners, LTD, Xxx X. Xxxx and Fort Pitt
Fund, substantially in the form of Exhibit F hereto, as amended,
supplemented or otherwise modified from time to time.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including without
limitation potential liability for investigating costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from
the presence, or release into the environment of any Materials of
Environmental Concern.
"Environmental Laws" means any law, statute, rule or regulation of any
governmental, judicial, legislative, executive, administrative or
regulatory authority of the United States, or of any state, local or
foreign government or any subdivision thereof or of any governmental body
or other regulatory or administrative agency or commission, domestic or
foreign (a "Law"), relating to pollution or protection of the environment
(including ambient air, surface water, groundwater, land surface or
subsurface strata), including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, and other
Laws relating to (i) emissions, discharges or releases of pollutants,
contaminants, chemicals, or industrial toxic or hazardous substances or
wastes (collectively known as "Polluting Substances") or (ii) the handling,
storage, disposal, reclamation, recycling or transportation of Polluting
Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor statute in effect from time to time).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time (or any successor statute in effect from
time to time), and the rules and regulations of the Commission promulgated
thereunder.
"FDIA" means the Federal Deposit Insurance Act, as amended (or any
successor statute in effect from time to time).
"FDIC" means the Federal Deposit Insurance Corporation and any
successor thereto.
"Fractional Unit" shall mean one fifth, two fifths, three fifths or
four fifths of a Unit.
"HOLA" means the Home Owners' Loan Act, as amended (or any successor
statute in effect from time to time).
"HSR" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (or any successor statute in effect from time to time), and the
rules and regulations of the Federal Trade Commission promulgated
thereunder.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in respect of such
asset.
"Management" means the following members of the senior management of
the Company: President and Chief Executive Officer, Chief Financial
Officer and any Executive Vice President.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of
operations of the Company and the Bank taken as a whole.
"Material Securityholder" means any Person who holds, either directly
or indirectly with any of its Affiliates, any of (i) $1,250,000 principal
amount of Senior Notes, (ii) 25 shares of Series A Preferred Stock or (iii)
Warrants to purchase 220,000 shares of Common Stock or 220,000 shares of
Common Stock acquired through the exercise of such Warrants, or any
combination of such Warrants and shares of Common Stock.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"NASD" means National Association of Securities Dealers, Inc.
"Non-performing Assets" means the following consolidated assets of the
Company: (i) non-performing loans, securities or other assets (i.e., all
assets on which the Company or the Bank has ceased recognizing interest
under generally accepted accounting principles or as to which any payments
of principal or interest are past due 90 days or more as of the applicable
date) and (ii) Real Estate Owned, exclusive of apartment buildings included
in Real Estate Owned; and references herein to the amounts of Non-
performing Assets shall mean and refer to the aggregate carrying value of
such assets as stated in the books and financial statements of the Company
and the Bank under generally accepted accounting principles.
"OTS" means the Office of Thrift Supervision and any successor
thereto.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or a political subdivision or an agency or instrumentality
thereof.
"Placement Agent" means Sandler X'Xxxxx, in its capacity as private
placement agent with respect to the offering of Units described in the
Confidential Memorandum.
"Preferred Stock" means the Preferred Stock, par value $.01 per share,
of the Company.
"Previously Disclosed" means disclosed in a letter dated the date
hereof delivered from the Company to each Purchaser or from a Purchaser to
the Company, as applicable, specifically referring to the appropriate
section of this Agreement and describing in reasonable detail the matters
contained therein.
"Purchaser" means each Person (other than the Company) listed on the
signature pages of this Agreement, and its permitted successors and assigns
as provided herein, including any Person who becomes a party hereto by
executing and delivering a signature page hereto after the date of this
Agreement.
"Real Estate Owned" means the consolidated properties of the Company
acquired by foreclosure on a loan or deed-in-lieu thereof or otherwise
included in the Company's real estate owned for purposes of reporting asset
quality of the Company in its reports filed with the Commission under the
Exchange Act and the asset quality of the Bank in its reports filed with
the OTS.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among the Company and the Purchasers, substantially in the
form of Exhibit G hereto, as amended, supplemented or otherwise modified
from time to time.
"Related Agreements" means the Senior Notes, the Security Agreement,
the Director Agreements and the Registration Rights Agreement.
"SAIF" means the Savings Association Insurance Fund administered by
the FDIC, and any successor thereto.
"Securities" means (i) the Senior Notes, the Series A Preferred Stock
and the Warrants included in the Units to be issued and sold by the Company
and purchased by the Purchasers pursuant to this Agreement and (ii) the
Common Stock issuable by the Company (x) upon exercise of the Warrants and
(y) pursuant to Section 6(b) of the Senior Notes and/or Section 2(b) of the
Certificate of Designations.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto as in effect from time to time), and the rules
and regulations of the Commission promulgated thereunder.
"Security Agreement" means the Security Agreement by and among the
Company and the Purchasers, substantially in the form of Exhibit E hereto,
as amended, supplemented or otherwise modified from time to time.
"Senior Notes" means the Senior Notes due 2000 included in the Units
to be issued and sold by the Company and purchased by the Purchasers
pursuant to this Agreement, substantially in the form of Exhibit B hereto,
as amended, supplemented or otherwise modified from time to time.
"Series A Preferred Stock" means the Cumulative Preferred Stock,
Series A, par value $.01 per share, of the Company included in the Units to
be issued and sold by the Company and purchased by the Purchasers pursuant
to this Agreement.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
"Stock Equivalents" means, with respect to any Person, options,
warrants, calls, contracts or other rights entered into or issued by such
Person which confer upon the holder thereof the right (whether or not
contingent) to acquire any Capital Stock, voting securities or securities
convertible into or exchangeable for Capital Stock or voting securities of
such Person.
"Stock Option Plan" means the Stock Option Plan adopted by the Company
in 1993 and approved by its shareholders in 1994.
"Subsidiary" of any Person means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are
owned directly or indirectly by such Person.
"Taxes" means all taxes, charges, fees, levies or other governmental
assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated, severance,
stamp, occupation, property or other taxes, customs, dues, fees,
assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
taxing authority (domestic or foreign).
"Tax Returns" means all foreign, federal, State and local returns
relating to Taxes.
"Unit" means a package of the following securities to be issued and
sold by the Company and purchased by Purchasers pursuant to the terms of
this Agreement: (i) $250,000 principal amount of Senior Notes, (ii) five
shares of Series A Preferred Stock and (iii) a Warrant to purchase 44,000
shares of Common Stock.
"Warrants" means the Warrants to purchase shares of Common Stock
included in the Units to be issued and sold by the Company and purchased by
the Purchasers pursuant to this Agreement, substantially in the form of
Exhibit D hereto, as amended, supplemented or otherwise modified from time
to time.
ARTICLE II
PURCHASE AND SALE OF UNITS
SECTION 2.1 PURCHASE AND SALE OF UNITS. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue and sell
to each Purchaser and each such Purchaser agrees, severally and not
jointly, that it will purchase from the Company the number of Units set
forth below such Purchaser's name on Exhibit A hereto at a price equal to
$500,000 per Unit (subject to pro rata adjustment in the case of any
Fractional Unit).
SECTION 2.2 CLOSING. The purchase and sale of the Units will take
place at a closing (the "Closing") to be held at the offices of Xxxxx,
Xxxxx & Xxxxx, Los Angeles, California, at 10:00 a.m., Pacific Time, on
December 15, 1995, or on such earlier date as all of the conditions to the
parties' obligations hereunder specified in Article IV of this Agreement
(other than the delivery of certificates, opinions and other instruments
and documents to be delivered at the Closing) have been satisfied or
waived, or at such other location, and on such other Business Day and time
as the parties hereto shall mutually agree. The date on which the Closing
is to occur is referred to herein as the "Closing Date."
SECTION 2.3 PRICE ALLOCATION. The Company and the Purchasers each
hereby acknowledge and agree that for United States Federal, State and
local income tax purposes, the "issue price" of the Senior Notes, Series A
Preferred Stock and Warrants included in the Units will be determined by
Deloitte & Touche LLP prior to the Closing and the Company and the
Purchasers each agree to use the issue prices as so determined for all
income tax purposes with respect to this transaction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except
as Previously Disclosed, the Company represents and warrants to, and
covenants and agrees with, each of the Purchasers as follows:
(a) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock and 10,000,000 shares of
Preferred Stock. As of the date hereof, there are (i) 2,599,275 shares of
Common Stock issued and outstanding and 5,400 shares of Common Stock are
held as treasury shares which are issued but not outstanding, and (ii) no
shares of Preferred Stock are issued and outstanding or held as treasury
shares. Immediately prior to the Closing on the Closing Date, the
Company's outstanding Capital Stock will be as set forth in the preceding
sentence, except for any increases in outstanding Common Stock as a result
of the exercise of options referred to in the last sentence of this Section
3.1(a). All outstanding shares of Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable and none of the
outstanding shares of Common Stock has been issued in violation of the
preemptive rights of any Person. Except for options to purchase 252,500
shares of Common Stock pursuant to the Stock Option Plan as of the date
hereof and as contemplated by this Agreement, there are no Stock
Equivalents authorized, issued or outstanding with respect to the Capital
Stock of the Company as of the date hereof.
(b) ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY. The Company
is a corporation duly organized and validly existing under the laws of
Delaware with full corporate power and authority to own or lease all of its
properties and assets and to carry on its business as now conducted and is
duly licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such licensing or qualification and where the
failure to be so licensed, qualified or in good standing would have a
Material Adverse Effect. The Company is duly registered as a savings and
loan holding company under the HOLA and the regulations of the OTS
thereunder. The Company has heretofore delivered true and complete copies
of the Certificate of Incorporation and Bylaws of the Company as in effect
as of the date hereof to each Purchaser which has requested the same.
Prior to the Closing, the Certificate of Designations will have been filed
with the Secretary of State of the State of Delaware in accordance with the
Delaware General Corporation Law.
(c) OWNERSHIP OF THE BANK. The Bank is the only Subsidiary of the
Company and except for (i) 15,000 shares of the Bank's common stock, which
constitutes all of the Bank's outstanding Capital Stock, (ii) stock in the
Federal Home Loan Bank of San Francisco, and (iii) securities and other
interests taken in consideration of debts previously contracted, the
Company does not own or have the right to acquire, directly or indirectly,
any outstanding Capital Stock or other voting securities or ownership
interests of any corporation, bank, savings association, partnership, joint
venture or other organization. The outstanding shares of Capital Stock of
the Bank have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly owned by the Company free and clear of all
Liens. No Stock Equivalents are authorized, issued or outstanding with
respect to the Capital Stock of the Bank and there are no agreements,
understandings or commitments relating to the right of the Company to vote
or to dispose of such Capital Stock.
