Exhibit 10.3.1
EXECUTION COPY
PURCHASE AGREEMENT
PURCHASE AGREEMENT (the "Agreement"), dated as of January 26, 2005,
between Sutter Holding Company, Inc., a Delaware corporation ("Sutter"), and the
purchaser listed on the signature page hereto ("Purchaser"). Capitalized terms
not otherwise defined herein shall have the meanings assigned to them in the
Certificate of Designations, Preferences and Rights of Series A Convertible
Preferred Stock of Sutter (the "Series A Certificate").
RECITALS
WHEREAS, Purchaser desires to purchase and Sutter desires to sell to
Purchaser, shares of Series A Preferred Stock, par value $0.0001 of Sutter (the
"Preferred Stock") on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and in reliance on the representations and warranties contained herein
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. DEFINITIONS
"Diversified Risk" means FLF, Inc. (d/b/a Diversified Risk Insurance
Brokers), a California corporation.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof.
2. PURCHASE AND SALE OF PREFERRED STOCK
2.1 Purchase and Sale of Preferred Stock. Subject to all of the
terms and conditions hereof, Sutter shall sell to Purchaser
and Purchaser shall purchase from Sutter 1,300 shares of
Preferred Stock (the "Shares") from Purchaser at a purchase
price of $1,000 per share or $1,300,000 in the aggregate (the
"Purchase Price").
2.2 Issuance and Delivery of Preferred Stock. The closing of the
purchase, issuance and delivery of Preferred Stock shall take
place on January 26, 2005 (the "Closing Date"), at the offices
of Kirkland & Ellis LLP at 153 East 53 Street, New York, New
York or any other location that may be mutually agreed to by
Purchaser and Sutter. At the Closing, (a) Purchaser shall
deliver the Purchase Price in cash, by wire transfer of
immediately available funds, to Sutter and (b) Sutter shall
issue and deliver to Purchaser a preferred stock certificate
evidencing the Shares.
3. REPRESENTATIONS, WARRANTIES, ACKNOWLEDGEMENTS AND AGREEMENTS
3.1 Representations and Warranties.
(A) Purchaser represents and warrants that it is
purchasing the Shares in good faith solely
for its own account for the purpose of
investment and not with a view to or for
sale in connection with any distribution
thereof.
(B) Purchaser represents and warrants that
Purchaser has such knowledge and experience
in financial and business matters as to be
capable of evaluating the merits and risks
of an investment in Sutter, understands the
risks of an investment in Sutter,
understands the risks of, and other
considerations relating to, a purchase of
unregistered stock in Sutter, is able to
bear the economic risk of holding the
Shares, and can afford to suffer the
complete loss of its investment in Sutter.
(C) Purchaser represents and warrants that
Purchaser (i) understands and has taken
cognizance of all the risk factors related
to the purchase of the Shares, (ii) has been
granted the opportunity to ask questions of,
and receive satisfactory answers from,
representatives of Sutter, has had the
opportunity to obtain and has obtained any
additional information which it deems
necessary regarding the purchase of the
Shares, and (iii) has not relied on any
person in connection with its investigation
of the accuracy or sufficiency of such
information or its investment decision.
(D) Purchaser represents and warrants that
(i) the Shares is being offered and sold in
reliance on specific exemptions from the
registration requirements of Federal and
applicable state law and that the
representations, warranties, agreements,
acknowledgments and understandings set forth
herein are necessary in order to determine
the applicability of such exemptions and the
suitability of Purchaser to acquire such
Shares, (ii) the Shares have not been
registered under the Securities Act by
reason of their issuance by Sutter in a
transaction exempt from the registration
requirements of the Securities Act, pursuant
to Section 4(2) thereof or Rule 505 or 506
promulgated under the Securities Act, (iii)
the Shares and the shares of Common Stock
into which the Shares may be converted (such
shares, the "Converted Shares") must be held
by such Purchaser indefinitely unless a
subsequent disposition thereof is registered
under the Securities Act or is exempt from
such registration, (iv) the Shares and the
Converted Shares will bear a legend to such
effect and (v) Sutter will make a notation
on its transfer books to such effect.
