EXHIBIT 2.3
ACQUISITION AGREEMENT
FIRST MORTGAGE INVESTMENT CO.
AND
ADVANCED FINANCIAL, INC.
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Table of Contents
1 Definitions............................................................1
2 Sale of Property.......................................................3
2.1 Purchase Price...................................................3
2.2 Settlement Charges...............................................4
2.3 Assumption of First Mortgage.....................................4
2.4 Title and Survey Requirements....................................4
2.5 Disclosure of Information Related to Real Estate.................5
2.6 Representations and Warranties of AFIM...........................5
2.7 Instruments of Transfer..........................................7
3 Recapitalization and Cancellation of Second Mortgage in Exchange for AFI
Stock..................................................................7
3.1 Conditions.......................................................7
3.2 Recapitalization.................................................8
3.3 Instruments of Transfer..........................................8
4 Option.................................................................9
5 Representations and Warranties of AFI and AFIM.........................9
5.1 Authority........................................................9
5.2 Title to Property and Assets.....................................9
5.3 Good Standing....................................................9
6 Representations and Warranties of FMIC.................................9
7 Covenants of AFI, AFIM and FMIC........................................9
7.1 Cooperation.....................................................10
8 Conditions Precedent to the Obligations of AFI and AFIM...............10
8.1 FMIC Representations True At Closing............................10
8.2 FMIC Performance Prior to Closing...............................10
8.3 Plan Confirmed..................................................10
9 Conditions Precedent to the Obligations of FMIC.......................10
9.1 AFI Representations True At Closing.............................10
9.2 AFI Performance Prior to Closing................................10
9.3 Plan Confirmed..................................................10
9.4 Contents of Confirmation Order..................................10
9.5 Completeness of Confirmation Order.............................11
9.6 Good Standing...................................................11
9.7 Subsidiary......................................................11
9.8 Independent Audit...............................................11
9.9 Securities and Exchange Commission Filings......................11
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10 Termination...........................................................11
10.1 By Mutual Consent...............................................11
10.2 By FMIC.........................................................12
10.3 By AFI..........................................................12
10.4 No Liability....................................................12
11 Miscellaneous.........................................................12
11.1 Time............................................................12
11.2 Notice..........................................................12
11.3 Survival........................................................12
11.4 Entire Agreement................................................12
11.5 Binding Effect..................................................12
11.6 Amendments......................................................12
11.7 Expenses........................................................13
11.8 Headings........................................................13
11.9 Construction of Agreement.......................................13
11.10 Counterparts. ..................................................13
11.11 No Assumption of AFI's or AFIM's Liabilities....................13
Table of Exhibits...........................................................15
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ACQUISITION AGREEMENT
THIS AGREEMENT is made as of the 13th day of November, 1998, by and among
FIRST MORTGAGE INVESTMENT CO., a Missouri corporation ("FMIC"), ADVANCED
FINANCIAL, INC., a Delaware corporation ("AFI") and AFI MORTGAGE, INC., a
Nebraska corporation ("AFIM").
RECITALS:
WHEREAS, AFI, a publicly traded company, is a debtor-in-possession in Case
No. 98-41228-11-JAP ("AFI Bankruptcy Proceeding") pending in the United States
Bankruptcy Court for the District of Kansas (the "Bankruptcy Court");
WHEREAS, AFIM, a wholly owned subsidiary of AFI, is a debtor-in-possession
in Case No. 97-43122-11-JAP ("AFIM Bankruptcy Proceeding") pending in the
Bankruptcy Court;
WHEREAS, the AFI Bankruptcy Proceeding and the AFIM Bankruptcy Proceeding
have been consolidated for administrative purposes by the Bankruptcy Court;
WHEREAS, FMIC is a secured creditor of AFIM holding a promissory note and
second mortgage, on certain real estate owned by AFIM, a copy of which second
mortgage is attached hereto as Exhibit A ("Second Mortgage");
WHEREAS, AFI, AFIM and FMIC desire to accomplish the following
transactions:
(i) AFIM will sell the Property as defined in Section 1.12 below to
FMIC;
(ii) FMIC will contribute the Second Mortgage Note held by FMIC to the
capital of AFI and will cancel the Second Mortgage held by FMIC in
exchange for stock in AFI representing sixty percent (60%) ownership
of all issued and outstanding common capital stock of AFI
immediately after the cancellation of FMIC's Second Mortgage and the
issuance of such stock in exchange thereof; and
(iii) AFI will grant an option to FMIC to acquire additional stock in AFI,
which option, if exercised to its fullest extent, would permit FMIC
to own eighty percent (80%) of the total issued and outstanding
common capital stock of AFI immediately after exercise of the
option.
NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and intending to be legally bound, the parties hereto do
hereby agree as follows:
1 Definitions. As used in this Agreement, terms defined in the preamble and
recitals of this Agreement shall have the meaning set forth therein and the
following terms shall have the meanings set forth below.
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1.1 "Joint Plan of Reorganization" shall mean that certain joint plan of
reorganization adopted and confirmed by the Bankruptcy Court in the AFI
Bankruptcy Proceeding and the AFIM Bankruptcy Proceeding in substantially the
same form as Exhibit 1.1 attached hereto.
1.2 "Agreement" shall mean this Acquisition Agreement and all Exhibits
hereto, as the same may from time to time be amended.
1.3 "Closing" shall mean the closing of the transactions contemplated by
this Agreement to be held at the offices of Hillix, Brewer, Hoffhaus, Whittaker
& ▇▇▇▇▇▇, L.L.C., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ - ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
or other such place as is mutually agreed to in writing by the parties to this
Agreement.
1.4 "Closing Date" shall mean the date on the Closing and shall be
September 15, 1998 or such other date as the parties may agree.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.6 "Confirmation Date" shall mean the date upon which the Confirmation
Order is entered by the Bankruptcy Court after a hearing conducted pursuant to
ss. 1128 of the Bankruptcy Code.
1.7 "Confirmation Order" shall mean the order of the Bankruptcy Court
confirming the Plan of Reorganization.
1.8 "Effective Date" shall mean the first day occurring on or after the
tenth (10th) day following the Confirmation Date, unless the Confirmation Order
is stayed pending appeal, in which case the Effective Date shall be the first
business day after the stay is vacated, or as soon thereafter as is practicable.
1.9 "First Mortgage" shall mean the promissory note and first mortgage
on the Property held by Citizen's National Bank, located at 7900 Quivira,
Lenexa, KS. 66215, attn:
▇▇▇ ▇▇▇▇▇▇, copies of which are attached hereto as Exhibit 1.9.
1.10 "Improvements" shall mean all improvements on the Property
including, without limitation, the building (the "Building") that is currently
located on the Property and all personal property used in the operations of the
Building including, without limitation, all mechanical systems, fixtures and
equipment, other than leased equipment.
1.11. "Liabilities" shall mean all debts, liabilities, taxes, obligations
under contracts, leases, agreements and commitments, and other obligations of
every kind and character of AFI or AFIM as the same may exist at the Closing
Date, whether accrued, absolute, contingent or otherwise, and whether due, to
become due or which may arise in the future based upon events or a state of
facts existing at the Closing Date.
1.12. "Property" shall mean that certain real property ("Land") as
described by Exhibit 1.12 attached hereto and made a part hereof and the
Improvements, together with all of Sellers' right, title and interest in
and to (a) any and all roads, easements, streets and ways bounding the
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Land, and (b) any rights of ingress and egress, development rights, zoning
rights and applications, air rights, water rights and sewer rights relating to
the Land and any strips or gores of land adjoining the Land; (c) all site plans,
surveys, soil and substrata studies, architectural renderings, plans and
specifications, engineering plans and studies, floor plans, environmental
audits, landscape plans and other plans, diagrams or studies of any kind, if
any, in Sellers' possession which relate to the Land or the Improvements; and
(d) all other rights, privileges and appurtenances owned by Sellers and any
rights privileges, easements, appurtenances and immunities belonging thereto or
in any way pertaining thereto.
