PURCHASE AGREEMENT
Dated as of June 28, 2002
between
FIRSTPLUS FINANCIAL GROUP, INC.
and
CL CAPITAL LENDING, LLC
TABLE OF CONTENTS
Page
----
1. Sale of LLC Interests; Conditions.............................................................................1
A. Sale of the LLC Interests............................................................................1
B. Purchase Price.......................................................................................1
2. The Closing...................................................................................................1
3. Representations and Warranties of Seller......................................................................2
A. Organization and Standing............................................................................2
B. Capitalization.......................................................................................2
C. Subsidiaries, Etc....................................................................................3
D. Authority for Agreement..............................................................................3
E. Governmental Consents................................................................................3
F. Litigation...........................................................................................3
G. Taxes................................................................................................4
H. Property and Assets..................................................................................4
I. Intellectual Property................................................................................4
J. Insurance............................................................................................4
K. Material Contracts and Obligations...................................................................4
L. Seller Projections...................................................................................5
M. Absence of Changes...................................................................................5
N. Employees............................................................................................5
O. ERISA................................................................................................5
P. Books and Records....................................................................................5
Q. Disclosures..........................................................................................5
4. Representations and Warranties of Purchaser...................................................................6
A. Organization and Standing............................................................................6
B. Capitalization.......................................................................................6
C. Subsidiaries, Etc....................................................................................6
D. Issuance of Purchaser Shares.........................................................................6
E. Authority for Agreement..............................................................................6
F. Governmental Consents................................................................................7
G. Litigation...........................................................................................7
H. Taxes................................................................................................7
I. Property and Assets..................................................................................8
J. Intellectual Property................................................................................8
K. Insurance............................................................................................8
L. Material Contracts and Obligations...................................................................8
M. Purchaser Financial Statements.......................................................................9
N. Absence of Changes...................................................................................9
O. Employees............................................................................................9
P. ERISA................................................................................................9
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Q. Books and Records....................................................................................9
R. Disclosures..........................................................................................9
5. Investment Representations and Warranties.....................................................................9
A. Representations and Warranties of Purchaser.........................................................10
B. Representations and Warranties of Seller............................................................11
C. Registration Rights of Seller.......................................................................11
6. Conditions to the Obligations of Purchaser...................................................................15
A. Accuracy of Representations and Warranties..........................................................16
B. Performance.........................................................................................16
C. Seller's Deliveries.................................................................................16
D. Consents............................................................................................16
E. Other Matters.......................................................................................16
7. Condition to the Obligations of Seller.......................................................................16
A. Accuracy of Representations and Warranties..........................................................16
B. Performance.........................................................................................17
C. Certificates and Documents. Purchaser shall have delivered to Seller:...............................17
D. Consents............................................................................................17
E. Other Matters.......................................................................................17
8. Covenants....................................................................................................17
A. Covenants of Seller.................................................................................17
B. Covenants of Purchaser..............................................................................18
9. [Intentionally left blank]...................................................................................19
10. Miscellaneous...............................................................................................20
A. Successors and Assigns..............................................................................20
B. Confidentiality.....................................................................................20
C. Survival of Representations and Warranties..........................................................20
D. Expenses............................................................................................20
E. Notices.............................................................................................20
F. Brokers.............................................................................................21
G. Entire Agreement....................................................................................21
H. Amendments and Waivers..............................................................................21
I. Counterparts........................................................................................21
J. Construction........................................................................................21
K. Severability........................................................................................21
L. Governing Law.......................................................................................22
M. Further Assurances..................................................................................22
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Seller Schedules
- ----------------
Schedule 3K - Material Contracts and Obligations
Purchaser Schedules
- -------------------
Schedule 4C - Subsidiaries, Etc.
Schedule 4G - Litigation
Exhibit:
- -------
Exhibit A - Certificate of Designation
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PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") dated as of June 28, 2002, is
entered into by and between FIRSTPLUS Financial Group, Inc., a Nevada
corporation (the "Purchaser"), and CL Capital Lending, LLC, a Texas limited
liability company (the "Seller").
In consideration of the mutual promises and covenants contained in this
Agreement, the parties agree as follows:
1. Sale of LLC Interests; Conditions.
---------------------------------
A. Sale of the LLC Interests. Subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 2), Purchaser, which
holds a one-third profits interest in Seller (the "Profits Interest"),
agrees to the conversion of the Profits Interest, and Seller agrees to
convert the Profits Interest, into a membership interest representing 42.3%
of the limited liability company interests (the "LLC Interests") in Seller,
and in connection therewith, Purchaser agrees to purchase and acquire, and
Seller agrees to sell, transfer, assign, convey and deliver to Purchaser,
the LLC Interests, free and clear of any option, pledge, security interest,
lien, charge, encumbrance, or restriction (whether on voting, sale,
transfer, disposition or otherwise), whether imposed by agreement,
understanding, law or otherwise ("Encumbrances"), preemptive rights or
rights of first refusal.
B. Purchase Price. On the terms and subject to the conditions
contained in this Agreement, the purchase price for the LLC Interests will
be (i) 25,639 shares of Series D Convertible Preferred Stock, par value
$1.00 per share, of Purchaser (the "Series D Preferred Stock"), having the
rights, restrictions, privileges and preferences set forth in the
Certificate of Designation of Preferences, Limitations, and Rights of
Series D Convertible Preferred Stock attached hereto as Exhibit A (the
"Certificate of Designation") and (ii) cancellation by Purchaser of the
principal and interest outstanding owed by Seller under the Revolving
Promissory Note dated August 24, 2001, between Purchaser and Seller. The
shares of Series D Preferred Stock being issued under this Agreement and,
unless the context otherwise requires, the shares of common stock, par
value $0.01 per share, of Purchaser (the "Purchaser Common Stock"), issued
or issuable upon the conversion of such shares of Series D Preferred Stock,
are referred to as the "Purchaser Shares."
2. The Closing. The closing (the "Closing") of the sale and purchase of the
LLC Interests under this Agreement shall take place on June 28, 2002, at the
offices of Purchaser, 1349 Empire Central, Suite 1300, Dallas, Texas 75247 at
1:30 p.m. on the date specified for the Closing, or at such other place or such
other time as Seller and Purchaser agree in writing.
A. At the Closing, Seller shall deliver to Purchaser an assignment of
the LLC Interests to Purchaser, free and clear of all Encumbrances,
preemptive rights or rights of first refusal, against delivery of a
certificate for the Series D Preferred Stock (the "Series D Certificate"),
registered in the name of CL Capital Lending, LLC.
B. If any of the conditions specified in Section 6 to be fulfilled at
or prior to Closing have not been fulfilled, Purchaser shall, at its
election, be relieved of all of its obligations
under this Agreement to be performed at the Closing without thereby waiving
any other rights it may have by reason of such failure or such
nonfulfillment.
C. If any of the conditions specified in Section 7 to be fulfilled at
or prior to Closing have not been fulfilled, Seller shall, at its election,
be relieved of all of its obligations under this Agreement to be performed
at the Closing without thereby waiving any other rights it may have by
reason of such failure or such nonfulfillment.