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(E) Purchaser represents and warrants that (i)
Purchaser is duly organized, formed or
incorporated, as the case may be, and
validly existing and in good standing under
the laws of Purchaser's jurisdiction of
organization, formation or incorporation and
(ii) Purchaser has all requisite power and
authority to execute, deliver and perform
its obligations under this Agreement and to
perform its obligations hereunder and
consummate the transactions contemplated
hereby.
(F) Purchaser represents and warrants that this
Agreement has been duly executed by
Purchaser and constitutes a valid and
legally binding agreement of Purchaser,
enforceable against Purchaser in accordance
with its terms.
(G) Purchaser represents and warrants that it is
not itself, is not acting on behalf of, and,
for its purchase of Shares, is not using the
assets of, an employee benefit plan as
defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as
amended or any "plan" as defined in Section
4975(e)(1) of the Internal Revenue Code of
1986, as amended.
(H) Sutter represents and warrants that all
corporate action on the part of Sutter, its
directors and shareholders necessary for the
authorization, execution, delivery and
performance of this Agreement by Sutter, the
authorization, sale, issuance and delivery
of the Shares and the performance of
Sutter's obligations hereunder has been
taken prior to the Closing Date. This
Agreement, when executed and delivered by
Sutter, will constitute a valid and binding
obligation of Sutter enforceable in
accordance with its terms, subject to (i)
laws of general application relating to
specific performance, injunctive relief or
other equitable remedies and (ii) applicable
bankruptcy, insolvency, reorganization or
other laws of general application relating
to or affecting the enforcement of
creditors' rights generally.
(I) Sutter represents and warrants that when
issued, sold and delivered in accordance
with the terms of this Agreement for the
consideration provided for herein, the
Shares shall be duly authorized, validly
issued, fully paid and non-assessable and
shall be free of any liens or encumbrances,
except applicable state and federal
securities laws. Shares of Sutter common
stock, par value $0.0001 (the "Common
Stock") sufficient to permit the conversion
of the Shares have been duly and validly
reserved for issuance and, upon issuance in
accordance with the terms of the Amended
Certificate of Incorporation, will be duly
authorized, validly issued, fully paid and
non-assessable under applicable state and
federal securities laws.
(J) Sutter represents and warrants that
immediately prior to the Closing, the
capitalization of Sutter will consist of the
following:
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(i) Common Stock. A total of four million eight
hundred seventy five thousand (4,875,000)
authorized shares of Common Stock, of which
one million eight hundred twenty eight
thousand and seventy two (1,828,072) shares
are issued and outstanding. All of the
outstanding shares of Common Stock have been
duly authorized, fully paid and are
nonassessable and issued in compliance with
all applicable federal and state securities
laws.
(ii) Preferred Stock. A total of one hundred
twenty five thousand (125,000) authorized
shares of Preferred Stock, consisting of one
thousand five hundred (1,500) shares
designated as Series A Preferred Stock.
(iii) Other Securities. Sutter has reserved two
hundred thousand (200,000) shares of its
Common Stock for future issuance to
employees, directors and officers of, and
consultants to, Sutter under the Sutter
Holding Company, Inc. 2004 Stock Option Plan
(the "2004 Plan") as may be determined by
the Company's Board of Directors from time
to time. Under the 2004 Plan, there are
options outstanding to purchase forty nine
thousand six hundred fifty (49,650) shares.
Sutter has also issued (x) options to
purchase two hundred sixteen thousand
(216,000) shares of Common Stock to certain
employees of Sutter and (y) warrants to
purchase sixty thousand (60,000) shares of
Common Stock to certain investors.
(iv) Executive Bonus Agreements. Pursuant to
those certain Executive Bonus Agreements by
and between each of R. Michael Collins,
Robert Dixon and William Knuff (each, an
"Executive") on the one hand and Sutter on
the other, each dated as of June 28, 2004,
in conjunction with the closing of any
transaction whereby Sutter acquires another
entity, each Executive is entitled to
receive options to purchase a notional
amount of shares of Common Stock equal to 5%
of the equity value of such transaction.