1.13 "Purchase Price" shall have the meaning indicated in Paragraph 2.1
hereof; and
1.14 "Record Date" shall mean the date upon which the shareholders of
record shall be determined for purposes of issuing stock pursuant to Paragraph
3.2 hereof.
1.15 "Settlement Charges" shall, except as otherwise provided by this
Agreement, mean costs of unpaid taxes, liens and the value of real estate
commissions avoided of the Property adjusted through the Closing Date.
1.16 "Title Commitment" shall mean a commitment for issuance of title
insurance as provided in Paragraph 2.4.1 hereof.
1.17 "Title Company" shall mean Columbian National Title Insurance
Company of ▇▇▇▇▇▇▇ County, Inc, located at ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
1.18 "Title Policy" shall mean the title insurance policy required in
Paragraph 2.4.1 hereof.
2 Sale of Property. AFIM agrees to sell, transfer, assign, convey and deliver to
FMIC, or its assigns, and FMIC agrees to purchase, accept and acquire from AFIM,
the Property, free and clear from any and all security interests, liens, and
encumbrances of every type and nature whatsoever including, but not limited to,
leases, tenancies or possessory rights of any kind, except as specifically
provided for herein.
2.1 Purchase Price. FMIC agrees to pay for the Property the sum of
One Million Thirty Thousand and No/100 Dollars ($1,030,000.) less
Settlement Charges as defined at paragraph 2.2 as follows:
2.1.1 An amount equal to the principal and accrued interest through
the Closing Date due and owing on the First Mortgage shall be paid by assumption
of such First Mortgage provided in Paragraph 2.3 below; and,
2.1.2 Cash or certified funds payable on the Closing Date in an
amount equal to the difference between the Purchase Price and the principal
balance plus accrued interest through the Closing Date due and owing on the
First Mortgage.
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2.2 Settlement Charges. All Settlement Charges due hereunder shall be
paid from or credited against the cash otherwise payable to AFIM at Closing as
defined in Paragraph 2.1 above.
2.3 Assumption of First Mortgage. FMIC agrees to assume all of AFIM's
obligations under the First Mortgage and FMIC agrees to at all times save
harmless AFI and AFIM against all claims, demands, actions, proceedings, costs
and expenses by reason of or growing out of obligations under the First
Mortgage. Except as specifically provided for herein, FMIC shall not assume or
become liable for any of AFI's or AFIM's Liabilities now or hereafter existing.
2.4 Title and Survey Requirements.
2.4.1 Title Commitment. AFI and AFIM (collectively "Sellers") shall,
as soon as possible but not later than ten (10) business days from the date
hereof and at Sellers' expense, cause to be furnished to FMIC a current ACTA
1992 commitment for an owner's policy of title insurance (the "Title
Commitment") on the Property issued by the Title Company in an amount not less
than the Purchase Price together with copies of all documents identified on the
Title Commitment as Schedule B exceptions. The Title Commitment shall: (i)
describe the Property; (ii) name FMIC as the party to be insured thereunder;
(iii) commit to insure FMIC with indefeasible, good and marketable title; and
(iv) satisfy the title policy requirements set forth on Exhibit 2.4.1, attached
hereto and incorporated herein by this reference. The Title Commitment shall
also commit to issue such endorsements as FMIC in its sole and absolute
discretion shall deem advisable including but not limited to an access
endorsement and a zoning endorsement.