3. Representations and Warranties of Seller. Subject to and except as
disclosed by Seller on the Schedules attached hereto, and Seller hereby
represents and warrants to Purchaser as follows:
A. Organization and Standing. Seller is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Texas and has the requisite power and authority to conduct its
business as presently conducted and as proposed to be conducted by it, to
own, lease and operate its property and assets, and to enter into and
perform this Agreement and to carry out the transactions contemplated by
this Agreement. Seller is not required to be qualified to do business as a
foreign limited liability company in any other jurisdiction. Seller has
furnished to Purchaser true and complete copies of its Articles of
Organization and Regulations, each as amended to date and currently in
effect.
B. Capitalization. Each of Circle JR Trust and Danmer, LLC, a Texas
limited liability company ("Danmer"), owns directly and of record good and
marketable title to 1,500 units of the LLC Interests free and clear of all
Encumbrances, preemptive rights or rights of first refusal. The LLC
Interests owned by Circle JR Trust and Danmer constitute all of the issued
and outstanding limited liability company interests of Seller, and are
validly issued, fully paid, transferable and nonassessable and no equity
securities have been issued in violation of the preemptive rights or rights
of first refusal of any individual, partnership, limited liability company,
joint venture, corporation, trust, unincorporated organization, division or
operating group of any of the foregoing, a government or any department or
agency thereof or any other entity. There are no (i) equity securities or
other securities bearing voting or other equity rights, whether contingent
or not, of Seller outstanding; (ii) outstanding subscriptions, puts,
options, warrants, convertible securities or other rights, contractual or
otherwise, to purchase or acquire any equity securities of Seller; (iii)
contracts, commitments, understandings, arrangements or restrictions by
which Seller is or may become bound to issue any additional equity
interests or any options or rights with respect thereto, or any securities
convertible into any equity interests; or (iv) restrictions upon the voting
or transfer of any of the LLC Interests pursuant to any agreement or other
instrument to which Seller is a party or by which Seller is bound. All of
the issued and outstanding limited liability company interests of Seller
have been offered, issued and sold by Seller in compliance with applicable
federal and state securities laws. There are no agreements, written or
oral, between Seller and any holder of limited liability company interests,
or, to the best of Seller's knowledge, among any holder of limited
liability company interests, relating to the acquisition (including without
limitation rights of first refusal or preemptive rights), disposition,
registration under the Securities Act of 1933, as amended (the "Securities
Act"), or voting of Seller's limited liability company interests.
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C. Subsidiaries, Etc. Seller has no subsidiaries and does not own or
control, directly or indirectly, any shares of capital stock of any other
corporation or any interest in any partnership, limited liability company,
joint venture or other non-corporate business enterprise.
D. Authority for Agreement. Seller has the full, absolute and
unrestricted right, power and authority to execute and perform this
Agreement and to carry out the transactions contemplated hereby. The
execution, delivery and performance by Seller of this Agreement, and the
consummation by Seller of the transactions contemplated hereby, have been
duly authorized by all necessary limited liability company action. This
Agreement has been duly executed and delivered by Seller and constitutes
valid and binding obligations of Seller enforceable in accordance with its
terms. The execution, delivery and performance of the transactions
contemplated by this Agreement and compliance with its provisions by Seller
does not and will not:
(i) result in any violation of or be in conflict with or
constitute a default under any term or provision of the organizational
documents of Seller, any judgment, decree, order, statute, injunction,
rule or regulation applicable to Seller, or any note, bond, mortgage,
indenture, lease, license, franchise, agreement or other instrument or
obligation to which Seller or any of either of their rights,
properties or assets may be subject or is bound;
(ii) result in the creation of any Encumbrance upon the LLC
Interests, or any of the properties or assets of Seller pursuant to
any such term or provision; or
(iii) constitute a default under or give any party the right to
accelerate, amend or modify, terminate, abandon or refuse to perform
or comply with, any contract, agreement, arrangement, commitment or
plan to which Seller is a party, or by which Seller or any of its
rights, properties or assets may be subject or bound.
Seller has discussed with its professional, legal, tax and financial
advisors the implications to and obligations of Seller resulting from the
execution of this Agreement and the consummation of the transactions
contemplated herein. Seller has received adequate legal, tax and financial
representation with respect to the drafting and negotiation of this
Agreement and the structure of the transactions contemplated herein.
E. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing
with, any governmental authority is required on the part of Seller in
connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the LLC Interests, or the other transactions
to be consummated at the Closing, as contemplated by this Agreement, except
such filings as shall have been made prior to and shall be effective on and
as of the Closing. Based on the representations made by Purchaser in
Section 5.A of this Agreement, the offer and sale of the LLC Interests to
Purchaser will be in compliance with applicable federal and state
securities laws.
F. Litigation. There is no action, suit or proceeding, or governmental
inquiry or investigation, pending, or, to the best of Seller's knowledge,
any basis therefor or threat thereof, against Seller, which questions the
validity of this Agreement or the right of Seller to enter into or
3
perform this Agreement, or which could reasonably be expected to have,
either individually or in the aggregate, any adverse effect on the
business, prospects, assets or condition, financial or otherwise, of
Seller, nor is there any litigation pending, or, to the best of Seller's
knowledge, any basis therefor or threat thereof, against Seller by reason
of the proposed activities of Seller.
G. Taxes. As of the Closing Date, Seller has not been required to file
any federal, state, county, local or foreign tax returns. No controversy
with respect to taxes of any type is pending or, to the best of Seller's
knowledge, threatened. There are no tax liens upon any property or assets
owned by Seller.
H. Property and Assets. Seller has good title to or a valid leasehold
interest in all of its properties and assets, which comprise all of the
properties and assets necessary or useful for the conduct of its business,
and none of such properties or assets is subject to any mortgage, pledge,
lien, security interest, lease, charge or encumbrance.
I. Intellectual Property. Seller owns, or possesses adequate licenses
or other rights to use, any and all computer software, software programs,
patents, patent applications, trademarks, trademark applications, trade
secrets, formulations, service marks, trade names, copyrights, inventions,
drawings, designs, customer lists, proprietary know-how or information or
other rights with respect thereto (collectively referred to as the "Seller
Intellectual Property Rights"), used in or required for its business as
currently conducted. Seller has not received written notice of any claims,
disputes, actions, proceedings, suits or appeals pending against Seller
with respect to any Seller Intellectual Property Rights that if adversely
determined could reasonably be expected to result in a loss of any Seller
Intellectual Property Rights or any other loss that could reasonably be
expected to have a material adverse effect. None of the Seller Intellectual
Property Rights infringes on the proprietary rights of any third party. No
other person or entity (including without limitation any prior employer of
any employee of or consultant to Seller) has any right to or interest in
any inventions, improvements, discoveries or other confidential information
developed or utilized by Seller in its business.