(d) ORGANIZATION, STANDING AND AUTHORITY OF THE BANK. The Bank is a
federally-chartered savings bank duly organized and validly existing under
the laws of the United States. The deposit accounts of the Bank are
insured by the SAIF to the maximum extent permitted by the FDIA, and the
Bank has paid all premiums and assessments required by the FDIA and the
regulations thereunder. The Bank has full power and authority to own or
lease all of its properties and assets and to carry on its business as now
conducted and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which its ownership or leasing of property
or the conduct of its business requires such qualification, except where
the failure to be so licensed, qualified or in good standing would not have
a Material Adverse Effect. The Company has heretofore delivered true and
complete copies of the Charter and Bylaws of the Bank as in effect as of
the date hereof to each Purchaser which has requested the same.
(e) AUTHORITY. Each of the Company and the Bank has full corporate
power and authority to perform its respective obligations under this
Agreement and each of the Related Agreements to which it is or will become
a party, and the execution, delivery and performance by (i) the Company of
this Agreement and (ii) the Company and the Bank of each Related Agreement
to which it is or will become a party have been duly authorized by all
necessary corporate action on the part of the Company or the Bank, as the
case may be.
(f) DUE EXECUTION. This Agreement constitutes, and each of the
Related Agreements to which the Company or the Bank is or will become a
party, when duly authorized, executed and delivered by the Company or the
Bank, as the case may be, will constitute a valid and binding obligation of
the Company or the Bank, as the case may be, enforceable against the
Company or the Bank, as the case may be, in accordance with its terms,
except (i) rights to indemnity and contribution under the Registration
Rights Agreement may be limited by applicable law, (ii) enforceability may
be limited by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and (iii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(g) NO CONFLICT. The execution, delivery and performance of this
Agreement and each of the Related Agreements to which the Company or the
Bank, as the case may be, is or will become a party will not conflict with
or constitute a breach of, or a default under (i) the Certificate of
Incorporation or Charter, as the case may be, or the Bylaws of the Company
or the Bank, (ii) any material obligation, agreement, indenture, bond,
debenture, note, instrument or any other evidence of indebtedness to which
the Company or the Bank is a party or the assets of either of which are
subject, or (iii) subject to the approvals and compliance referred to in
the next sentence, any law, ordinance, order, license, rule or other
regulation or demand of any court or governmental agency, arbitration panel
or authority applicable to the Company or the Bank. Except for (i) the
approval of the issuance of the Warrants by the shareholders of the Company
pursuant to Section 6(i)(1)(d) of Part III to Schedule D of the Bylaws of
the NASD (unless exempted therefrom upon application to the NASD), (ii)
compliance with applicable federal and State securities laws in connection
with this Agreement and the performance by the Company of its obligations
under the Registration Rights Agreement and (iii) any required compliance
by the Company with applicable federal and State securities laws and/or HSR
in connection with (x) the issuance of shares of Common Stock upon exercise
of the Warrants in accordance with their terms or (y) any issuance of
Common Stock pursuant to Section 6(b) of the Senior Notes or Section 2(b)
of the Certificate of Designations, no consent, approval, order or other
authorization of any governmental, administrative or regulatory body or
agency is legally required by or on behalf of the Company or the Bank in
connection with the execution, delivery and performance of this Agreement
and each of the Related Agreements to which the Company or the Bank, as the
case may be, is or will become a party. The representations and warranties
contained in this Section 3.1(g), insofar as they relate to federal and
State securities laws requirements, are made in reliance on the
representations and warranties of the Purchasers contained in Section 3.2
of this Agreement.
(h) STATUS OF SECURITIES. Subject to satisfaction of the condition
set forth in Section 4.1(a) hereof, the Units and the shares of Common
Stock issuable upon exercise of the Warrants have been authorized by all
necessary corporate action on the part of the Company. When the Units are
delivered to the Purchasers at the Closing against payment therefor as
provided herein, the Senior Notes, Series A Preferred Stock and Warrants
included therein will be duly authorized, validly issued and, in the case
of the Series A Preferred Stock, fully paid and nonassessable, and in each
case will not be issued in violation of the preemptive rights of any
Person. Subject to the approvals and compliance referred to in the second
sentence of Section 3.1(g) hereof, shares of Common Stock issued by the
Company (i) upon exercise of Warrants in accordance with their terms or
(ii) pursuant to Section 6(b) of the Senior Notes or Section 2(b) of the
Certificate of Designations, will be duly authorized, validly issued and
non-assessable at the time of issuance and will not be issued in violation
of the preemptive rights of any Person. The representations and warranties
contained in this Section 3.1(h), insofar as they relate to federal and
State securities laws requirements, are made in reliance on the
representations and warranties of the Purchasers contained in Section 3.2
of this Agreement.
(i) SECURITIES REPORTS. The Company has filed all reports and other
documents required to be filed by it under the Exchange Act and the
Securities Act on a timely basis or has received a valid extension of such
time of filing, and all such reports and other documents complied in all
material respects with the requirements of the Exchange Act and the
Securities Act, as applicable, and did not 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, at the time
and in light of the circumstances under which they were made, not
misleading.
(j) FINANCIAL STATEMENTS.
(i) The Company has previously delivered to each Purchaser (x)
consolidated balance sheets of the Company as of December 31, 1994 and
1993 and consolidated statements of operations, changes in
shareholders' equity and cash flows of the Company for each of the
years ended December 31, 1994, 1993 and 1992, accompanied by the
related audit report of Deloitte & Touche LLP, and (y) an unaudited
consolidated balance sheet of the Company as of June 30, 1995 and
unaudited consolidated statements of operations, changes in
shareholders' equity and cash flows of the Company for the six months
ended June 30, 1995. The foregoing financial statements, as well as
the financial statements of the Company to be delivered pursuant to
Section 5.7(a) hereof (collectively the "Company Financial
Statements"), fairly present or will fairly present, as the case may
be, the consolidated financial condition of the Company as of the
respective dates set forth therein, and the consolidated results of
operations, changes in shareholders' equity and cash flows of the
Company for the respective periods or as of the respective dates set
forth therein.
(ii) Each of the Company Financial Statements has been or will
be, as the case may be, prepared in accordance with generally accepted
accounting principles consistently applied during the periods
involved, except as stated therein, and except that unaudited Company
Financial Statements need not contain all of the footnote and line
item disclosures that would be required for financial statements
prepared in accordance with generally accepted accounting principles.
The books and records of the Company and the Bank are being maintained
in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all
material respects all dealings and transactions in respect of the
business, assets, liabilities and affairs of the Company and the Bank.
(iii) Except to the extent (x) reflected, disclosed or
provided for in the consolidated statement of financial condition of
the Company as of June 30, 1995 (including related notes) and (y) of
liabilities incurred since such date in the ordinary course of
business, neither the Company nor the Bank has any liabilities,
whether absolute, accrued, contingent or otherwise, which would have a
Material Adverse Effect.
(k) MATERIAL ADVERSE CHANGE. Except as Previously Disclosed, since
June 30, 1995, no events or developments involving the Company or the Bank
have occurred which, individually or in the aggregate, (i) have had, or
would reasonably be likely to have, a Material Adverse Effect, provided
that any special assessment of SAIF-insured institutions to recapitalize
the SAIF shall not be deemed to have such an effect if the condition set
forth in Section 4.1(f)(iii) hereof is satisfied, or (ii) materially impair
the ability of the Company or the Bank to perform its obligations under
this Agreement, any Related Agreement to which it will become a party or
any of the Securities.
(l) ENVIRONMENTAL MATTERS.
(i) To the best of the knowledge of the Company and the Bank,
the Company and the Bank are in compliance with all Environmental
Laws, except for any violations of any Environmental Law which would
not, individually or in the aggregate, have a Material Adverse Effect.
Neither the Company nor the Bank has received any communication
alleging that the Company or any Company Subsidiary is not in such
compliance and, to the best knowledge of the Company, there are no
present circumstances that would prevent or interfere with the
continuation of such compliance.
(ii) To the best of the knowledge of the Company and the Bank,
none of the properties owned, leased or operated by the Company or the
Bank has been or is in violation of or liable under any Environmental
Law, except for any such violations or liabilities which would not
individually or in the aggregate have a Material Adverse Effect.
(iii) To the best of the knowledge of the Company and the
Bank, there are no past or present actions, activities, circumstances,
conditions, events or incidents that could reasonably form the basis
of any Environmental Claim or other claim or action or governmental
investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or the Bank or
against any Person whose liability for any Environmental Claim the
Company or the Bank has or may have retained or assumed either
contractually or by operation of law, except such as would not have a
Material Adverse Effect.
(m) TAX MATTERS. The Company and the Bank have timely filed all Tax
Returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns
and withholding and employment tax returns) and have paid, or where payment
is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all Taxes required to be paid in respect of the
periods covered by such Tax Returns, except in all cases where the failure
to do so does not or will not have a Material Adverse Effect. As of the
date hereof, there is no audit examination, assessed deficiency, deficiency
litigation or refund litigation with respect to any Taxes of the Company or
the Bank. All Taxes due with respect to completed and settled examinations
or concluded litigation relating to the Company have been paid in full or
adequate provision has been made for any such Taxes on the Company's
consolidated statement of financial condition in accordance with generally
accepted accounting principles. The Company has not executed an extension
or waiver of any statute of limitations on the assessment or collection of
any material tax due that is currently in effect. Nothing has occurred,
whether by action or by failure to act, which would subject to recapture
the bad debt reserves established by the Bank for federal income tax
purposes under Section 593 of the Code.
(n) ERISA. The Company is in compliance in all material respects
with all presently applicable provisions of ERISA; no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan" (as
defined in ERISA) for which the Company would have any material liability;
the Company has not incurred and does not expect to incur liability under
(i) Title IV of ERISA with respect to termination of, or withdrawal from,
any "pension plan" or (ii) Sections 412 (whether or not waived) or 4971 of
the Code; and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(o) LITIGATION. There are no actions, suits, investigations or legal
proceedings pending against, or to the knowledge of the Company threatened
against, or affecting the Company or the Bank or their respective
properties before any court or governmental body or agency which would
reasonably be expected to have a Material Adverse Effect or which in any
manner challenge the legality, validity or enforceability of this
Agreement, any of the Related Agreements or any of the Securities, or which
would reasonably be expected to materially impair the ability or obligation
of the Company or the Bank to perform fully on a timely basis their
respective obligations under this Agreement, any Related Agreement to which
it will become a party or any of the Securities.