2.4.2 Survey. Sellers shall, as soon as possible but not later than
twenty (20) business days from the date hereof and at Sellers' expense, cause to
be prepared and furnished to FMIC and the Title Company a current survey
prepared by a Registered Public Surveyor acceptable to FMIC and to the Title
Company (the "Survey") of the Property. The Survey at a minimum shall meet the
standards and requirements set forth on Exhibit 2.4.2 attached hereto and
incorporated herein by this reference. Sellers shall provide to the surveyor a
copy of Exhibit 2.4.1 when the Survey is ordered. The Survey shall be
satisfactory to the Title Company so as to permit the Title Company to delete
the standard printed survey and boundary exceptions in the Owner's Title Policy
to be issued to FMIC as required herein. Sellers covenant and agree that they
shall, at their expense, cause to be effected a lot split, replat or other
subdivision of the real property containing the Property such that the
conveyance of the Property to FMIC hereunder complies with the applicable
subdivision ordinance or municipal development plan, if required.
2.4.3 Review of Title and Survey. FMIC shall have twenty (20) days
after the receipt of both the Survey and the Title Commitment in which to notify
Sellers of any objections FMIC has to any matters with respect to the Title
Commitment or the Survey. Any title encumbrances or exceptions which are set
forth in the Title Commitment or the Survey and to which FMIC does not timely
object shall be deemed to be permitted exceptions to the status of Sellers'
title (the "Permitted Exceptions"). With regard to items to which FMIC does
timely object, Sellers shall cure such matters within twenty (20) days from the
date of FMIC's notice (the "Cure Period"), provided that Sellers shall be
obligated, as of the Closing Date, to cause to be fully paid and discharged, and
either released of record or insured over, all deeds of trust and other
financing documents of record encumbering the Property or any part thereof
(collectively, "Mortgage Documents"), excepting only the First Mortgage which
Buyer has agreed to assume
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hereunder. Any matter to which FMIC objects shall be deemed cured if Sellers
obtain the agreement of the Title Company to issue the Owner's Title Policy to
FMIC without making exception for such matter or to provide affirmative
insurance acceptable to FMIC, in FMIC's sole discretion, against such matter. If
Sellers fail to cure such objections within the Cure Period, FMIC, at FMIC's
option, may waive the objections not cured or terminate this Contract by notice
to Sellers. If, as of 5:00 P.M. on the last day of the Cure Period, any such
objection of FMIC remains uncured and FMIC has not waived the title objection in
writing, then FMIC shall be irrevocably deemed to have canceled the Contract.
2.5 Disclosure of Information Related to Real Estate. Sellers shall, as
soon as possible and not later than twenty (20) days from the date hereof,
deliver to FMIC legible, accurate and complete copies of the following, to the
extent that such items exist and are within Sellers' possession (the "Delivery
Items"):
2.5.1 the most recent ad valorem tax statements from all taxing
authorities having jurisdiction over the Property; and
2.5.2 site plans, surveys, soil and substrata studies, architectural
renderings, as built plans and specifications, engineering plans and studies,
floor plans, landscape plans and the plans, diagrams or studies of any kind, if
any, in Sellers' possession, which relate to the Land or the Improvements,
together with all documents relating or pertaining to all warranties and
guaranties of construction, if any, in Sellers' possession;
2.5.3 Schedule of repairs/replacements during the past 36 months;
2.5.4 Disclosure as to who is responsible for maintenance and
repairs to ingress-egress easements to the Property;
2.5.5 Copy of the construction and building plans for the Property;
2.5.6 Copy of any existing Phase I Environmental Report on the
Property. FMIC and their authorized representatives shall have the right to
inspect the Property.
2.6 Representations and Warranties of AFIM. AFIM hereby represents and
warrants as of the date hereof and as of the Closing Date that, to the best of
its knowledge and belief:
2.6.1 There are no contracts of employment, management, maintenance,
service, supply or rental outstanding which affect any portion of the Property
or its operation.
2.6.2 There is no pending condemnation or similar proceeding
affecting the Property or any portion thereof, and Sellers have not received any
written notice that any such proceeding is contemplated.
2.6.3 The Property is not in violation of any federal, state, county
or municipal law, ordinance, order, regulation or requirement and no written
notice of any such violation has been issued to Sellers by any governmental
authority.