(v) Repurchase Rights. Except for those rights
granted to holders of Preferred Stock,
Sutter has no obligation (contingent or
otherwise) to (x) issue any subscription,
warrant, option, convertible security or
other such right or (y) purchase, redeem or
otherwise acquire any shares of its capital
stock of any interest therein or to pay any
dividend or make any other distribution in
respect thereof.
3.2 Acknowledgements.
(A) Purchaser understands, recognizes and acknowledges
that the Shares have not been registered under the
Securities Act or any applicable state securities
laws by reason of exemptions from the registration
requirements of the Securities Act and such laws, and
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may not be sold, pledged, assigned, or otherwise
disposed of in the absence of an effective
registration statement under the Securities Act
unless an exemption from such registration is
available.
(B) Purchaser understands, recognizes and acknowledges
that the offer to sell the Shares was communicated to
Purchaser directly by Sutter and was not communicated
through any form of general advertising or
solicitation.
(C) Purchaser acknowledges and agrees that this
Agreement, along with the Registration Rights
Agreement by and between the purchaser and Sutter
dated as of the date hereof and the Put Agreement by
and between the Purchaser and Sutter dated as of the
date hereof, constitute the sole agreement, and
supersede all prior agreements, understandings and
statements, written or oral, among the parties or any
of their respective affiliates and any other person
with respect to the subject matter hereof and
thereof.
3.3 Agreements.
(A) Sutter agrees that, without the prior written consent
of 50% of the holders of the Preferred Stock
outstanding at such time, Sutter shall not: (i) cause
Diversified Risk to declare any dividends (other than
those dividends that are declared solely for the
purposes of paying declared and unpaid dividends on
the Preferred Stock) (ii) make any amendment to the
Certificate of Incorporation or Bylaws of Sutter that
materially adversely and prejudicially affects the
rights of the holders of the Shares or (iii) permit
any of its Subsidiaries to incur any Indebtedness
(other than Permitted Indebtedness).
(B) For so long as Purchaser holds more than 25% of the
Preferred Stock outstanding, if at any time Sutter is
no longer subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended,
Sutter shall provide the Purchaser with the
following, within the time periods specified in the
rules and regulations of the U.S. Securities and
Exchange Commission:
(i) the audited consolidated balance sheet of
Sutter its consolidated subsidiaries as at
the end of each year and the related audited
consolidated statements of income and cash
flows for such year; and
(ii) the unaudited consolidated balance sheet of
Sutter its consolidated subsidiaries as at
the end of each fiscal quarter and the
related audited consolidated statements of
income and cash flows for such fiscal
quarter.
(C) So long as Purchaser holds more than 25% of the
Preferred Stock outstanding as of the record date of
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any annual meeting, Sutter agrees to (i) include the
name of one individual designated by Purchaser as a
candidate for membership of Sutter's board of
directors (such individual, the "MPF Director") in
Sutter's proxy statement for such annual meeting and
(ii) recommend that the shareholders of Sutter vote
for the MPF Director; provided, that the MPF Director
is reasonably acceptable to Sutter.
3.4 Key Man Insurance. Within ninety (90) days of the Closing
Date, Sutter shall have obtained a paid life insurance policy
insuring the lives of Michael Collins, Robert Dixon and
William Knuff, each in the amount of $1,000,000 naming Sutter
as the primary beneficiary; provided that if the Loan Parties
are proceeding in good faith but are unable to deliver the
Life Insurance within such sixty (60) day period as a result
of circumstances beyond their control, Purchaser shall extend
the deadline for such requirement by an additional thirty (30)
days.
4. MISCELLANEOUS
4.1 Assignability. Except as expressly as set forth herein,
neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be
assignable by either Sutter or Purchaser without the prior
written consent of the other party; provided, that Purchaser
may assign or transfer this Agreement to its Affiliates.
4.2 Termination. This Agreement shall terminate upon the earliest
to occur of:
(A) the redemption of the Shares;
(B) the conversion of the Shares;
(C) written consent of Purchaser and Sutter; and
(D) Purchaser ceasing to own at least 50% of the Shares.