(p) COMPLIANCE WITH LAWS. Each of the Company and the Bank has all
permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, federal, State,
local and foreign governmental or regulatory bodies that are necessary in
order to permit it to carry on its business as it is presently being
conducted and the absence of which could have a Material Adverse Effect;
all such permits, licenses, certificates of authority, orders and approvals
are in full force and effect; and to the best knowledge of the Company, no
suspension or cancellation of any of the same is threatened.
(q) NO DEFAULT OR VIOLATION. Neither the Company nor the Bank
currently is in violation of its Certificate of Incorporation and Charter,
respectively, its Bylaws, or of any applicable federal, state or local law
or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all
banking, securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders,
rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any governmental agency, any of which violations or
defaults could, individually or in the aggregate, reasonably be deemed (i)
to have a Material Adverse Effect or (ii) materially adversely impair the
ability of the Company or the Bank to perform on a timely basis any
obligation which it has under this Agreement, any Related Agreement to
which it will become a party or any of the Securities and neither the
Company nor the Bank has received any notice or communication from any
federal, state or local governmental authority asserting that the Company
or the Bank is in violation of any of the foregoing which could reasonably
be deemed to have any effect set forth in clauses (i) or (ii) above.
Except for the Capital Directive issued by the OTS to the Bank as of June
30, 1995 and as Previously Disclosed, neither the Company nor the Bank is
subject to any regulatory or supervisory cease and desist order, agreement,
written directive, memorandum of understanding or written commitment, and
none of them has received any written communication requesting that they
enter into any of the foregoing.
(r) CERTAIN FEES. Except for fees and expenses payable by the
Company to the Placement Agent, as Previously Disclosed, no fees or
commissions will be payable by the Company or the Bank to brokers, finders,
investment bankers or banks pursuant to any agreement entered into by the
Company or the Bank with respect to the offer and sale of the Units or any
of the other transactions contemplated hereby.
(s) USURY LAWS. The Senior Notes will not be subject to a defense
that the interest rate is in violation of the usury laws of the State of
California, as currently in effect. The Company hereby waives, to the
fullest extent permitted by applicable law, its right to assert the
violation of any such usury law and the usury law of any other applicable
jurisdiction as a defense to the fulfillment of any of its obligations
under the Senior Notes and covenants and agrees to take all reasonable
actions as may be necessary in the future to make such waiver effective.
(t) CERTAIN ASSETS. The Company has Previously Disclosed a true and
correct listing of the following assets of the Company and its Subsidiaries
as of August 31, 1995: (i) all non-performing loans, securities or other
assets (i.e., all assets on which the Company or the Bank has ceased
recognizing interest under generally accepted accounting principles or as
to which any payments of principal or interest are past due 90 or more days
as of such date), (ii) all loans, securities or other assets as to which
any payments of principal or interest are past due 60 or more days, (iii)
all loans, securities or other assets not included in the foregoing which
have been classified special mention, substandard, doubtful or loss by
management of the Company or the Bank or regulatory examiners, and (iv)
each parcel of Real Estate Owned (excepting such parcels as may have been
disposed of in the ordinary course of business subsequent to such date),
including an identification of the amount of reserves which have been
established with respect to each such parcel and its net carrying value.
(u) NO DEBT. Except for the Senior Notes and Permitted Debt (as
defined in Section 4(c)(i) and (ii) of the Senior Notes), as of the date
hereof the Company, on an unconsolidated basis, does not have any
outstanding Debt (as defined in Section 3 of the Senior Notes), and except
for the Senior Notes and Permitted Debt, the Company will have no
outstanding Debt on the Closing Date.
(v) PRIVATE OFFERING. Neither the Company nor, assuming the accuracy
of such representations of the Placement Agent as may be requested by the
Company in connection with the transactions contemplated hereby, any Person
acting on its behalf, has taken or will take any action which might subject
the offering, issuance or sale of the Units to the registration
requirements of the Securities Act or comparable provisions of any
applicable State securities laws.
(w) DISCLOSURE. None of the representations and warranties of the
Company or any of the information or documents which have been Previously
Disclosed to a Purchaser pursuant hereto are false or misleading in any
material respect or contain any untrue statement of a material fact, or
omit to state any material fact required to be stated or necessary to make
any such information or document, at the time and in light of the
circumstances, not misleading. Copies of all documents referred to in this
Section 3.1 are true, correct and complete copies thereof and include all
amendments, supplements and modifications thereto and all waivers
thereunder.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS.
(a) INVESTMENT INTENT. Each Purchaser, severally and not jointly and
as to itself only, represents and warrants to, and covenants and agrees
with, the Company that the Securities to be acquired by it hereunder are
being acquired for its own account for investment and with no intention of
distributing or reselling such Securities or any part thereof or interest
therein in any transaction which would be in violation of the securities
laws of the United States of America or any State, without prejudice,
however, to a Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities under an effective
registration statement under the Securities Act and other applicable State
securities laws or under an exemption from such registration, and subject,
nevertheless, to the disposition of a Purchaser's property being at all
times within its control. Each Purchaser, severally and not jointly and as
to itself only, further represents and warrants to the Company that such
Purchaser has no present agreement, understanding, plan or intent to
transfer the Units (including the Warrants) to be purchased by it to any
transferee.
(b) TRANSFER RESTRICTIONS.
(i) If a Purchaser should decide to dispose of any of the
Securities, such Purchaser understands and agrees that it may do so
only pursuant to an effective registration statement under the
Securities Act or as set forth below: (i) to the Company, (ii) to any
Person reasonably believed by such Purchaser to be a "qualified
institutional buyer" (as defined in Rule 144A under the Securities
Act) in compliance with Rule 144A under the Securities Act, (iii)
pursuant to an exemption from registration set forth in Rule 144 under
the Securities Act, (iv) to any Person who is reasonably believed by
such Purchaser to be an "accredited investor" (as defined in Rule
501(a) under the Securities Act) and that, prior to such transfer,
furnishes to the Purchaser and the Company a signed letter confirming
its status as an accredited investor and agreeing to the restrictions
on transfer of the Securities set forth in this Agreement or (v) to
any Affiliate of such Purchaser pursuant to an applicable exemption
under the Securities Act. In connection with any transfer of any
Securities other than (i) any transfer pursuant to an effective
registration statement or (ii) any transfer by a qualified
institutional buyer (as defined in Rule 144A under the Securities Act)
pursuant to clause (i) or (ii) above, the Company may require that the
transferor of any such Securities provide to the Company an opinion of
counsel experienced in the area of United States securities laws
selected by the transferor (which may include in-house counsel of a
transferor), which counsel shall be and the form and substance of
which opinion shall be, reasonably satisfactory to the Company, to the
effect that such transfer does not require registration of such
Securities under the Securities Act or any State securities laws. In
connection with any transfer pursuant to clause (ii) above, the
Company may request reasonable certification as to the status of the
transferor's transferee as a qualified institutional buyer. Each
Purchaser agrees to the imprinting, so long as appropriate, (i) on the
Senior Notes of the first legend set forth on the form of Senior Note
included as Exhibit B hereto, (ii) on the Warrants of the first legend
set forth on the form of Warrant included as Exhibit D hereto and
(iii) on certificates representing the Series A Preferred Stock and
the Common Stock issuable (x) upon exercise of the Warrants or (y)
pursuant to Section 6(b) of the Senior Notes and/or Section 2(b) of
the Certificate of Designations, a legend substantially similar to the
foregoing legends. The legends set forth above may be removed if and
when the applicable Securities are disposed of pursuant to an
effective registration statement under the Securities Act or in the
opinion of counsel to the Company experienced in the area of United
States securities laws such legend is no longer required under
applicable requirements of the Securities Act. The Senior Notes,
Warrants and certificates evidencing the Series A Preferred Stock and
Common Stock referred to in clauses (i), (ii) and (iii) above also
shall bear any other legends required by applicable federal or state
securities laws, which legends may be removed when, in the opinion of
counsel to the Company experienced in the applicable securities laws,
the same are no longer required under the applicable requirements of
such securities laws. The Company agrees that it will provide each
Purchaser, upon request, with a substitute document evidencing the
Securities not bearing such legend at such time as such legend is no
longer applicable.
(ii) Each Purchaser understands and agrees that it may transfer
the Senior Note, shares of Series A Preferred Stock and Warrant which
comprise a Unit (including any Fractional Unit) only together as such
until the earlier of (x) the date the Company files with the
Commission its annual report on Form 10-K for the year ended December
31, 1996 and (y) March 30, 1997. Each Purchaser agrees to the
imprinting, so long as appropriate, of the second legend set forth on
the form of Senior Notes and the form of Warrant included as Exhibit B
and Exhibit D hereto, respectively, on the Senior Notes, certificates
evidencing Series A Preferred Stock and Warrants which are included in
the Units. Such legends may be removed following the expiration of
the restrictions on transfer contained in paragraph (b)(ii) and (iii)
of this Section 3.2, and the Company agrees that it will provide each
Purchaser, upon request, with a substitute document evidencing the
Senior Notes, Series A Preferred Stock and Warrants comprising the
Units not bearing such legend at such time as such legend is no longer
applicable.
(iii) Each Purchaser understands and agrees that until the
Warrants become exercisable in accordance with their terms, it will
give the Company not less than 10 Business Days' notice of any
proposed transfer of Units and/or Securities, accompanied by
information related to such transfer which is reasonably sufficient to
enable the Company to make the determinations referred to herein, so
that the Company may determine in its reasonable judgment whether (i)
such proposed transfer involves a person who is a "5% shareholder" of
the Company, as that term is defined in Section 382(k)(7) of the Code,
or who would become a 5% shareholder of the Company as a result of
such proposed transfer, and, if so, (ii) whether such proposed
transfer could reasonably be expected to result in an "ownership
change" under Section 382 of the Code and the regulations promulgated
thereunder (taking into account both the proposed transfer and any
other transactions of which the Company is aware) and, if so, (iii)
whether such "ownership change" would result in a material loss of tax
benefits to the Company. In the event the Company makes such
determinations and provides the Purchaser with written notice of the
same within 10 Business Days of its receipt of the above-referenced
notice from the Purchaser, or in the event the Company makes a
reasonable written request to such Purchaser for further information
concerning such proposed transfer within the same 10-Business Day
period and makes the foregoing determinations within 10 Business Days
after receipt of such further information, the Purchaser agrees not to
effect any such transfer as the Company may request in order to avoid
such an "ownership change."