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2.6.4 The Property does not contain any of the following
(collectively, "Hazardous Materials"): (a) urea formaldehyde foam insulation;
(b) transformers or other equipment which contain dielectric fluid containing
polychlorinated biphenyls; (c) pesticides or herbicides; or (d) any other
chemical, material or substance to which exposure is prohibited, limited or
regulated by any federal, state, county, regional or local authority.
2.6.5 The Property is not now being used nor has it been used during
the period of Sellers' ownership for any activities involving, directly or
indirectly, the use, generation, treatment, storage or disposal of any Hazardous
Materials.
2.6.6 The Property has access to and from one or more publicly
dedicated streets, highways or roads.
2.6.7 No work has been performed or is in progress by Sellers at the
Property and no materials have been furnished to the Property or any portion
thereof by or for Sellers, which might give rise to mechanic's, materialman's or
other liens against the Property or any portion thereof.
2.6.8 Sellers are not a party to any contracts or other obligations
outstanding for the sale, exchange or transfer of the Property or any portion
thereof.
2.6.9 Sellers are not foreign persons selling property as described
in the Foreign Investment in Real Property Tax Act and agree to deliver an
affidavit at Closing reflecting that Sellers are not such foreign persons and
providing Sellers' tax identification numbers ("Tax Affidavit").
2.6.10 There are no actions, suits, claims, proceedings or
causes of action which are pending or have been threatened or asserted against,
or are affecting, Sellers or the Property or any part thereof in any court or
before any arbitrator, board or governmental or administrative agency or other
person or entity which might have an adverse effect on the Property.
2.6.11 No zoning, building or similar law, ordinance or
regulation is, or as of the Closing will be, violated by the continued
maintenance, operation or use of the Property.
To the best of Seller's knowledge, all information created or
generated by Seller and given to FMIC with respect to the Property, or the
operations thereon, is true and correct in all respects and fully and accurately
depicts the matters set forth therein. To the best of Seller's knowledge, there
are no facts or other information concerning the condition of the Property which
have not been disclosed fully to FMIC and which could reasonably be expected to
have a material bearing upon FMIC's decision to enter into this Agreement.
2.7 Instruments of Transfer.
2.7.1 AFIM's Deliveries. At the Closing, AFIM shall deliver to FMIC:
(a) A special warranty deed for the Property.
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(b) The Title Policy insuring the Property as provided by
Paragraph 2.4.1 above, issued at the expense of AFIM.
(c) Such other instrument or instruments necessary to
complete the sale of the Property contemplated under this Agreement.
2.7.2 FMIC's Deliveries. At the Closing, FMIC shall deliver to AFIM:
(a) Cash or certified funds required under Paragraph 3
above; and
(b) Such other instrument or instruments necessary to
complete the sale of the Property contemplated under this Agreement.
3 Recapitalization and Cancellation of Second Mortgage in Exchange for AFI
Stock. AFI agrees to issue to FMIC, and FMIC agrees to accept in complete
satisfaction and release of AFIM's obligations to FMIC under the Second
Mortgage, the number of shares of AFI's common capital stock which equals sixty
percent (60%) of its total issued and outstanding common capital immediately
after said issuance. Under the terms of the AFI and AFIM Joint Plans of
Reorganization, such number of shares is expected to be one million eight
hundred thousand (1,800,000) shares.
3.1 Conditions. FMIC's obligation to cancel the Second Mortgage in
exchange for receipt of AFI stock shall be subject to the following conditions:
3.1.1 All existing stock options or stock warrants, if any, of
either AFI or AFIM will be terminated; and
3.1.2 AFI shall have only one class of stock.
3.1.3 AFI and AFIM shall have no liabilities, obligations, contracts
or other commitments of any kind or nature except as set forth in the AFI and
AFIM Joint Plan of Reorganization.