J. Insurance. Seller does not have in effect any insurance policies.
K. Material Contracts and Obligations. Schedule 3K sets forth a list
of all material agreements or commitments of any nature to which Seller is
a party or by which it is bound, including without limitation (i) each
agreement which requires future expenditures by Seller in excess of $50,000
or which might result in payments to Seller in excess of $50,000, (ii) all
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and
arrangements, and distributor and sales representative agreements, (iii)
each agreement with any holder of limited liability company interests,
officer or director of Seller, or any "affiliate" or "associate" of such
persons (as such terms are defined in the rules and regulations promulgated
under the Securities Act), including without limitation any agreement or
other arrangement providing for the furnishing of services by, rental of
real or personal property from, or otherwise requiring payments to, any
such person or entity, and (iv) any agreement relating to the Seller
Intellectual Property Rights. Seller has made available to Purchaser copies
of such of the foregoing agreements as Purchaser has requested. All of such
agreements and contracts are valid, binding and in full force and effect.
4
L. Seller Projections. A complete copy of Seller's projected profits
and loss statement for the period from May 31, 2002 through December 31,
2003 (collectively, the "Seller Projections") have been provided to
Purchaser. The Seller Projections have been prepared from, and are in
accordance with, the books and records of Seller.
M. Absence of Changes. Since Seller's organization, there has been no
adverse change in the condition, financial or otherwise, net worth or
results of operations of Seller, other than changes occurring in the
ordinary course of business, which changes have not, individually or in the
aggregate, had an adverse effect on the business, prospects, properties or
condition, financial or otherwise, of Seller.
N. Employees. None of the employees of Seller is represented by any
labor union, and there is no labor strike or other labor trouble pending
with respect to Seller (including without limitation any organizational
drive) or, to the best of Seller's knowledge, threatened. Seller is in
compliance in all material respects with all applicable laws (including,
without limitation, federal income tax laws), ordinances, regulations,
statutes, rules and restrictions of any federal, state, municipal, domestic
or foreign government, court, tribunal, administrative agency, department,
commission, board, bureau or other governmental or taxing authority or
instrumentality (each, a "Governmental Entity") respecting employment and
employment practices and terms and conditions of employment.
O. ERISA. Seller does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974 (other than a medical benefit plan with respect
to which Seller has made all required contributions and has complied with
all applicable laws). No actions, suits, proceedings, audits, or claims are
pending or, to the knowledge of Seller, expected or threatened with respect
to any employee benefit plan, other than routine claims for benefits, or of
any actions, suits, proceedings, audits or claims pending or, to the
knowledge of Seller, are expected or threatened with respect to any
employee benefit plan which could result in liability to Seller.
P. Books and Records. The minute books of Seller contain complete and
accurate records of all meetings and other corporate actions of its
members, managers and committees. The limited liability interest ledger of
Seller is complete and reflects all issuances, transfers, repurchases and
cancellations of limited liability company interests of Seller.
Q. Disclosures. Neither this Agreement nor any Schedule or Exhibit to
this Agreement, nor any report, certificate or instrument furnished to
Purchaser in connection with the transactions contemplated by this
Agreement, when read together, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. Seller knows of no information or
fact which has or would have an adverse effect on the business, prospects,
assets or condition, financial or otherwise, of Seller which has not been
disclosed to Purchaser in this Agreement, the Exhibits hereto or other
written materials furnished to Purchaser.
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4. Representations and Warranties of Purchaser. Subject to and except as
disclosed by Purchaser on the Schedules attached hereto, Purchaser hereby
represents and warrants to Seller as follows:
A. Organization and Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada and has the requisite corporate power and authority to
conduct its business as presently conducted and as proposed to be conducted
by it, to own, lease and operate its property and assets, and to enter into
and perform this Agreement and to carry out the transactions contemplated
by this Agreement. Purchaser is qualified to do business in the State of
Texas. Purchaser has furnished to Seller true and complete copies of its
Articles of Incorporation and Bylaws, each as amended to date and currently
in effect.
B. Capitalization. Immediately prior to the Closing, the authorized
capital stock of Purchaser shall consist of 100,000,000 shares of common
stock, par value $0.01 per share (the "Purchaser Common Stock"), of which
44,340,055 shares shall be issued and outstanding, and 2,600,000 shares of
Preferred Stock, $1.00 par value per share, of which 25,639 shares have
been designated as Series D Preferred Stock, none of which shares of Series
D Preferred Stock shall be issued or outstanding. All of the issued and
outstanding shares of Purchaser Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. All of the issued and
outstanding shares of capital stock of Purchaser have been offered, issued
and sold by Purchaser in compliance with applicable federal and state
securities laws.
C. Subsidiaries, Etc. Except as set forth on Schedule 4C, Purchaser
has no subsidiaries and does not own or control, directly or indirectly,
any shares of capital stock of any other corporation or any interest in any
partnership, joint venture or other non-corporate business enterprise.
D. Issuance of Purchaser Shares. The issuance, sale and delivery of
the Series D Preferred Stock in accordance with this Agreement, and the
issuance and delivery of the shares of Purchaser Common Stock issuable upon
conversion of the Series D Preferred Stock, have been, or will be on or
prior to the Closing, duly authorized by all necessary corporate action on
the part of Purchaser, and the Purchaser Common Stock has been duly
reserved for issuance. The Series D Preferred Stock when so issued, sold
and delivered against payment therefor in accordance with the provisions of
this Agreement, and the shares of Purchaser Common Stock issuable upon
conversion of the Series D Preferred Stock, when issued upon such
conversion in accordance with the Certificate of Designation, will be duly
and validly issued, fully paid and nonassessable.
E. Authority for Agreement. Purchaser has the corporate right, power
and authority to execute and perform this Agreement and to carry out the
transactions contemplated hereby. The execution, delivery and performance
by Purchaser of this Agreement, and the consummation by Purchaser of the
transactions contemplated hereby, have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and
delivered by Purchaser and constitutes valid and binding obligations of
Purchaser enforceable in accordance with its terms. The execution, delivery
and performance of the transactions contemplated by this Agreement and
compliance with its provisions by Purchaser does not and will not:
6
(i) result in any violation of or be in conflict with or
constitute a default under any term or provision of the organizational
documents of Purchaser, any judgment, decree, order, statute,
injunction, rule or regulation applicable to Purchaser, or any note,
bond, mortgage, indenture, lease, license, franchise, agreement or
other instrument or obligation to which Purchaser or any of either of
their rights, properties or assets may be subject or is bound;
(ii) result in the creation of any Encumbrance upon the Purchaser
Shares, or any of the properties or assets of Purchaser pursuant to
any such term or provision; or
(iii) constitute a default under or give any party the right to
accelerate, amend or modify, terminate, abandon or refuse to perform
or comply with, any contract, agreement, arrangement, commitment or
plan to which Purchaser is a party, or by which Purchaser or any of
their rights, properties or assets may be subject or bound.
Purchaser has discussed with its professional, legal, tax and
financial advisors the implications to and obligations of Purchaser
resulting from the execution of this Agreement and the consummation of the
transactions contemplated herein. Purchaser has received adequate legal,
tax and financial representation with respect to the drafting and
negotiation of this Agreement and the structure of the transactions
contemplated herein.
F. Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing
with, any governmental authority is required on the part of Purchaser in
connection with the execution and delivery of this Agreement, the offer,
issuance, sale and delivery of the Purchaser Shares, or the other
transactions to be consummated at the Closing, as contemplated by this
Agreement, except such filings as shall have been made prior to and shall
be effective on and as of the Closing. Based on the representations made by
Seller in Section 5.B of this Agreement, the issuance of the Purchaser
Shares to Seller will be in compliance with applicable federal and state
securities laws.
G. Litigation. Except as set forth on Schedule 4G, there is no action,
suit or proceeding, or governmental inquiry or investigation, pending, or,
to the best of Purchaser's knowledge, any basis therefor or threat thereof,
against Purchaser, which questions the validity of this Agreement or the
right of Purchaser to enter into or perform this Agreement, or which could
reasonably be expected to have, either individually or in the aggregate,
any adverse effect on the business, prospects, assets or condition,
financial or otherwise, of Purchaser, nor is there any litigation pending,
or, to the best of Purchaser's knowledge, any basis therefor or threat
thereof, against Purchaser by reason of the proposed activities of
Purchaser, or negotiations by Purchaser with possible investors in
Purchaser.
H. Taxes. Purchaser has filed all federal, state, county, local and
foreign tax returns which are required to be filed by it on or prior to
1999, such returns are true and correct and all taxes shown thereon to be
due have been timely paid. Federal income tax returns of Purchaser have not
been audited by the Internal Revenue Service, and no controversy with
respect to taxes of
7
any type is pending or, to the best of Purchaser's knowledge, threatened.
To Purchaser's knowledge, there are no tax liens upon any property or
assets owned by Purchaser.
I. Property and Assets. Purchaser has good title to or a valid
leasehold interest in all of its properties and assets, which comprise all
of the properties and assets necessary or useful for the conduct of its
business, and none of such properties or assets is subject to any mortgage,
pledge, lien, security interest, lease, charge or encumbrance.
J. Intellectual Property. Purchaser owns, or possesses adequate
licenses or other rights to use, any and all computer software, software
programs, patents, patent applications, trademarks, trademark applications,
trade secrets, formulations, service marks, trade names, copyrights,
inventions, drawings, designs, customer lists, proprietary know-how or
information or other rights with respect thereto (collectively referred to
as the "Purchaser Intellectual Property Rights"), used in or required for
its business as currently conducted. Purchaser has not received written
notice of any claims, disputes, actions, proceedings, suits or appeals
pending against Purchaser with respect to any Purchaser Intellectual
Property Rights that if adversely determined could reasonably be expected
to result in a loss of any Purchaser Intellectual Property Rights or any
other loss that could reasonably be expected to have a material adverse
effect. None of the Purchaser Intellectual Property Rights infringes on the
proprietary rights of any third party. No other person or entity (including
without limitation any prior employer of any employee of or consultant to
Purchaser) has any right to or interest in any inventions, improvements,
discoveries or other confidential information developed or utilized by
Purchaser in its business.
K. Insurance. Purchaser has in effect insurance policies of fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are reasonable for the
business and assets of Purchaser and are sufficient for material compliance
with all requirements of law and all agreements for which those entities
are parties, all of which are valid and enforceable policies, and will
remain in full force and effect through the Closing Date, and will not in
any way be affected by, or terminate or lapse by reason of, the
transactions contemplated herein. All premiums due under such policies have
been paid through the Closing Date and the insureds have complied in all
material respects with such policies.
L. Material Contracts and Obligations. Purchaser has made available to
Seller copies of all of the following material agreements or commitments of
any nature to which Purchaser is a party or by which it is bound which
Seller has requested: (i) each agreement which requires future expenditures
by Purchaser in excess of $50,000 or which might result in payments to
Purchaser in excess of $50,000, (ii) all employment and consulting
agreements, employee benefit, bonus, pension, profit-sharing, stock option,
stock purchase and similar plans and arrangements, and distributor and
sales representative agreements, (iii) each agreement with any stockholder,
officer or director of Purchaser, or any "affiliate" or "associate" of such
persons (as such terms are defined in the rules and regulations promulgated
under the Securities Act), including without limitation any agreement or
other arrangement providing for the furnishing of services by, rental of
real or personal property from, or otherwise requiring payments to, any
such person or entity, and (iv) any agreement relating to the Purchaser
Intellectual Property Rights. All of such agreements and contracts are
valid, binding and in full force and effect.
8
M. Purchaser Financial Statements. A complete copy of Purchaser's
unaudited balance sheet and related unaudited statement of income as of
June 18, 2002 and for the period from January 1, 2002 through June 18,
2002, respectively, (collectively, the "Purchaser Financial Statements")
have been provided to Seller. The Purchaser Financial Statements have been
prepared from, and are in accordance with, the books and records of
Purchaser.
N. Absence of Changes. Since the date of the Purchaser Financial
Statements, there has been no adverse change in the condition, financial or
otherwise, net worth or results of operations of Purchaser, other than
changes occurring in the ordinary course of business, which changes have
not, individually or in the aggregate, had an adverse effect on the
business, prospects, properties or condition, financial or otherwise, of
Purchaser.
O. Employees. None of the employees of Purchaser is represented by any
labor union, and there is no labor strike or other labor trouble pending
with respect to Purchaser (including without limitation any organizational
drive) or, to the best of Purchaser's knowledge, threatened. Purchaser is
in compliance in all material respects with all applicable laws (including,
without limitation, federal income tax laws), ordinances, regulations,
statutes, rules and restrictions of any Governmental Entity respecting
employment and employment practices and terms and conditions of employment.
P. ERISA. Purchaser does not have or otherwise contribute to or
participate in any employee benefit plan subject to the Employee Retirement
Income Security Act of 1974 (other than a medical benefit plan with respect
to which Seller has made all required contributions and has complied with
all applicable laws). No actions, suits, proceedings, audits, or claims are
pending or, to the knowledge of Purchaser, expected or threatened with
respect to any employee benefit plan, other than routine claims for
benefits, or of any actions, suits, proceedings, audits or claims pending
or, to the knowledge of Purchaser, are expected or threatened with respect
to any employee benefit plan which could result in liability to Purchaser.
Q. Books and Records. The minute books of Purchaser contain materially
complete and accurate records of all meetings and other corporate actions
of its stockholders and its Board of Directors and committees thereof. The
stock ledger of Purchaser is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of
Purchaser.
R. Disclosures. Neither this Agreement nor any Schedule or Exhibit to
this Agreement, nor any report, certificate or instrument furnished to
Seller in connection with the transactions contemplated by this Agreement,
when read together, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. Purchaser knows of no information or fact which
has or would have an adverse effect on the business, prospects, assets or
condition, financial or otherwise, of Purchaser which has not been
disclosed to Seller in this Agreement, the Exhibits hereto or other written
materials furnished to Seller.