(c) STOP TRANSFER INSTRUCTIONS. Each Purchaser agrees that the
Company shall be entitled to make a notation on its records and give
instructions to any transfer agent of the Securities in order to implement
the restrictions on transfer set forth in Section 3.2(b) of this Agreement.
(d) ACCREDITED INVESTOR. Each Purchaser, severally and not jointly
and as to itself only, represents and warrants to, and covenants and agrees
with, the Company that (i) at the time it was offered the Units, it was,
(ii) at the date hereof, it is, and (iii) at the Closing, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act,
and has such knowledge, sophistication and experience in business and
financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment, is able to bear the economic risk of
such investment and, at the present time, is able to afford a complete loss
of such investment.
(e) DUE EXECUTION. Each Purchaser, severally and not jointly and as
to itself only, represents and warrants to the Company that this Agreement
has been, and each Related Agreement to which it will become a party will
be, duly executed and delivered by it or on its behalf and constitutes, or
will constitute, as applicable, a valid and binding obligation of such
Purchaser, enforceable against the Purchaser in accordance with its terms,
except that (i) rights to indemnity and contribution under the Registration
Rights Agreement may be limited by applicable law, (ii) enforceability may
be limited by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and (iii) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles
of general applicability.
(f) NO CONFLICT. Each Purchaser, severally and not jointly and as to
itself only, represents and warrants to the Company that (i) the execution,
delivery and performance of this Agreement and each of the Related
Agreements to which it will become a party do not and will not, as
applicable, conflict with or constitute a breach or a default under (i) its
articles of incorporation, charter or other organizational document or
bylaws, as applicable, (ii) any material obligation, agreement, indenture,
bond, debenture, note, instrument or any other evidence of indebtedness to
which it is a party or its assets are subject or (iii) subject to Section
3.2(i) hereof, any law, ordinance, order, license, rule or other regulation
or demand of any court or governmental agency, arbitration panel or
authority applicable to it.
(g) ACCESS TO INFORMATION. Each Purchaser acknowledges receipt of
the Confidential Memorandum and further acknowledges that prior to the date
hereof and, subject to the Company's compliance with its obligations
pursuant to Section 5.3(a) hereof, on and subsequent to the date hereof, it
has been afforded (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Units
and the merits and risks of investing in the Units and (ii) access to
information about the Company and the Company's financial condition,
results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment in the Units.
(h) RELIANCE. Each Purchaser also understands and acknowledges that
(i) the Units are being offered and sold without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) such exemption depends in part
on, and that the Company, its counsel and the Private Placement Agent will
rely upon, the accuracy and truthfulness of the foregoing representations
and warranties of such Purchaser, and such Purchaser hereby consents to
such reliance.
(i) GOVERNMENTAL AUTHORIZATION. Except for (i) compliance with
applicable federal and State securities laws in connection with the
performance by a Purchaser of its obligations under the Registration Rights
Agreement, (ii) any required compliance by a Purchaser with applicable
federal and State securities laws, HSR and/or federal banking laws and
regulations in connection with (x) the issuance of shares of Common Stock
upon exercise of the Warrants in accordance with their terms or (y) any
issuance of Common Stock pursuant to Section 6(b) of the Senior Notes or
Section 2(b) of the Certificate of Designations and (iii) such written
confirmations from the OTS as may be reasonably determined by a Purchaser
to be necessary to ensure that upon consummation of the transactions
contemplated by Section 2.1 hereof it will not be deemed to be in control
of the Company or subject to a rebuttable presumption of control of the
Company under the HOLA and 12 C.F.R. Part 574, each Purchaser, severally
and not jointly and as to itself only, represents and warrants to the
Company that no consent, approval, order or other authorization of any
governmental, administrative or regulatory body or agency is legally
required by or on behalf of the Purchaser in connection with the execution,
delivery and performance of this Agreement and each Related Agreement to
which it will become a party.
(j) OWNERSHIP OF COMPANY STOCK.
(i) Each Purchaser who is an individual, severally and not
jointly and as to itself only, represents and warrants to the Company
that, other than by virtue of this Agreement and in the case of
Management as Previously Disclosed, (A) he does not own any Capital
Stock or Stock Equivalents of the Company, and that to his knowledge
after due inquiry none of his spouse, parents, children or
grandchildren (including for this purpose, persons related by blood or
adoption) (collectively, the "Related Persons") owns any Capital Stock
or Stock Equivalents of the Company, (B) to his knowledge after due
inquiry no partnership, limited liability company or corporation in
which he or any of his Related Persons owns a 5% or greater interest
and no estate or trust of which he or any of his Related Persons is a
beneficiary (collectively, "Related Entities"), owns, directly or
indirectly, any Capital Stock or Stock Equivalents of the Company, and
(C) neither such Purchaser nor to the knowledge of such Purchaser
after due inquiry any of such Purchaser's Related Persons or any
entity that constitutes a Related Entity with respect to such
Purchaser has any present intention or plan to acquire Common Stock or
Stock Equivalents of the Company otherwise than through the exercise
of the Warrants and the terms of the Units.
(ii) Each Purchaser that is not an individual, severally and not
jointly and as to itself only, represents and warrants to the Company
that, other than by virtue of this Agreement, (A) it does not own any
Capital Stock or Stock Equivalents of the Company, (B) to such
Purchaser's knowledge after due inquiry, no partnership, limited
liability company or corporation in which it owns a 5% or greater
interest, or estate or trust of which it is a beneficiary owns,
directly or indirectly, any Capital Stock or Stock Equivalents of the
Company and (C) neither it nor to its knowledge after due inquiry any
Affiliate has any present intention or plan to acquire Common Stock or
Stock Equivalents of the Company otherwise than through the exercise
of the Warrants and the terms of the Units.
(iii) Each Purchaser, whether or not an individual, severally
and not jointly and as to itself only, further represents and warrants
to the Company that (A) such Purchaser owns no shares of stock of any
funds advised by Xxxxx Securities Corporation or Dimensional Fund
Advisors Inc and (B) to such Purchaser's knowledge, no partnership,
limited liability company or corporation in which he or it owns an
interest of less than 5% owns, directly or indirectly, any Common
Stock, or Stock Equivalents of the Company, nor does any such
partnership, limited liability company or corporation have any present
intention or plan to acquire any such Common Stock or Stock
Equivalents.
(iv) Each Purchaser, severally and not jointly and as to itself
only, represents and warrants to the Company that, except as
Previously Disclosed, it does not bear a relationship to any other
Purchaser that is specified in Section 267(b) or Section 707(b) of the
Code.
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
SECTION 4.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The
respective obligations of each of the parties hereto to fulfill their
obligations under Section 2.1 hereof at the Closing shall be subject to the
satisfaction or waiver prior to the Closing of the following conditions:
(a) All requirements prescribed by law which are necessary to
the consummation of the transactions contemplated by this Agreement
shall have been satisfied.
(b) No party hereto shall be subject to any order, decree or
injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of any of the transactions
contemplated by this Agreement.
(c) No statute, rule or regulation shall have been enacted,
entered, promulgated, interpreted, applied or enforced by any
governmental authority which prohibits, restricts or makes illegal
consummation of any of the transactions contemplated by this
Agreement.
(d) Each of the parties hereto shall have received (i) a
counterpart to this Agreement, duly executed and delivered by the
parties hereto, and (ii) a counterpart of each Related Agreement
(other than the Senior Notes) to which it is a party, in form and
substance satisfactory to the parties, which shall have been duly
executed and delivered by the Company, the Bank and the Purchaser or
Purchasers, as applicable.
(e) The Certificate of Designations shall have been filed with
the Secretary of State of the State of Delaware in accordance with the
Delaware General Corporation Law.
(f) The OTS shall have indicated in writing to the Bank that
upon the submission by the Company of notice to the OTS of the
consummation of the transactions contemplated by Section 2.1 hereof,
(i) the Prompt Corrective Action Directive issued to the Bank by the
OTS as of June 30, 1995 will be terminated, (ii) the regulatory
capital requirements applicable to the Bank will be the requirements
of general applicability set forth at 12 C.F.R. 567.2 and related
regulations and there will be no individual minimum regulatory capital
requirement required to be maintained by the Bank, (iii) the OTS will
not, solely by virtue of any special assessment to recapitalize the
SAIF, require the Bank to meet an individual minimum regulatory
capital requirement or otherwise increase the amount of regulatory
capital required to be maintained by the Bank, and (iv) the Bank will
not be subject to any capital restoration plan filing requirement and
the Bank's revised capital plan submitted to the OTS on June 22, 1995
will be void.
SECTION 4.2 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS. The
obligations of each of the Purchasers to fulfill its obligations under
Section 2.1 hereof shall be subject to the satisfaction or waiver prior to
the Closing of the following conditions:
(a) Each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date
as if made on the Closing Date (or on the date when made in the case
of any representation or warranty which specifically relates to an
earlier date); the Company shall have performed, in all material
respects, each of its covenants and agreements contained in this
Agreement to be performed prior to the Closing; and each of the
Purchasers shall have received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of the Company,
dated the Closing Date, to the foregoing effect.
(b) The Company shall have delivered to each Purchaser a Senior
Note, certificate evidencing Series A Preferred Stock and a Warrant,
in each case registered in the name of the Purchaser, sufficient to
evidence the Securities in the Units to be issued and sold by the
Company and purchased by the Purchaser, as set forth on Exhibit A
hereto, against payment therefor to the Company in the amount of
$500,000 per Unit (subject to pro rata adjustment in the case of any
Fractional Unit).
(c) Each Purchaser shall have received such written
confirmations from the OTS as may be reasonably determined by it to be
necessary to ensure that upon consummation of the transactions
contemplated by Section 2.1 hereof it will not be deemed to be in
control of the Company or subject to a rebuttable presumption of
control of the Company under the HOLA and 12 C.F.R. Part 574, and no
such confirmation shall include any condition or requirement that,
individually or in the aggregate, would reduce the benefits of the
transactions contemplated by this Agreement in so significant a manner
that the party, in its judgment, would not have entered into this
Agreement had such condition or requirement been known at the date
hereof.