4.3 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of
this Agreement will be in writing and will be deemed to have
been given when delivered if delivered personally, sent via a
nationally recognized overnight courier, or sent via facsimile
to the recipient, or if sent by certified or registered mail,
return receipt requested, will be deemed to have been given
two business days thereafter. Such notices, demands and other
communications will be sent to the address indicated below:
To the Company:
William Knuff, III, Co-Chairman, Co-CEO and CFO and
R. Michael Collins, President
Sutter Holding Company, Inc.
220 Montgomery Street, Suite 2100
San Francisco, CA 94104
Facsimile: (415) 788-1515
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with a copy (which shall not constitute notice to the Company)
to:
Kirkland & Ellis LLP
Citigroup Center
153 East 53rd Street
New York, NY 10022
Attention: Eunu Chun, Esq.
Facsimile: (212) 446-4900
To MPF:
c/o MacKenzie Patterson Fuller, Inc.
Attn: Chip Patterson, Vice President & General
Counsel
1640 School Street
Moraga, CA 94556
or such other address, telecopy number or to the attention of such other Person
as the recipient party shall have specified by prior written notice to the
sending party.
4.4 Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights
specifically, to recover damages and costs (including
reasonable attorneys' fees) caused by reason of any breach of
any provision of this Agreement and to exercise all other
rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law
or equity of competent jurisdiction (without posting any bond
or other security) for specific performance and for other
injunctive relief in order to enforce or prevent violation of
the provisions of this Agreement.
4.5 Amendments and Waivers. No modification, amendment or waiver
of any provision of this Agreement shall be effective against
Sutter or the Purchaser unless such modification, amendment or
waiver is approved in writing by Sutter and the Purchaser. The
failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
4.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating
the remainder of this Agreement.
4.7 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain
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the signatures of more than one party, but all such
counterparts taken together will constitute one and the same
Agreement.
4.8 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
4.9 Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will
bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not.
4.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of
California, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of
California or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the
State of California.
4.11 Waiver of Jury Trial. The parties to this Agreement each
hereby waives, to the fullest extent permitted by law, any
right to trial by jury of any claim, demand, action, or cause
of action (i) arising under this Agreement or (ii) in any way
connected with or related or incidental to the dealings of the
parties hereto in respect of this Agreement or any of the
transactions related hereto, in each case whether now existing
or hereafter arising, and whether in contract, tort, equity,
or otherwise. The parties to this Agreement each hereby agrees
and consents that any such claim, demand, action, or cause of
action shall be decided by court trial without a jury and
that the parties to this Agreement may file an original
counterpart of a copy of this Agreement with any court as
written evidence of the consent of the parties hereto to the
waiver of their right to trial by jury.
4.12 Jurisdiction. Each of the parties hereto submits to the
jurisdiction of any state or federal court sitting in San
Francisco, California, in any action or proceeding arising out
of or relating to this Agreement and agrees that all claims in
respect of the action or proceeding may be heard and
determined in any such court and hereby expressly submits to
the personal jurisdiction and venue of such court for the
purposes hereof and expressly waives any claim of improper
venue and any claim that such courts are an inconvenient
forum. Each of the parties hereby irrevocably consent to the
service of process of any of the aforementioned courts in any
such suit, action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to
its address set forth in Section 4.3, such service to become
effective 10 days after such mailing.
4.13 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted
jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by
virtue of the authorship of any of the provisions of this
Agreement.
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4.14 Entire Agreement. This Agreement and the agreements, the
documents referred to herein, the Registration Rights
Agreement by and among Sutter, the Purchaser and the other
parties named therein dated as of the date hereof and the Put
Agreement by and between Sutter and the Purchaser dated as of
the date hereof contain the entire agreement and understanding
among the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings,
whether written or oral, relating to such subject matter in
any way.
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IN WITNESS WHEREOF, Sutter and Purchaser have executed this
Agreement as of the day and year first above written.
SUTTER HOLDING COMPANY, INC.
By: /s/ ROBERT DIXON
--------------------------
Name: Robert Dixon
Title: Co-Chief Executive Officer
MACKENZIE PATTERSON FULLER, INC.
By: /s/ GLEN W. FULLER
--------------------------
Name: Glen W. Fuller
Title: Senior Vice President
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