5. Investment Representations and Warranties.
-----------------------------------------
9
A. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Seller as follows:
(i) Knowledge and Experience. Purchaser has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its participation in the
transactions contemplated hereby. Purchaser has had access to and an
opportunity to inspect all relevant information relating to Seller
sufficient to enable Purchaser to evaluate the merits and risks of its
participation in such transaction. Purchaser also has had adequate
opportunity to ask questions and receive answers respecting, and to
obtain such additional information as it has desired regarding, the
business, financial condition and affairs of Seller.
(ii) Investment Purpose. The acquisition by Purchaser of the LLC
Interests issued hereunder is for its account, is for investment
purposes, and is without a view to, and not for offer or sale by
Purchaser in connection with, any "distribution" within the meaning of
the Securities Act. Purchaser is not participating and does not have
an intent to participate in any such distribution or the underwriting
of any such distribution.
(iii) Restrictions on Transferability. Purchaser acknowledges
that the LLC Interests to be issued by Seller hereunder constitute
securities under the Securities Act and the applicable state
securities laws (collectively, with the Securities Act referred to as
the "Acts") and have not been registered for sale to Purchaser under
the Securities Act or the Acts in reliance on available exemptions
from the registration requirements thereof. Purchaser understands that
because the LLC Interests have not been registered under the
Securities Act, it cannot dispose of any or all of the LLC Interests
unless they are subsequently registered under the Securities Act or
exemptions from registration are available. Purchaser understands that
no public market now exists for any of the LLC Interests and that
there is no assurance that a public market will ever exist for the LLC
Interests. Purchaser acknowledges and understands that it has no
registration rights. Although it may be possible in the future to make
limited public sales of the LLC Interests without registration under
the Securities Act, Rule 144 is not now available and there is no
assurance that it will become available for any purpose. By reason of
these restrictions, Purchaser understands that it may be required to
hold the LLC Interests for an indefinite period of time. Purchaser
agrees that in no event will it make a transfer or disposition of any
of the LLC Interests unless and until, at the expense of Purchaser or
transferee, it shall have furnished to Seller an opinion of counsel or
other evidence, reasonably satisfactory to Seller, to the effect that
such transfer may be made without registration under the Securities
Act. Purchaser understands that any certificate representing the LLC
Interests will bear appropriate state "blue sky" legends and a legend
substantially as follows:
THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE UNITS MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR
10
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
UNITS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT.
(iv) Rule 144A Information. Seller shall, at all times during
which it is neither subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), nor exempt from reporting pursuant to Rule 12g3-2(b)
under the Exchange Act, upon the written request of Purchaser, provide
in writing to Purchaser and to any prospective transferee of any LLC
Interests of Purchaser the information concerning Seller described in
Rule 144A(d)(4) under the Securities Act ("Rule 144A Information").
B. Representations and Warranties of Seller. Seller represents and
warrants to Purchaser as follows:
(i) Knowledge and Experience. Seller has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its participation in the
transactions contemplated hereby. Seller has had access to and an
opportunity to inspect all relevant information relating to Purchaser
sufficient to enable Seller to evaluate the merits and risks of its
participation in such transaction. Seller also has had adequate
opportunity to ask questions and receive answers respecting, and to
obtain such additional information as it has desired regarding, the
business, financial condition and affairs of Purchaser.
(ii) Investment Purpose. The acquisition by Seller of the
Purchaser Shares issued hereunder is for its account, is for
investment purposes, and is without a view to, and not for offer or
sale by Seller in connection with, any "distribution" within the
meaning of the Securities Act. Seller is not participating and does
not have an intent to participate in any such distribution or the
underwriting of any such distribution.
(iii) Restrictions on Transferability. Seller acknowledges that
Purchaser Shares to be issued by Purchaser hereunder constitute
securities under the Acts and have not been registered for sale to
Seller under the Securities Act or the Acts in reliance on available
exemptions from the registration requirements thereof. Seller
understands that because the Series D Preferred Stock has not been,
and the shares of Purchaser Common Stock delivered or deliverable upon
exercise of the Series D Preferred Stock, when issued will not have
been, registered under the Securities Act, it cannot dispose of any or
all of the Purchaser Shares unless they are subsequently registered
under the Securities Act or exemptions from registration are
available. Seller understands that no public market now exists for any
of the Purchaser Shares and that there is no assurance that a public
market will ever exist for the Purchaser Shares. Seller acknowledges
and understands that it has no registration rights. Although it may be
possible in the future to make limited public sales of the Purchaser
Shares without registration under the Securities Act, Rule 144 is not
now available and there is no assurance that it will become available
for any purpose. By reason of
11
these restrictions, Seller understands that it may be required to hold
the Purchaser Shares for an indefinite period of time. Seller agrees
that in no event will it make a transfer or disposition of any of the
Purchaser Shares unless and until, at the expense of Seller or
transferee, it shall have furnished to Purchaser an opinion of counsel
or other evidence, reasonably satisfactory to Purchaser, to the effect
that such transfer may be made without registration under the
Securities Act. Seller understands that each certificate representing
the Purchaser Shares will bear appropriate state "blue sky" legends
and a legend substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNLESS SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(iv) Rule 144A Information. Purchaser shall, at all times during
which it is neither subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, nor exempt from reporting pursuant to
Rule 12g3-2(b) under the Exchange Act, upon the written request of
Seller, provide in writing to Seller and to any prospective transferee
of any Purchaser Shares of Seller the Rule 144A Information.
C. Registration Rights of Seller.
-----------------------------
(i) Demand Registrations.
(a) At any time subsequent to the date which is sixty days
following the date hereof, Seller or holders of at least two-thirds of
the Registrable Securities, on behalf of all holders of Registrable
Securities, severally from time to time may notify Purchaser in
writing that such holder(s) intends to offer for public sale any
Registrable Securities (but only if the aggregate number of shares of
such Registrable Securities to be offered for public sale is more than
fifty percent (50%) of the Registrable Securities outstanding). Upon
receipt of such written notice, Purchaser will use its reasonable best
efforts to cause the Registrable Securities as may be requested by
Seller or holders of the Registrable Securities (individually, a
"Holder," and collectively, the "Holders") to be included in a
registration statement under the Securities Act. Purchaser shall not
be required to file any registration statement for securities other
than shares of Purchaser Common Stock, although any conversion of
Series D Preferred may be conditioned upon such registration statement
becoming effective to the extent that such conversion or exercise
relates to the shares of Purchaser Common Stock issued or issuable
upon conversion of the Series D Preferred ("Conversion Shares")
covered by the Holder's written notice of an intended public
12
offering. In the event any registration attempted under this Section
5.C(i) pursuant to which Purchaser would be responsible for the
Registration Expenses of the Holder is not consummated, then Purchaser
shall pay such expenses and shall remain responsible for such expenses
of the Holder with respect to two (2) consummated registrations made
under this Section 5.C(i); provided, however, that if a registration
attempted under this Section 5.C(i) is not consummated solely as a
result of the withdrawal of the Holder requesting such registration,
unless such Holder reimburses the Registration Expenses incurred by
Purchaser such registration statement shall count against the two (2)
registration statements that Purchaser is required to a consummate.