(d) The Company shall have delivered to each Purchaser a
certificate signed by the Chief Executive Officer and Chief Financial
Officer of the Company, dated the Closing Date, to the following
effect:
(i) at November 30, 1995, the Company had not less
than $23,500,000 of consolidated shareholders' equity under
generally accepted accounting principles;
(ii) at November 30, 1995, the Company's consolidated
general allowance for loan losses and consolidated general
allowance for losses on Real Estate Owned (x) amounted to not
less than $12,500,000 in the aggregate and (y) complied with any
applicable requirement of the OTS, including without limitation
the requirements set forth in a letter, dated October 5, 1995,
from Xxxxxxx X. Xxxxx, Assistant Regional Director of the OTS, to
Xxxxx X. Xxxxx;
(iii) from August 1, 1995 to November 30, 1995, the
Company received not less than $14,000,000 of net proceeds from
the sale of Real Estate Owned (other than apartment buildings),
which sales in each case have been recorded by the Company as
such under generally accepted accounting principles;
(iv) at November 30, 1995, the Company's consolidated
Non-performing Assets amounted to not more than $50,600,000; and
(v) to the best of the knowledge and belief of each
such officer, no event has occurred subsequent to November 30,
1995 which would make the statements in clauses (i)-(iv) above
inaccurate.
(e) Unless waived by the Purchasers in accordance with Section
6.3(a) hereof, either (i) the Company's issuance of the Warrants
included in the Units to be sold pursuant to this Agreement shall have
been approved by the requisite vote of the holders of the Common Stock
pursuant to Section 6(i)(1)(D) of Part III to Schedule D of the Bylaws
of the NASD or (ii) the Company shall have obtained an exemption from
such requirement to obtain shareholder approval upon application to
the NASD and mailed to all shareholders of the Company the notice
referred to in Section 6(i)(1)(e) of Part III to Schedule D of the
Bylaws of the NASD.
(f) Members of Management shall have agreed, by their execution
of this Agreement, to purchase in the aggregate not less than 5% of
the aggregate Units to be sold by the Company pursuant to this
Agreement.
(g) Each Purchaser shall have received, in form and substance
reasonably satisfactory to it, an opinion, addressed to the Purchasers
and dated the Closing Date, of Xxxxx, Xxxxx & Xxxxx, counsel for the
Company and the Bank, with respect to the matters set forth in Exhibit
H hereto.
(h) No party to this Agreement (other than the relevant
Purchaser) shall be in material breach of this Agreement unless such
breach shall have been waived in writing by each of the other parties
to this Agreement.
(i) Each Purchaser shall have received such other certificates,
opinions, documents and instruments related to the transactions
contemplated hereby as may have been reasonably required by it and are
customary for transactions of this type, and all corporate and other
proceedings, and all documents, instruments and other legal matters in
connection with the transactions contemplated by this Agreement, shall
be reasonably satisfactory in form and substance to it and its
counsel.
SECTION 4.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to fulfill its obligations under this Agreement,
including without limitation the obligations set forth in Section 2.1
hereof, shall be subject to the satisfaction or waiver prior to the Closing
of the following conditions, provided that the condition set forth at
paragraph (e) below may not be waived without the prior written consent of
the Purchasers:
(a) Each of the representations and warranties of the Purchasers
contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date
as if made on the Closing Date, and the Company shall have received a
certificate signed by each Purchaser who is an individual and by a
duly authorized officer of each other Purchaser to the foregoing
effect.
(b) Each Purchaser shall have delivered to the Company $500,000
per Unit (subject to pro rata adjustment in the case of any Fractional
Unit) for each of the Units to be issued and sold by the Company and
purchased by the Purchaser pursuant to this Agreement, as set forth on
Exhibit A hereto, such amount to be payable (i) by wire transfer of
immediately available funds to an account with a bank designated by
the Company, by notice to each of the Purchasers to be provided no
later than two Business Days prior to the Closing Date, or (ii) a
federal (same day) funds check payable to the order of the Company.
(c) No party to this Agreement (other than the Company) shall be
in material breach of this Agreement unless such breach shall have
been waived in writing by each of the other parties to this Agreement.
(d) The Company shall have received such other certificates,
opinions, documents and instruments related to the transactions
contemplated hereby as may have been reasonably required by the
Company and are customary for transactions of this type, and all
corporate and other proceedings, and all documents, instruments and
other legal matters in connection with the transactions contemplated
by this Agreement, shall be reasonably satisfactory in form and
substance to the Company and its counsel.
(e) The Company shall have received, in form and substance
reasonably satisfactory to the Company, an opinion, addressed to it
and dated the Closing Date of Xxxxx, Xxxxx & Xxxxx, counsel for the
Company and the Bank, to the effect that there is "substantial
authority" within the meaning of Treasury Regulation 1.6662-4(d) to
support the conclusion that consummation of the transactions
contemplated by Section 2.1 hereof will not result in a change of
ownership of the Company for purposes of Section 382 of the Code.
ARTICLE V
COVENANTS
SECTION 5.1 SHAREHOLDER MEETING; EXEMPTION. The Company agrees to
use its best efforts to obtain from the NASD an exemption from the
requirement, pursuant to Section 6(i)(1)(d) of Part III to Schedule D of
the Bylaws of the NASD, to obtain shareholder approval of the issuance of
the Warrants included in the Units to be sold pursuant to this Agreement
and, in the event it obtains such exemption, to mail to all shareholders of
the Company the notice referred to in Section 6(i)(1)(e) of Part III to
Schedule D of the Bylaws of the NASD (collectively, the "NASD Exemption").
In the event that the Company does not obtain the NASD Exemption by October
15, 1995, the Company shall (i) take all action necessary (including
without limitation the preparation, filing and dissemination of requisite
proxy materials) to have its shareholders consider the issuance of the
Warrants included in the Units to be sold pursuant to this Agreement at a
special meeting of shareholders which is called for the purpose as promptly
as practicable after the date hereof, (ii) recommend that its shareholders
approve the issuance of the Warrants included in the Units to be sold
pursuant to this Agreement and use its best efforts to obtain (including
without limitation retaining a proxy solicitor if requested by any
Purchaser), as promptly as practicable, such approval and (iii) cooperate
and consult with the Purchasers with respect to each of the foregoing
matters, provided that the Company may cease taking any of the actions set
forth in the foregoing clauses if it obtains the NASD Exemption.
SECTION 5.2 APPLICATIONS. In the event that any approval, consent
or non-objection need be obtained by the Company, the Bank or any Purchaser
from, or a notice or other filing need be filed by the Company, the Bank or
any Purchaser with, the OTS, the FDIC or any other governmental authority
(including without limitation the Federal Trade Commission and the
Assistant Attorney General in charge of the Antitrust Division of the U.S.
Department of Justice pursuant to the HSR) in connection with (i) the
execution, delivery and performance of this Agreement or any Related
Agreement by the Company, the Bank or any Purchaser or (ii) the Company's
issuance of Common Stock upon exercise of Warrants or pursuant to Section
6(b) of the Senior Notes or Section 2(b) of the Certificate of
Designations, such party shall take all actions necessary to obtain any
such approval, consent or non-objection or file such notice or other filing
as promptly as practicable, and the other parties hereto agree to cooperate
with such party in obtaining or filing the same. Any party that is
required to file any notice, application or other document pursuant to the
preceding sentence shall provide copies thereof (excluding any confidential
information) for review to each Purchaser who is a Material Securityholder
in the case of the Company, and to the Company in the case of a Purchaser,
not less than three Business Days prior to the making of such filing and
shall keep such other party or parties hereto, as applicable, apprised of
the status of such filing and the consideration thereof by the relevant
governmental authority.
SECTION 5.3 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Closing, the Company shall permit each Purchaser and
its representatives reasonable access to its properties and personnel, and
shall disclose and make available to each Purchaser all books, papers and
records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of the Company and its Subsidiaries, including,
but not limited to, all books of account (including the general ledger),
tax records, minute books of meetings of boards of directors (and any
committees thereof) and shareholders, organizational documents, bylaws,
material contracts and agreements, filings with any regulatory authority,
accountants' work papers, litigation files, loan files, plans affecting
employees, and any other business activities or prospects in which a
Purchaser may have a reasonable interest, provided that such access shall
be reasonably related to the transactions contemplated hereby and not
unduly interfere with normal operations, and provided further that in the
event that any of the foregoing are in the control of any third party, the
Company shall use its best efforts to cause such third party to provide
access to such materials to each Purchaser who shall request the same. In
the event that the Company is prohibited by law from providing any of the
access referred to in the preceding sentence to a Purchaser, it shall use
its best efforts to obtain promptly waivers thereof so as to permit such
access. The Company shall make the directors, officers, employees and
agents and authorized representatives (including counsel and independent
public accountants) of the Company and its Subsidiaries available to confer
with a Purchaser and its representatives, provided that such access shall
be reasonably related to the transactions contemplated hereby and not
unduly interfere with normal operations.
(b) All information furnished to a Purchaser by the Company
previously in connection with the transactions contemplated by this
Agreement or pursuant hereto shall be treated as the sole property of the
Company and each Purchaser covenants, severally and not jointly and as to
itself only, that it shall use its best efforts to keep confidential all
such information and shall not directly or indirectly use such information
for any competitive or other commercial purposes. The obligation to keep
such information confidential shall continue for five years from the date
hereof but shall not apply to (i) any information which (x) a Purchaser can
establish by convincing evidence was already in its possession prior to the
disclosure thereof by the Company; (y) was then generally known to the
public; or (z) became known to the public through no fault of a Purchaser;
or (ii) disclosures pursuant to a legal requirement or in accordance with
an order of a court of competent jurisdiction, provided that a Purchaser
shall use its best efforts to give the Company at least ten Business Days
prior notice thereof and shall limit such disclosure to the minimum amount
required by such legal requirement or court order.
SECTION 5.4 PRESS RELEASES. The Company and each Purchaser who
will be a Material Securityholder upon consummation of the transactions
specified in Section 2.1 hereof shall agree with each other as to the form
and substance of any press release related to this Agreement or the
transactions contemplated hereby, and consult with each other as to the
form and substance of other public disclosures which may relate to the
transactions contemplated by this Agreement, provided, however, that
nothing contained herein shall prohibit any party, following notification
to such other parties, from making any disclosure which it determines in
good faith is required by law or regulation. For purposes of the
foregoing, the Company may treat a law firm designated from time to time by
the Purchasers who are Material Securityholders as the authorized
representative of each of the Purchasers.
SECTION 5.5 NO SOLICITATION. Prior to the Closing, neither the
Company nor the Bank, nor any of the directors, officers, employees,
representatives or agents of the Company or other persons controlled by the
Company, shall solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, lease or purchase of all or a
substantial portion of the assets of, or any equity interest in, the
Company or the Bank, or any business combination with the Company or the
Bank, other than as contemplated by this Agreement. The Company will
immediately notify the Purchasers orally and in writing if any such
inquiries or proposals are received by, or such information is requested
from, or any such negotiations or discussions are sought to be initiated
with, the Company or the Bank.
