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Exhibit 4.6
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.
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"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, Lee M. Bass 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
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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 Hart-Scott-Rodino 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
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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 O'Neill, 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.
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"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.
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"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 Mayer, Brown & Platt,
Los Angeles, California, at 10:00 a.m., Pacific Time, on December 15, 1995, or
on such earlier date
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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
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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.
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(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
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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
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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
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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
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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
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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
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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
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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
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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
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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)
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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)
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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
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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 Heine 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.
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(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. Section 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.
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(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 Timothy J. Layne, Assistant Regional Director of the OTS, to
Scott A. Braly;
(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;
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(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 Mayer, Brown & Platt, 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
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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 Mayer, Brown & Platt, 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
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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
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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
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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.
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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
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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
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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.
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(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.
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(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
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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.
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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
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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
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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
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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 2381 Rosecrans Avenue, El
Segundo, California 90245, 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, Tiernan & Herrick 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
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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
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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.
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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/ Scott A. Braly
-----------------------------------
Name: Scott A. Braly
Title: President and Chief
Executive Officer
VALUE PARTNERS, LTD
By: /s/ Timothy G. Ewing
-----------------------------------
Name: Timothy G. Ewing
Title: Partner-in-Charge
SID R. BASS MANAGEMENT TRUST
By: /s/ Sid R. Bass*
-----------------------------------
Name: Sid R. Bass
Title: Trustee
THE BASS MANAGEMENT TRUST
By: /s/ Perry R. Bass
-----------------------------------
Name: Perry R. Bass
Title: Trustee
/s/ Mr. Lee M. Bass*
-----------------------------------
Mr. Lee M. Bass
- ----------
*By William P. Hallman, Jr., Attorney-in-fact.
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FORT PITT FUND, L.P.
By: FORT PITT CAPITAL MANAGEMENT
CORPORATION
By: /s/ Harry F. Radcliffe
-----------------------------------
Name: Harry F. Radcliffe
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/ David S. Hunt
-----------------------------------
Name: David S. Hunt
Title: President
TYNDALL PARTNERS
By: HALO CAPITAL PARTNERS, L.P., its
General Partner
By: /s/ Jeffrey Halis
-----------------------------------
Name: Jeffrey Halis
Title: General Partner
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/s/ Scott A. Braly
-----------------------------------
Mr. Scott A. Braly
/s/ Mr. David Hardin
-----------------------------------
Mr. David Hardin
/s/ Mr. Norman Morales
-----------------------------------
Mr. Norman Morales
/s/ Dr. Jeff Schultz
-----------------------------------
Dr. Jeff Schultz
/s/ Mr. Timothy B. Matz
-----------------------------------
Mr. Timothy B. Matz
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EXHIBIT A
Name and Address of
Purchaser No. of Units Dollar Amount
- ----------------------------- ------------ -------------
Value Partners, LTD 17 Units $8,500,000
2200 Ross Avenue
4660 West
Dallas, TX 75201
Attn: Mr. Timothy Ewing
W (214) 999-1900
FAX (214) 999-1901
Lee M. Bass 6 Units $3,000,000
201 Main Street (32nd
Floor)
Fort Worth, TX 76102
Attn: Mr. Brian McManus
W (817) 338-2681
FAX (817) 338-8366
Sid R. Bass Management 6 Units $3,000,000
Trust
201 Main Street (32nd
Floor)
Fort Worth, TX 76102
Attn: Mr. Brian McManus
W (817) 338-2681
FAX (817) 338-8366
The Bass Management Trust 5 Units $2,500,000
201 Main Street (32nd
Floor)
Fort Worth, TX 76102
Attn: Mr. Brian McManus
W (817) 338-2681
FAX (817) 338-8366
Fort Pitt Fund, L.P. 7 Units $3,500,000
Birmingham Tower
Suite 710
2100 Wharton Street
Pittsburgh, PA 15203
Attn: Mr. Harry F.
Radcliffe
W (412) 488-1550
FAX (412) 488-1930
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Mr. Scott A. Braly 2.4 Units $1,200,000
Hawthorne Financial
Corporation
2381 Rosecrans Avenue
2nd Floor
El Segundo, CA 90245
W (310) 725-5600
FAX (310) 725-5038
Mr. David Hardin .2 Units $ 100,000
Hawthorne Financial
Corporation
2381 Rosecrans Avenue
2nd Floor
El Segundo, CA 90245
W (310) 725-5600
FAX (310) 725-5038
Mr. Norman Morales .4 Units $ 200,000
Hawthorne Financial
Corporation
2381 Rosecrans Avenue
2nd Floor
El Segundo, CA 90245
W (310) 725-5600
FAX (310) 725-5038
Prosper Value Fund, L.P. 2 Units $1,000,000
3900 Thanksgiving Tower
Dallas, TX 75201
Attn: Mr. David Hunt
W (214) 880-8484
FAX (214) 880-7101
Tyndall Partners 1 Unit $ 500,000
500 Park Avenue
New York, NY 10022
Attn: Mr. Jeff Halis
W (212) 486-4794
FAX (212) 644-4482
Dr. Jeff Schultz 3 Units $1,500,000
Christian Brothers
University
650 East Parkway South
Memphis, TN 38104
W (901) 722-0300
FAX (901) 722-0580
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Mr. Timothy B. Matz 1 Unit $ 500,000
Elias, Matz, Tiernan &
Herrick L.L.P.
734 15th Street, N.W.
12th Floor
Washington, D.C. 20005
W (202) 347-0300
FAX (202) 347-2172
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