The Holder covered by the registration statement who desires to do so
may sell such Registrable Securities in an offering pursuant to this
Section 5.C(i) that is underwritten ("Underwritten Offering"). In any
such Underwritten Offering, the investment banker or investment
bankers and manager or managers that will administer the offering will
be selected by the Holders of a majority of the Registrable Securities
included in such offering, subject to approval of Purchaser not to be
unreasonably withheld.
(b) A registration statement filed pursuant to the request of the
Holder may include other securities of Purchaser with respect to which
"piggy-back" registration rights have been granted, and may include
securities of Purchaser being sold for the account of Purchaser;
provided, however, that if Purchaser shall request inclusion in any
registration pursuant to this Section 5.C(i) of the securities being
sold for its own account, or if other persons shall request inclusion
in any registration undertaken pursuant to this Section 5.C(i), the
Holder shall, on behalf of all entities requesting inclusion in such
registration, offer to include such securities in the offering;
provided, however, that the Holder may condition any such offer on
their acceptance of reasonable conditions (including, without
limitation, if such offering is an Underwritten Offering, that
Purchaser or any other such requesting holders agree in writing to
enter into an underwriting agreement with usual and customary terms).
Notwithstanding any other provisions of this Section 5.C(i), if the
representative of the underwriters advises the Holder in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the number of shares to be underwritten and included in
the registration shall be allocated: (a) first, to the Holder(s)
requiring such registration, pro rata among such Holder(s) on the
basis of the number of shares of Registrable Securities for which each
such Holder has requested registration, (b) second, to Purchaser, and
(c) third, to the other holders requesting inclusion in the
registration, pro rata among the respective holders thereof on the
basis of the number of shares for which each such requesting holder
has requested registration. If a person who has requested inclusion in
such registration as provided above does not agree to the terms of any
such underwriting, such person shall be excluded therefrom by written
notice from Purchaser, the underwriter or the Holder(s). The
securities so excluded shall also be withdrawn from registration.
13
(c) Except as provided in Section 5.C(i)(a) with respect to
withdrawn registration statements, all Registration Expenses of a the
Holder incurred in connection with registrations requested pursuant to
this Section 5.C shall be borne by Purchaser.
(iii) "Piggy-Back" Registrations.
(a) If Purchaser decides to register any of its Common Stock or
securities convertible into or exchangeable for Common Stock under the
Securities Act on a form which is suitable for an offering for cash or
shares of Purchaser held by third parties and which is not a
registration solely to implement an employee benefit plan, a
registration statement on Form S-4 (or successor form) or a
transaction to which Rule 145 or any other similar rule of the United
States Securities and Exchange Commission (the "Commission") is
applicable, Purchaser will promptly give written notice to the Holder
of its intention to effect such a registration. Subject to Section
5.C(ii)(b) below, Purchaser will use all reasonable efforts to effect
the registration under the Securities Act of all Registrable
Securities that the Holder(s) request(s) be included in such
registration by a written notice delivered to Purchaser within fifteen
(15) days after the notice given by Purchaser. The Holder agrees that
any securities it requests to be included in a Purchaser registration
pursuant to this Section 5.C(ii)(a) shall be included by Purchaser on
the same form of registration statement as has been selected by
Purchaser for the securities Purchaser is registering for sale for its
own account.
(b) If the registration involves an Underwritten Offering,
Purchaser will not be required to register Registrable Securities in
excess of the amount that the principal underwriter reasonably and in
good faith recommends may be included in such offering (a "Cutback"),
which recommendation, and supporting reasoning, shall be delivered to
the Holder. If such a Cutback occurs, the number of shares that are
entitled to be included in the registration and underwriting shall be
allocated in the following manner: (i) first, to Purchaser for any
securities it proposes to sell for its own account, (ii) second, to
the Holder(s) requiring such registration, and (iii) third, to the
other holders requesting inclusion in the registration, pro rata among
the respective holders thereof on the basis of the number of shares
for which each such requesting holder has requested registration.
(c) If Purchaser elects to terminate any registration filed under
this Section 5.C(ii), Purchaser will have no obligation to register
the securities sought to be included by the Holder in such
registration. If Purchaser includes in such registration any
securities to be offered by it, all Registration Expenses of the
Holder will be borne by Purchaser.
14
(iii) Limitation on Registration; Lock-Up Agreement; Suspension of
Sales.
(a) Purchaser is not required to file more than two (2)
registration statements in total under Section 5.C(i). Purchaser may
postpone the filing of any registration statement required under
Section 5.C(i) for a reasonable period of time, not to exceed ninety
(90) days, if Purchaser has been advised by legal counsel that such
filing would require the disclosure of a material fact, and Purchaser
determines reasonably and in good faith that such disclosure would
have a detrimental effect on Purchaser.
(b) If (i) in the good faith judgment of the Board of Directors
of Purchaser, a required registration under Section 5.C(i) would be
detrimental to Purchaser and the Board of Directors of Purchaser
concludes, as a result, that it is essential to defer the filing of
such registration statement at such time, and (ii) Purchaser shall
furnish to the Holder a certificate signed by the President of
Purchaser stating that in the good faith judgment of the Board of
Directors of Purchaser, it would be detrimental to Purchaser for such
registration statement or amendment to be filed in the near future and
that it is, therefore, essential to defer the filing of such
registration statement or amendment, then Purchaser shall have the
right to defer such filing for a period of not more than one hundred
and eighty (180) days after receipt of the request of the Holder, and,
provided further, that Purchaser shall not defer its obligation in
this manner more than once in any twelve-month period.
(iv) Obligations of Holders and Others in a Registration. Each Holder
agrees timely to furnish such information regarding such person and the
securities sought to be registered and to take such other action as
Purchaser may reasonably request in connection with the registration,
qualification or compliance. Purchaser may exclude from any registration
statement any Holder that timely fails to comply with the provisions of the
preceding sentence. If the registration involves an underwriter, each
Holder agrees, upon the request of such underwriter, not to sell any
unregistered securities of Purchaser for a period of ninety (90) days
following the effective date of the registration statement for such
offering and to enter into an underwriting agreement with such underwriters
containing usual and customary terms and provisions. The Holder agree not
to affect the sale of securities under any registration statement until
they have received a prospectus, as needed, and notice of the effectiveness
of the registration statement of which the prospectus forms a part.
6. Conditions to the Obligations of Purchaser. The obligation of Purchaser
to purchase the LLC Interests at the Closing is subject to the fulfillment, or
the waiver by Purchaser, of each of the following conditions on or before the
Closing:
15
A. Accuracy of Representations and Warranties. Each representation and
warranty contained in Sections 3 and 5.B shall be true at and as of the
Closing the same effect as though such representation and warranty had been
made on and as of the date of the Closing.
B. Performance. Seller shall have performed and complied with all
agreements and conditions contained in this Agreement required to be
performed or complied with by Seller prior to or at the Closing.