SECTION 5.6 USE OF PROCEEDS. On the Closing Date the Company shall
apply the net proceeds from the sale of Units pursuant to this Agreement as
follows:
(i) not less than $17,500,000 of such net proceeds shall be
contributed by the Company to the Bank as additional paid-in capital
on the Capital Stock of the Bank held by the Company; and
(ii) an amount of such net proceeds equal to the first six full
semi-annual interest payments which become due on the Senior Notes
shall be used to establish and maintain the Interest Reserve Account
required by Section 1(b) of the Senior Notes and the Security
Agreement.
SECTION 5.7 CURRENT INFORMATION.
(a) Between the date hereof and the Closing, the Company shall
provide to each Purchaser (i) promptly following the filing thereof, copies
of each report filed by the Company under the Exchange Act and each regular
and periodic report filed by the Company and the Bank with the OTS, (ii)
concurrently with the mailing thereof, copies of each communication sent by
the Company to its shareholders generally and (iii) within 15 days after
the end of the month of November 1995 (and in any event prior to the
Closing), a consolidated statement of operations of the Company for each of
October and November 1995 and for the period beginning at the commencement
of the fiscal year and ending at the end of each such monthly period, and a
consolidated balance sheet of the Company as of November 30, 1995, in each
case prepared in accordance with generally accepted accounting principles.
(b) Subsequent to the Closing, the Company shall furnish to each
Purchaser who holds Series A Preferred Stock and/or Warrants, promptly upon
their becoming available, (i) each communication sent by the Company to its
shareholders generally, (ii) each report filed by the Company with the
Commission pursuant to the Exchange Act and (iii) each registration
statement and prospectus filed by the Company with the Commission under the
Securities Act, provided that the Company shall not be required to furnish
any such Purchaser any of the same to the extent that it already has done
so pursuant to Section 4(h)(iv) of the Senior Notes or the Registration
Rights Agreement.
SECTION 5.8 LISTING OF ADDITIONAL SHARES OF COMMON STOCK. The
Company shall take all action which is necessary to ensure that Common
Stock issuable upon exercise of the Warrants and Common Stock which may be
issued pursuant to Section 6(b) of the Senior Notes or Section 2(b) of the
Certificate of Designations will be eligible upon issuance for quotation on
the Nasdaq Stock Market's National Market or any exchange on which the
Common Stock is then traded.
SECTION 5.9 RIGHTS OF FIRST REFUSAL. (a) Subject to subsection
(g), for so long as a Purchaser is a holder of a Unit (an "Eligible
Purchaser"), the Company agrees not to issue any of its Capital Securities
or to permit the Bank to issue any of its Capital Securities (such Capital
Securities of the Company and the Bank hereinafter deemed to be jointly
covered by the term "Capital Securities") to any Person or Persons, other
than in the case of Capital Securities of the Bank to the Company (a "Third
Party Purchaser"), without first offering or causing the Bank to offer, as
applicable, to such Eligible Purchaser the opportunity to purchase all or
part of such Capital Securities being issued at the same purchase price and
on the same terms as are proposed to be offered to a Third Party Purchaser.
For this purpose, the Company shall deliver a written notice, or cause the
Bank to deliver a written notice, as applicable (in each case a "Notice"),
to each Eligible Purchaser of any proposed issuance of Capital Securities
which shall contain all of the material terms of the proposed issuance,
including, without limitation, the purchase price and total amount of
Capital Securities proposed to be issued, which terms, including without
limitation the purchase price and any conversion price or rate of such
Capital Securities, may to the extent necessary be expressed in the form of
good faith estimates by the Board of Directors of the Company.
(b) Upon receipt of the Notice, each Eligible Purchaser will have the
right to subscribe for all or part of the Capital Securities on the same
terms set forth in the Notice, by delivery of written notice to the Company
or the Bank, as applicable ("Acceptance Notice"), in accordance with the
instructions set forth in the Notice, within 20 days from the date of its
receipt of the Notice (the "Offer Period"). The Acceptance Notice shall
specify the amount (not exceeding all) of the Capital Securities being
offered with respect to which the Eligible Purchaser wishes to exercise its
subscription rights.
(c) An Acceptance Notice, once given by an Eligible Purchaser in
accordance with subsection (b), shall become irrevocable at the end of the
Offer Period unless it is withdrawn prior to the expiration of the Offer
Period (any such Acceptance Notice which so becomes irrevocable being
called an "Irrevocable Acceptance" and the Eligible Purchaser giving such
notice being an "Accepting Eligible Purchaser").
(d) (i) In the event that any Eligible Purchaser fails to have
delivered an Irrevocable Acceptance with respect to any Notice on or prior
to the last day of the Offer Period with respect to such Notice, such
Eligible Purchaser will have no further right to subscribe for the Capital
Securities proposed to be issued in such Notice during a Free Sale Period
commencing on the date immediately following the end of the Offer Period
with respect to such Notice.
(ii) In the event that no Eligible Purchasers shall have
delivered an Irrevocable Acceptance with respect to a Notice on or
prior to the last day of the Offer Period with respect to such Notice,
the Company or the Bank, as applicable, will be entitled to a Free
Sale Period with respect to the Capital Securities proposed to be
issued in such Notice commencing on the date immediately following the
end of the Offer Period with respect to such notice.
(iii) In the event that Accepting Eligible Purchasers deliver
Irrevocable Acceptances relating to an amount of Capital Securities in
the aggregate in excess of the amount of Capital Securities proposed
to be issued pursuant to the Notice, the amount of Capital Securities
which each Accepting Eligible Purchaser shall be obligated to purchase
will be such Eligible Purchaser's Purchaser Percentage of the Capital
Securities proposed to be issued pursuant to such Notice (provided
that, if one or more Accepting Eligible Purchasers deliver Irrevocable
Acceptances to subscribe for less than such Eligible Purchaser's
Purchaser Percentage, then the Capital Securities that would have been
allocated to such Eligible Purchaser or Purchasers pursuant to this
subsection (d)(iii) shall be allocated to the other Accepting Eligible
Purchasers in accordance with their respective Purchaser's
Percentages, except that no Accepting Eligible Purchaser shall be
required to purchase any Capital Securities in an amount greater than
the amount elected to be subscribed for by such Accepting Eligible
Purchaser pursuant to its Irrevocable Acceptance).
(iv) In the event that Accepting Eligible Purchasers exercise
their option to purchase, pursuant to the foregoing provisions of this
Section 5.9, in the aggregate, all (or, if the Company or the Bank, as
applicable, shall so elect, more than 90%) of the Capital Securities
proposed to be issued in the Notice, all such Eligible Purchasers and
the Company or the Bank, as applicable, shall complete the purchase of
the Capital Securities on the terms set forth in the Notice within 30
days of the expiration of the Offer Period, or within such longer
period (not to exceed six months from the date of the Accepting
Eligible Purchaser's Irrevocable Acceptance) as may be required for
such Accepting Eligible Purchaser to obtain any applicable regulatory
approvals that such Accepting Eligible Purchaser is making a good
faith effort to obtain. If an Accepting Eligible Purchaser does not
complete the purchase of Capital Securities as set forth above, other
than as a result of the negligence, bad faith or wilful misconduct of
the Company or the Bank or any action or omission made by the Company
or the Bank that would prevent such an Accepting Eligible Purchaser
from completing its purchase, the Company or the Bank, as applicable,
will be entitled to a Free Sale Period commencing on the 31st day
following the expiration of the Offer Period, subject to extension as
set forth in the immediately preceding sentence.
(v) Other than as set forth in subsection (vi) below (and
subject to subsection (iv) above), in the event that Accepting
Eligible Purchasers shall have delivered Irrevocable Acceptances for
all or less than all of the Capital Securities set forth in the
Notice, each Accepting Eligible Purchaser shall purchase, within the
applicable period set forth in subsection (iv) above or subsection
(vi) below, as the case may be, the amount of Capital Securities set
forth in its Irrevocable Acceptance.
(vi) In the event that Accepting Eligible Purchasers elect to
subscribe for, in the aggregate, less than all (or if the Company or
the Bank, as applicable, shall so elect 90%) of the Capital Securities
proposed to be offered pursuant to the Notice, the Company or the
Bank, as applicable, shall have a Free Sale Period commencing on the
date immediately following the end of the Offer Period with respect to
the Capital Securities offered pursuant to such Notice as to which
Accepting Eligible Purchasers do not elect to subscribe and the
Company agrees to sell, and to cause the Bank to sell, as applicable,
and the Accepting Eligible Purchasers shall be obligated to purchase,
the Capital Securities for which they subscribed substantially
simultaneously (or, with respect to any Accepting Eligible Purchaser,
within such longer period (not to exceed four months from the relevant
purchase by the Third Party Purchaser) as may be required for such
Accepting Eligible Purchaser to obtain any applicable regulatory
approvals that such Accepting Eligible Purchaser is making a good
faith effort to obtain) with the purchase by the Third Party Purchaser
of the balance of the Capital Securities proposed to be offered
pursuant to such Notice, it being understood that if such balance of
Capital Securities is not so purchased on the terms set forth in the
Notice, no Eligible Purchaser will be required or entitled to purchase
such Capital Securities as to which its Irrevocable Acceptance
applied.
(e) If at any time during a Free Sale Period the terms of a proposed
issuance shall have changed in any material respect from the terms set
forth in the Notice, the Company or the Bank, as applicable, shall give
notice (the "Alteration Notice") to the Eligible Purchasers describing the
changes in terms. Upon receipt of any Alteration Notice, each Eligible
Purchaser will have the right to subscribe for all or part of the Capital
Securities on the terms set forth in the Alteration Notice, by delivery of
an Acceptance Notice to the Company or the Bank, as applicable, in
accordance with the instructions set forth in the Alteration Notice, within
20 days from the date of receipt of the Alteration Notice (the "Altered
Offer Period"), stating the amount (not exceeding all) of Capital
Securities proposed to be offered as to which such Eligible Purchaser
wishes to exercise its right to subscribe. In any such case, the
procedures set forth in subsection (d), to the extent applicable, shall be
followed.
(f) The failure of an Eligible Purchaser to respond to any particular
Notice or Alteration Notice will not constitute a waiver of such Eligible
Purchaser's rights with respect to any proposed issuance of Capital
Securities pursuant to a subsequent Notice or Alteration Notice.