C. Seller's Deliveries. Seller shall have delivered to counsel to
Purchaser:
(i) the Articles of Organization of Seller, as amended and in
effect as of the date of the Closing, certified by a manager of Seller
as of the date of the Closing;
(ii) a certificate, as of the most recent practicable date, as to
the good standing of Seller in the state of Texas;
(iii) the Regulations of Seller, certified by a manager of Seller
as of the date of the Closing;
(iv) resolutions of the managers and members of Seller,
authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby and thereby,
certified by a manager of Seller as of the date of the Closing; and
(v) a certificate, executed by a manager of Seller, dated the
date of the Closing, certifying to the fulfillment of the conditions
specified in Sections 6.A and 6.B.
D. Consents. All consents, waivers, estoppels, approvals, licenses,
authorizations of, or filings or declarations with third parties or
Governmental Entities required to be obtained by Seller in order to permit
the transactions contemplated herein to be consummated shall have been
obtained.
E. Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory
in substance and form to Purchaser and its counsel, and Purchaser and its
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
7. Condition to the Obligations of Seller. The obligations of Seller to
issue and sell the LLC Interests to Purchaser at the Closing are subject to
fulfillment, or the waiver by Seller, of each of the following conditions on or
before the Closing:
A. Accuracy of Representations and Warranties. Each representation and
warranty contained in Sections 4 and 5.A shall be true at and as of the
Closing the same effect as though such representation and warranty had been
made on and as of the date of the Closing.
16
B. Performance. Purchaser shall have performed and complied with all
agreements and conditions contained in this Agreement required to be
performed or complied with by Purchaser prior to or at the Closing.
C. Certificates and Documents. Purchaser shall have delivered to
Seller:
(i) the Series D Certificate;
(ii) the Articles of Incorporation of Purchaser, as amended and
in effect as of the date of the Closing (including the Certificate of
Designation), certified by the Secretary of Purchaser as of the date
of the Closing;
(iii) certificates, as of the most recent practicable dates, as
to the corporate good standing of Purchaser in the states of Nevada
and Texas;
(iv) Bylaws of Purchaser, certified by the Secretary of Purchaser
as of the date of the Closing;
(v) resolutions of the Board of Directors of Purchaser,
authorizing and approving all matters in connection with this
Agreement and the transactions contemplated hereby and thereby,
certified by the Secretary of Purchaser as of the date of the Closing;
and
(vi) a certificate, executed by the President of Purchaser, dated
the date of the Closing, certifying to the fulfillment of the
conditions specified in Sections 7.A and 7.B.
D. Consents. All consents, waivers, estoppels, approvals, licenses,
authorizations of, or filings or declarations with third parties or
Governmental Entities required to be obtained by Purchaser in order to
permit the transactions contemplated herein to be consummated shall have
been obtained.
E. Other Matters. All corporate and other proceedings in connection
with the transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be reasonably satisfactory
in substance and form to Seller, and Seller shall have received all such
counterpart originals or certified or other copies of such documents as it
may reasonably request.
8. Covenants.
---------
A. Covenants of Seller.
-------------------
(i) Inspection and Observation. Seller agrees to permit Purchaser
or any authorized representative thereof, to visit and inspect the
properties of Seller, including its corporate and financial records,
and to discuss its business and finances
17
with the officers and Managers of Seller, during normal business hours
following reasonable notice and as often as may be reasonably
requested.
(ii) Material Changes, Litigation and Government Filings. Until
Closing or other termination of this Agreement, Seller shall promptly
notify Purchaser of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of Seller and
of any litigation or governmental proceeding or investigation brought
or, to the best of Seller's knowledge, threatened against Seller or
against any officer, director, key employee or principal holder of
limited liability company interests of Seller materially adversely
affecting or which, if adversely determined, could reasonably be
expected to materially adversely affect its business, prospects,
assets or condition, financial or otherwise. In addition, as soon as
practicable, but not later than thirty (30) days after any filing,
Seller will provide Purchaser with any and all documents filed by
Seller with any governmental agency, other than routine tax filings.
(iii) Indemnification. Seller will indemnify Purchaser and its
agents and representatives against, and hold Purchaser and its agents
and representatives harmless from, all losses, claims, damages,
liabilities, costs (including the costs of preparation and attorneys'
fees and expenses) (collectively, the "Losses") incurred pursuant to
any investigation or proceeding against Seller, Purchaser or any of
their agents and representatives arising out of or in connection with
this Agreement or other related agreement (or any other document or
instrument executed pursuant hereto or thereto), which investigation
or proceeding requires the participation of, or is commenced or filed
against, Purchaser and any of its agents because of this Agreement,
any related agreement and the transactions contemplated hereby and
thereby, other than any Losses resulting from action on the part of
Purchaser or its agents or representatives which are primarily and
directly a result of (a) Purchaser's gross negligence or willful
misconduct or (b) an act or omission that involves intentional
misconduct or a knowing violation of law by Purchaser. Seller agrees
to reimburse Purchaser and its agents and representatives promptly for
all such Losses as they are incurred by Purchaser and its agents.
Purchaser agrees to reimburse Seller for any payments made by Seller
to Purchaser pursuant to this Section 8.A(iii) for Losses which are
finally determined in such proceeding to primarily and directly result
from the gross negligence or willful misconduct of Purchaser. The
obligations of Seller under this Section 8.A(iii) will survive any
transfer of interests or securities by Purchaser and the termination
of this Agreement for a period of twelve (12) months.
B. Covenants of Purchaser.
----------------------
(i) Inspection and Observation. Purchaser shall permit Seller or
any authorized representative thereof, to visit and inspect the
properties of Purchaser, including its corporate and financial
records, and to discuss its business and finances with officers of
Purchaser, during normal business hours following reasonable notice
and as often as may be reasonably requested.
18
(ii) Material Changes, Litigation and Government Filings.
Purchaser shall promptly notify Seller of any material adverse change
in the business, prospects, assets or condition, financial or
otherwise, of Purchaser and of any litigation or governmental
proceeding or investigation brought or, to the best of Purchaser's
knowledge, threatened against Purchaser or against any officer,
director, key employee or principal shareholder of Purchaser
materially adversely affecting or which, if adversely determined,
could reasonably be expected to materially adversely affect its
business, prospects, assets or condition, financial or otherwise. In
addition, as soon as practicable, but not later than thirty (30) days
after any filing, Purchaser will provide Seller with any and all
documents filed by Purchaser with any governmental agency, other than
routine tax filings.
(iii) Reservation of Common Stock. Purchaser shall reserve and
maintain a sufficient number of shares of Purchaser Common Stock for
issuance upon conversion of all of the outstanding Series D Preferred
Stock.
(iv) Indemnification. Purchaser will indemnify Seller and its
agents and representatives against, and hold Seller and its agents and
representatives harmless from, all Losses incurred pursuant to any
investigation or proceeding against Seller, Purchaser or any of their
agents and representatives arising out of or in connection with this
Agreement, any other related agreement (or any other document or
instrument executed pursuant hereto or thereto), which investigation
or proceeding requires the participation of, or is commenced or filed
against, Seller and any of its agents because of this Agreement, any
related agreement and the transactions contemplated hereby and
thereby, other than any Losses resulting from action on the part of
Seller or its agents or representatives which are primarily and
directly a result of (a) Seller's gross negligence or willful
misconduct or (b) an act or omission that involves intentional
misconduct or a knowing violation of law by Seller. Purchaser agrees
to reimburse Seller and its agents and representatives promptly for
all such Losses as they are incurred by Seller and its agents. Seller
agrees to reimburse Purchaser for any payments made by Purchaser to
Seller pursuant to this Section 8.B(iv) for Losses which are finally
determined in such proceeding to primarily and directly result from
the gross negligence or willful misconduct of Seller. The obligations
of Purchaser under this Section 8.B(iv) will survive any transfer of
securities by Seller and the termination of this Agreement.
(v) Board of Directors. Purchaser agrees that, as long as a
majority of the Series D Preferred Stock issued pursuant to this
Agreement remains outstanding, Purchaser shall take all appropriate
actions to set a Board of Directors consisting of seven (7) members,
all of whom shall be designated at the Closing by Seller.
(vi) Director and Officer Liability Insurance. Purchaser agrees that
it shall maintain a policy of director and officer liability insurance
with coverage of at least $1,000,000, and a deductible of no more than
an aggregate of $50,000.
9. [Intentionally left blank]
19
10. Miscellaneous.
-------------
A. Successors and Assigns. The rights and obligations of Purchaser
under this Agreement may be assigned by Purchaser to any person or entity
to which LLC Interests are transferred by Purchaser. The rights and
obligations of Seller under this Agreement may be assigned by Seller to any
person or entity to which Purchaser Shares are transferred by Seller. All
the terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective executors, heirs,
legal representatives, successors and assigns.
B. Confidentiality. Each party agrees that it will keep confidential
and will not disclose or divulge any confidential, proprietary or secret
information which such party may obtain (the "receiving party") from a
party hereto (the "disclosing party") pursuant to financial statements,
reports and other materials submitted by the disclosing party to the
receiving party pursuant to this Agreement or otherwise, or pursuant to
visitation or inspection rights granted hereunder, unless such information
is known, or until such information becomes known, to the public other than
by breach of this Agreement; provided, however, that each party may
disclose such information (i) to its attorneys, accountants, consultants
and other professionals to the extent necessary to obtain their services in
connection with the transactions contemplated herein, (ii) to any
prospective purchaser of any LLC Interests from Purchaser as long as such
prospective purchaser agrees in writing to be bound by the provisions of
this Section 10.B, (iii) to any prospective purchaser of any Purchaser
Shares from Seller as long as such prospective purchaser agrees in writing
to be bound by the provisions of this Section 10.B or (iv) to any
affiliate, stockholder, holder of limited liability company interests,
officer or director of Purchaser or Seller.
C. Survival of Representations and Warranties. All representations and
warranties contained in this Agreement shall survive the execution and
delivery of this Agreement and the closing of the transactions contemplated
hereby for a period of two (2) years.
D. Expenses. Each party shall bear its own costs, expenses and
professional fees and disbursements incurred in connection herewith.
E. Notices. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered personally,
by facsimile transmission, by overnight delivery service, or by first class
mail, postage prepaid:
(i) If to Purchaser, to FIRSTPLUS Financial Group, Inc., 1349
Empire Central, Suite 1300, Dallas, Texas 75247, attention: Chief
Executive Officer, facsimile: (214) 231-7690, with a copy to Ronald J.
Frappier, Esq., Jenkens & Gilchrist, a Professional Corporation, 1445
Ross Avenue Suite 3200, Dallas, Texas 75202, facsimile: (214)
855-4300, or at such other address or addresses as may have been
furnished in writing by Purchaser to Seller;
(ii) If to Seller, to CL Capital Lending, LLC, 1349 Empire
Central, Suite 1300, Dallas, Texas 75247, attention: Chief Executive
Officer, facsimile: (214) 231-7690,
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or at such other address or addresses as may have been furnished by
Seller to Purchaser.
Notices provided in accordance with this Section 10.E shall be deemed
delivered upon personal delivery or telecopy, one (1) business day after
deposit with an overnight courier service, or three (3) business days after
deposit in the United States mail.
F. Brokers. Each of Seller and Purchaser (i) represents and warrants
to the other party hereto that it has retained no finder or broker in
connection with the transactions contemplated by this Agreement, and (ii)
will indemnify and save the other party harmless from and against any and
all claims, liabilities or obligations with respect to brokerage or finders
fees or commissions, or consulting fees in connection with the transactions
contemplated by this Agreement asserted by any person on the basis of any
statement or representation alleged to have been made by such indemnifying
party.
G. Entire Agreement. This Agreement, the Schedules and the Exhibits
embody the entire agreement and understanding between the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings relating to such subject matter.
H. Amendments and Waivers. Except as otherwise expressly set forth in
this Agreement, any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), with
the written consent of Seller and Purchaser. Any amendment or waiver
effected in accordance with this Section 10.H shall be binding upon each
holder of any LLC Interests and Series D Preferred Stock (including shares
of Purchaser Common Stock into which the Series D Preferred Stock has been
converted), each future holder of all such LLC Interests and Purchaser
Shares, Seller and Purchaser. No waivers of or exceptions to any term,
condition or provision of this Agreement, in any one or more instances,
shall be deemed to be, or construed as, a further or continuing waiver of
any such term, condition or provision.
I. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall be one and the same document.
J. Construction. The headings of this Agreement are for convenience
only and do not constitute a part of this Agreement. References to pronouns
shall include the masculine, feminine, neuter, singular and plural, as the
identity of the antecedent may require. All parties have participated in
the negotiation of this Agreement and have been represented by counsel of
their choosing and agree that this Agreement shall not be construed
strictly against any party.
K. Severability. If any provision of this Agreement is held by final
judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalid, illegal or unenforceable provision shall be
severed from the remainder of this Agreement, and the remainder of this
Agreement shall be enforced. In addition, the invalid, illegal or
unenforceable provision shall be deemed to be automatically modified, and
as so modified, to be included in this Agreement, such modification being
made to the minimum extent necessary to render the provision valid, legal
and enforceable. Notwithstanding the foregoing, however, if the severed or
modified provision concerns
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all or a portion of the essential consideration to be delivered under this
Agreement by one party to the other, the remaining provisions of this
Agreement shall also be modified to the extent necessary to equitably
adjust the parties' respective rights and obligations hereunder.
L. Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Texas
without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Texas or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of Texas.
M. Further Assurances. Each party to this Agreement hereby covenants
and agrees, without the necessity of any further consideration, to execute
and deliver any and all such further documents and take any and all such
other actions as may be necessary or appropriate to carry out the intent
and purposes of this Agreement and to consummate the transactions
contemplated hereby.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
PURCHASER:
FIRSTPLUS FINANCIAL GROUP, INC.
By: /s/ Daniel T. Phillips
-----------------------------
Daniel T. Phillips, President
SELLER:
CL CAPITAL LENDING, LLC
By: /s/ Jack Roubinek
-----------------------------
Name: Jack Roubinek, Manager