(g) Subsections (a)-(f) shall not apply to the issuance of Capital
Securities pursuant to or in connection with (i) the purchase and sale of
the Securities contemplated by this Agreement, (ii) a reorganization,
merger or consolidation of the Company or the Bank or a sale, disposition
or other transfer of all or substantially all of the assets of the Company
or the Bank to any Person or any Person to the Company or the Bank pursuant
to one transaction or series of related transactions, (iii) any conversion
or exchange of any Capital Securities (including without limitation the
Warrants) in accordance with the terms of such securities or of the
instruments relating to or governing the issuance of such Capital
Securities, (iv) any employee benefit plans, other than the Employee Stock
Ownership Plan or any similar plan of the Company, (v) any stock dividends,
or pro rata (as to any class) split-ups, combinations or exchanges of or
similar transactions involving Capital Securities, (vi) the issuance of
Common Stock pursuant to Section 6(b) of the Senior Notes or Section 2(b)
of the Certificate of Designations, (vii) any bona fide public offering of
Capital Securities which is registered under the Securities Act and
underwritten by an underwriting firm or firms of national reputation or
(viii) any issuance of Common Stock, Options (as defined in the Warrants)
or Convertible Securities (as defined in the Warrants) which would result
in an adjustment in accordance with the terms of the Warrants to the number
of shares of Common Stock issuable upon exercise of the Warrants or the
exercise price of a share of Common Stock which may be acquired upon
exercise thereof and (ix) any issuance of Common Stock, Options (as so
defined) or Convertible Securities (as so defined) to the holders of Common
Stock in their capacities as such which would not result in an adjustment
in accordance with the terms of the Warrants to the number of shares of
Common Stock issuable upon exercise of the Warrants or the exercise price
of a share of Common Stock which may be acquired upon exercise thereof,
provided that the Company concurrently therewith grants to each Eligible
Purchaser as of the record date for such transaction the rights, warrants
or options to which each Eligible Purchaser would have been entitled if, on
the record date used to determine the stockholders entitled to the rights,
warrants or options being granted by the Company, the Eligible Purchaser
was the holder of record of the number of whole shares of Common Stock then
issuable upon exercise of the Warrants held by such Eligible Purchaser.
(h) Notwithstanding anything to the contrary contained in this
Section 5.9, except as permitted under subsection (g) above, neither
Eligible Purchasers nor any Third Party Purchaser will be permitted to
purchase an amount of Capital Securities of the Bank which, when combined
with any other Capital Securities of the Bank owned by such Purchasers,
would result in the Company and the Bank not being permitted to file a
consolidated federal income tax return in the opinion of independent public
accountants or counsel for the Company, in form and substance reasonably
satisfactory to each Accepting Eligible Purchaser.
(i) For the purposes of this Section 5.9,
"Purchaser Percentage" means, at any time of determination
with respect to an Eligible Purchaser, the aggregate number of
shares of Common Stock (including shares of Common Stock which
may be acquired upon exercise of outstanding Warrants, whether or
not then exercisable) then held by such Eligible Purchaser
divided by the aggregate number of shares of Common Stock
(including shares of Common Stock which may be acquired upon
exercise of outstanding Warrants, whether or not then
exercisable) outstanding at such time, expressed as a percentage,
with fractional percentages of .5 or more and less than .5
rounded up and down, respectively.
"Free Sale Period" means a period of three months (or such
longer period of time, not in excess of one year, required to
obtain any regulatory approvals, consents or other actions
necessary to consummate a sale to a Third Party Purchaser which
has agreed in writing (subject to such regulatory approvals,
consents or actions and other reasonable closing conditions) to
purchase Capital Securities on or prior to the end of such three-
month period), during which the Company or the Bank, as
applicable, shall be permitted to issue the Capital Securities
which were proposed to be issued pursuant to a Notice or
Alteration Notice to a Third Party Purchaser on terms no more
favorable to the Third Party Purchaser than those set forth in
such Notice or Alteration Notice, as the case may be.
SECTION 5.10 RULE 144 AND RULE 144A REPORTING.
With a view to making available to holders of Securities the benefits
of certain rules and regulations of the Commission which may permit the
sale of the Securities to the public without registration, the Company
agrees at all times to:
(a) make and keep public information available, as those terms
are understood and defined in Rules 144 and 144A under the Securities
Act (or any successors thereto); and
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under
the Securities Act and the Exchange Act.
SECTION 5.11 PURCHASES OF SECURITIES.
The Company will not, and will not permit any of its Subsidiaries to,
purchase any:
(i) Senior Notes except in accordance with Section 4(m) of the
Senior Notes;
(ii) Series A Preferred Stock except pursuant to a repurchase
offer made to each holder of shares of Series A Preferred Stock pro
rata in accordance with the aggregate number of shares of Series A
Preferred Stock held by such holder; and
(iii) Warrants except pursuant to a repurchase offer made to
each holder of a Warrant pro rata in accordance with the aggregate
number of shares of Common Stock which may be acquired upon exercise
of the Warrants held by such holder.
SECTION 5.12 STOCK OPTIONS. Between the date hereof and the
Closing, the Company shall use its best efforts to cancel all unexercised
stock options issued to Management pursuant to the Stock Option Plan prior
to the Closing and to grant to members of Management substitute options
under the Stock Option Plan to purchase an aggregate of 360,000 shares of
Common Stock, which options shall (i) have a per share exercise price equal
to the greater of the fair market value of a share of Common Stock on the
date of grant, as determined pursuant to the Stock Option Plan, and $3.875,
(ii) become vested and exercisable in three equal annual installments
commencing on the first anniversary of the date of grant and (iii)
terminate seriatim in three equal annual installments commencing on the
fifth anniversary of the date of grant. The Purchasers acknowledge that an
aggregate of an additional 240,000 shares of Common Stock may be made
subject to options to be granted to other employees of the Company or the
Bank in connection with a program to reduce the amounts of annual cash
compensation payable by the Company and the Bank.
SECTION 5.13 EXCHANGE OF SECURITIES. The Company will, at its
expense, promptly upon surrender of (i) any Senior Note, (ii) any
certificate evidencing Series A Preferred Stock and (iii) any Warrant, at
the office of the Company referred to in, or designated pursuant to,
Section 6.4, respectively execute and deliver to the Purchaser (i) a new
Senior Note or Senior Notes in aggregate principal amounts specified by the
Purchaser (subject to the minimum denomination of the Senior Notes) for an
aggregate principal amount equal to the Senior Note or Senior Notes
surrendered, (ii) a new certificate or certificates in denominations
specified by the Purchaser for an aggregate number of shares of Series A
Preferred Stock equal to the number of shares of such stock represented by
the certificate or certificates surrendered and (iii) a new Warrant or
Warrants covering a number of shares of Common Stock specified by the
Purchaser for an aggregate number of shares of Common Stock equal to the
shares of Common Stock covered by the Warrant or Warrants surrendered.
SECTION 5.14 ACQUISITION OF COMMON STOCK. Until the Warrants become
exercisable in accordance with their terms, each Purchaser who is a
Material Securityholder agrees to give the Company not less than 10
Business Days' notice of any proposed purchase or other acquisition of
"stock" of the Company (as defined under Section 382 of the Code and the
regulations thereunder), including any acquisition of "stock" pursuant to
Section 5.9 hereof but excluding shares of Common Stock which may be
acquired pursuant to Section 6(b) of the Senior Notes and/or Section 2(b)
of the Certificate of Designations, accompanied by information related to
such proposed transaction which is reasonably sufficient to enable the
Company to make the determinations referred to herein, so that the Company
may determine in its reasonable judgment whether such purchase or other
acquisition (i) would result in such Material Securityholder becoming a "5%
shareholder" of the Company, as that term is defined in Section 382(k)(7)
of the Code and, if so, (ii) whether such purchase or other acquisition
could reasonably be expected to result in an "ownership change" under
Section 382 of the Code and the regulations promulgated thereunder (taking
into account both the proposed transfer and any other transactions of which
the Company is aware) and, if so, (iii) whether such "ownership change"
would result in a material loss of tax benefits to the Company. In the
event the Company makes such determinations and provides the Purchaser with
written notice of the same within 10 Business Days of its receipt of the
above-referenced notice from the Purchaser, or in the event the Company
makes a reasonable written request to such Purchaser for further
information concerning such proposed transaction within the same 10-
Business Day period and makes the foregoing determinations within 10
Business Days after receipt of such further information, the Purchaser
agrees not to effect any such purchase or other acquisition as the Company
may request in order to avoid such an "ownership change."
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 SURVIVAL OF PROVISIONS. The representations,
warranties and covenants of the Company and the Purchasers made herein and
each of the provisions of Articles V and VI shall remain operative and in
full force and effect regardless of (i) any investigation made by or on
behalf of any Purchaser or the Company, as the case may be, (ii) acceptance
of any of the Securities and payment by the Purchasers therefor and
retirement thereof, (iii) the transfer of any Securities or interest
therein by any Purchaser, provided that no transferee may claim the benefit
of any such representation or warranty, or (iv) any termination of this
Agreement.
SECTION 6.2 TERMINATION. This Agreement may be terminated (as
between the party electing so to terminate it and the counterparty to which
termination is directed) by giving written notice of termination to the
applicable counterparty at any time prior to the Closing:
(a) By the Company if any of the conditions specified in
Sections 4.1 and 4.3 of this Agreement has not been met or waived by
it pursuant to the terms of this Agreement by 3:00 p.m., Pacific Time
on December 15, 1995; or
(b) By any Purchaser if any of the conditions specified in
Sections 4.1 and 4.2 of this Agreement has not been met or waived by
such Purchaser pursuant to the terms of this Agreement by 3:00 p.m.,
Pacific Time, on December 15, 1995.
SECTION 6.3 WAIVER; AMENDMENTS.
(a) No failure or delay on the part of the Company or any Purchaser
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. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or any Purchaser at law or in equity. No waiver
of or consent to any departure by the Company or any Purchaser from any
provision of this Agreement shall be effective unless signed in writing by
the party entitled to the benefit thereof. Except as otherwise provided
herein, no amendment, modification or termination of any provision of this
Agreement shall be effective unless signed in writing by or on behalf of
the Company and each Purchaser. Any amendment, supplement or modification
of or to any of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure from the terms of any provision
of this Agreement, shall be effective 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 any
party hereto in any case shall entitle another party hereto to any other or
further notice or demand in similar or other circumstances.
(b) The Company shall not, directly or indirectly, pay or cause to be
paid any remuneration, whether by way of dividends, redemption premiums,
fees or otherwise, to any holder of any Securities as consideration for or
as an inducement to any consent, waiver or amendment of any of the terms
and provisions of this Agreement unless such remuneration is paid to all
Purchasers; provided, however, that this Section 6.3(b) does not restrict
the Company's ability to deal individually with any Purchaser or any
subsequent holder with respect to any settlement of a dispute or in the
ordinary course of business.
SECTION 6.4 COMMUNICATIONS. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing
by hand-delivery, registered first-class mail, telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to any Purchaser, initially at the address set forth
below its name on Exhibit A hereto, and thereafter at such other
address, notice of which is given in accordance with this Section 6.4;
and
(ii) if to the Company, initially at 0000 Xxxxxxxxx Xxxxxx, Xx
Xxxxxxx, Xxxxxxxxxx 00000, Attention: President; and thereafter at
such other address notice of which is given in accordance with this
Section 6.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five
Business Days after being sent by certified mail, return receipt requested,
if mailed; when answered back, if telexed; when receipt is acknowledged, if
telecopied; and on the next Business Day if timely delivered to an air
courier guaranteeing overnight delivery.
SECTION 6.5 COSTS, EXPENSES AND TAXES. The Company agrees to pay
all reasonable costs and expenses incurred by it in connection with the
negotiation, preparation, typing, reproduction, execution, delivery and
performance of this Agreement and the Related Agreements and any amendment
or supplement or modification hereof or thereof (except to the extent
otherwise provided in the Registration Rights Agreement), including without
limitation, attorneys fees and expenses and all reasonable costs and
expenses incurred by it in connection with the Company's administration of
this Agreement and any Related Agreement. The Company also agrees to pay
up to $150,000 of the expenses of the Purchasers incurred in connection
with the transactions provided for herein, including reasonable fees and
expenses payable to Elias, Matz, Xxxxxxx & Xxxxxxx L.L.P. in connection
with the negotiation, preparation, typing, reproduction, execution and
delivery of this Agreement and the Related Agreements. The Company shall
pay all reasonable costs and expenses (including, without limitation,
attorneys' fees and expenses), if any, incurred by the Purchasers in
connection with any waiver, amendment or modification of any provision of
this Agreement or any Related Agreement with respect to an obligation of,
or requested by, the Company. In addition, the Company shall pay any and
all stamp, transfer and other similar taxes payable in connection with the
execution and delivery of this Agreement or the original issuance of any
Securities, and shall save and hold each Purchaser harmless from and
against any and all liabilities with respect to or resulting from any delay
in paying, or omission to pay, such taxes.
SECTION 6.6 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
SECTION 6.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing, the
rights and obligations of any Purchaser under this Agreement may not be
assigned to any other Person except with the prior written consent of the
Company, and after the Closing the rights and obligations of any Purchaser
may be assigned by such Purchaser to any Person purchasing Securities from
the Purchaser contemporaneously with such assignment (provided the rights
so assigned shall apply to the Securities so purchased), subject to the
provisions of Section 3.2(b), provided that the rights of a Purchaser
pursuant to Section 5.9 hereof may not be assigned to any Person other than
an Affiliate of such Purchaser. The rights and obligations of the Company
under this Agreement may not be assigned by the Company without the consent
of each Purchaser. Except as expressly provided in this Agreement, this
Agreement shall not be construed so as to confer any right or benefit upon
any Person other than the parties to this Agreement, and their respective
successors and permitted assigns. This Agreement shall be binding upon the
Company and each Purchaser, and their respective successors and permitted
assigns.
SECTION 6.8 GOVERNING LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of California, and for all
purposes shall be construed in accordance with the laws of said state,
without regard to principles of conflict of laws.
SECTION 6.9 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability only without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 6.10 HEADINGS AND GENDER. The Article and Section headings
and Table of Contents used or contained in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement. Use of a particular gender herein shall be considered to
represent the masculine, feminine or neuter gender whenever appropriate.
SECTION 6.11 INTEGRATION. This Agreement (including documents
delivered pursuant hereto) and the Related Agreements constitute the entire
agreement among the parties with respect to the subject matter thereof and
there are no promises or undertakings with respect thereto not expressly
set forth or referred to herein or therein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
HAWTHORNE FINANCIAL CORPORATION
By: /S/ XXXXX X. XXXXX
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: President and Chief
Executive Officer
VALUE PARTNERS, LTD
By: /S/ XXXXXXX X. XXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Partner-in-Charge
XXX X. XXXX MANAGEMENT TRUST
By: /S/ XXX X. XXXX*
-------------------------------------
Name: Xxx X. Xxxx
Title: Trustee
THE BASS MANAGEMENT TRUST
By: /S/ XXXXX X. XXXX
-------------------------------------
Name: Xxxxx X. Xxxx
Title: Trustee
/S/ XX. XXX X. XXXX*
-------------------------------------
Xx. Xxx X. Xxxx
_____
*By Xxxxxxx X. Xxxxxxx, Xx., Attorney-in-fact.
FORT PITT FUND, L.P.
By: FORT PITT CAPITAL MANAGEMENT
CORPORATION
By: /S/ XXXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive
Officer
PROSPER VALUE FUND, L.P.
By: PROSPER CAPITAL MANAGEMENT,
L.P., its General Partner
By: CHAPARRAL CAPITAL
CORPORATION, its General Partner
By: /S/ XXXXX X. XXXX
----------------------------------
Name: Xxxxx X. Xxxx
Title: President
XXXXXXX PARTNERS
By: HALO CAPITAL PARTNERS, L.P., its
General Partner
By: /S/ XXXXXXX XXXXX
-------------------------------------
Name: Xxxxxxx Xxxxx
Title: General Partner
/S/ XXXXX X. XXXXX
-------------------------------------
Xx. Xxxxx X. Xxxxx
/S/ MR. XXXXX XXXXXX
-------------------------------------
Mr. Xxxxx Xxxxxx
/S/ XX. XXXXXX XXXXXXX
-------------------------------------
Xx. Xxxxxx Xxxxxxx
/S/ DR. XXXX XXXXXXX
-------------------------------------
Dr. Xxxx Xxxxxxx
/S/ XX. XXXXXXX X. XXXX
-------------------------------------
Xx. Xxxxxxx X. Xxxx
/S/ W. XXXXXXX XXXXXXX
-------------------------------------
W. Xxxxxxx Xxxxxxx
/S/ XXXXXXX X. XXXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxxx
/S/ XXXX X. XXXXXXXX
-------------------------------------
Xxxx X. Xxxxxxxx
/S/ XXXXXXX X. XXXXXX
-------------------------------------
Xxxxxxx X. Xxxxxx
EXHIBIT A
Name and Address of
Purchaser No. of Units Dollar Amount
------------------- ------------ --------------
Value Partners, LTD 17 Units $8,500,000
0000 Xxxx Xxxxxx
0000 Xxxx
Xxxxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxxx
W (000) 000-0000
FAX (000) 000-0000
Xxx X. Xxxx 6 Units $3,000,000
000 Xxxx Xxxxxx (00xx
Xxxxx)
Xxxx Xxxxx, XX 00000
Attn: Mr. Xxxxx XxXxxxx
W (000) 000-0000
FAX (000) 000-0000
Xxx X. Xxxx Management 6 Units $3,000,000
Trust
000 Xxxx Xxxxxx (00xx
Xxxxx)
Xxxx Xxxxx, XX 00000
Attn: Mr. Xxxxx XxXxxxx
W (000) 000-0000
FAX (000) 000-0000
The Bass Management Trust 5 Units $2,500,000
000 Xxxx Xxxxxx (00xx
Xxxxx)
Xxxx Xxxxx, XX 00000
Attn: Mr. Xxxxx XxXxxxx
W (000) 000-0000
FAX (000) 000-0000
Fort Pitt Fund, L.P. 7 Xxxxx x0,000,000
Xxxxxxxxxx Xxxxx
Xxxxx 000
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xx. Xxxxx X.
Xxxxxxxxx
W (000) 000-0000
FAX (000) 000-0000
Name and Address of
Purchaser No. of Units Dollar Amount
------------------- ------------ --------------
Xx. Xxxxx X. Xxxxx 2.4 Units $1,200,000
Hawthorne Financial
Corporation
0000 Xxxxxxxxx Xxxxxx
0xx Xxxxx
Xx Xxxxxxx, XX 00000
W (000) 000-0000
FAX (000) 000-0000
Mr. Xxxxx Xxxxxx .2 Units $ 100,000
Hawthorne Financial
Corporation
0000 Xxxxxxxxx Xxxxxx
0xx Xxxxx
Xx Xxxxxxx, XX 00000
W (000) 000-0000
FAX (000) 000-0000
Xx. Xxxxxx Xxxxxxx .4 Units $ 200,000
Hawthorne Financial
Corporation
0000 Xxxxxxxxx Xxxxxx
0xx Xxxxx
Xx Xxxxxxx, XX 00000
W (000) 000-0000
FAX (000) 000-0000
Prosper Value Fund, L.P. 2 Units $1,000,000
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn: Mr. Xxxxx Xxxx
W (000) 000-0000
FAX (000) 000-0000
Xxxxxxx Partners 1 Unit $ 500,000
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxx Xxxxx
W (000) 000-0000
FAX (000) 000-0000
Dr. Xxxx Xxxxxxx 3 Units $ 1,500,000
Christian Brothers
University
000 Xxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
W (000) 000-0000
FAX (000) 000-0000
Name and Address of
Purchaser No. of Units Dollar Amount
------------------- ------------ --------------
Xx. Xxxxxxx X. Xxxx 1 Unit $ 500,000
Elias, Matz, Xxxxxxx &
Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
W (000) 000-0000
FAX (000) 000-0000
W. Xxxxxxx Xxxxxxx .1 Units $100,000
Elias, Matz, Xxxxxxx &
Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
W (000) 000-0000
FAX (000) 000-0000
Xxxxxxx X. Xxxxxxx .2 Units $200,000
Elias, Matz, Xxxxxxx &
Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
W (000) 000-0000
FAX (000) 000-0000
Xxxx X. Xxxxxxxx .1 Units $100,000
Elias, Matz, Xxxxxxx &
Xxxxxxx L.L.P.
000 00xx Xxxxxx, X.X.
00xx Xxxxx
Xxxxxxxxxx, X.X. 00000
W (000) 000-0000
FAX (000) 000-0000
Xxxxxxx X. Xxxxxx .1 Units $100,000
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
W (000) 000-0000
FAX (000) 000-0000