3.2 Recapitalization. As part of the Joint Plan of Reorganization, AFI
shall:
3.2.1 Cancel all outstanding common and preferred stock, as of the
Closing Date, and replace said canceled stock with one class of common capital
stock as described in Paragraph 3.2.2 below; and
3.2.2 In replacement of the stock canceled as described in Paragraph
3.2.1, issue common capital stock aggregating ten percent (10%) of AFI's total
outstanding common capital stock to the canceled common and preferred stock
shareholders, on a pro rata basis to their respective common and preferred stock
ownership in AFI as of the Record Date as set forth in the AFI Plan of
Reorganization. It is now anticipated that this ten percent (10%) shall be
represented by three hundred thousand (300,000) shares; and
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3.2.3 Issue common capital stock aggregating thirty percent (30%) of
its common capital stock to all the creditors, excluding FMIC, of AFI and AFIM,
on a pro rata basis of each respective creditor's outstanding receivables from
AFI and AFIM as set forth in the AFI and AFIM Plan of Reorganization. It is now
anticipated that this thirty percent (30%) shall be represented by nine hundred
thousand (900,000) shares.
3.2.4 It is now anticipated that AFI's stock ownership after the
recapitalization and exchange of the Second Mortgage for stock shall be as
follows:
Shares Percent
(a) Pre-transaction Shareholders 300,000. (10.%)
(b) AFI and AFIM Creditors 900,000. (30.%)
(c) FMIC 1,800,000. (60.%)
(d) Total Anticipated Shares 3,000,000. (100.%)
3.2.5 The Articles of Incorporation of AFI shall be amended to
provide for capital of Ten Million (10,000,000) shares of common stock, $0.001
par value, and One Million (1,000,000) shares of Preferred Stock, $0.005 par
value. The Articles shall provide that the terms and conditions of each series
of the Preferred Stock shall be established from time to time by the Board of
Directors as provided by Section 151 of the Delaware General Corporation Law.
3.3 Instruments of Transfer.
3.3.1 AFI's Deliveries. At the Closing, AFI shall deliver to FMIC;
(a) Stock certificate or certificates in the name of FMIC as
owner representing that number of shares in AFI's common stock equal to sixty
percent (60%) of AFI's total outstanding common stock immediately after the
issuance of stock contemplated in Paragraph 3 above. Such shares shall be
lawfully issued, validly authorized, fully paid and non assessable.
(b) Such other instrument or instruments necessary to complete
the recapitalization and issuance of stock to FMIC contemplated under this
Agreement or required by the AFI Joint Plan of Reorganization.
3.3.2 FMIC's Deliveries. At the Closing FMIC shall deliver to AFI or
AFIM:
(a) All documents and instruments necessary to effect FMIC's
complete satisfaction and release of AFIM's obligations under the Second
Mortgage; and
(b) Such other instrument or instruments necessary to complete
the recapitalization and issuance of stock to FMIC contemplated under this
Agreement or required by the Joint Plans of Reorganization.
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4 Option. AFI agrees to grant to FMIC an option in the form of the Option
Agreement attached hereto as Exhibit 4 to acquire additional stock in AFI
5 Representations and Warranties of AFI and AFIM. Except as expressly provided
herein, the purchase of the Property herein and the acquisition by FMIC of AFI's
common stock as contemplated herein is "as is-where is." Notwithstanding the
foregoing AFI and AFIM represent and warrant to FMIC as follows:
5.1 Authority. Each individual executing this Agreement on behalf of AFI
and AFIM has authority to execute and deliver this Agreement, and the terms
hereof are binding and enforceable upon AFI and AFIM in accordance with its
terms.
5.2 Title to Property and Assets. At Closing, AFIM will have authority to
transfer good and marketable title to the Property in accordance with the terms
and conditions of this Agreement, free and clear of any mortgage, pledge, lien,
security interest, lease, charge, encumbrance or conditional sale or other title
retention agreement, except as otherwise expressly provided herein.
5.3 Good Standing. AFI and AFIM are duly organized and in good standing in
their respective states of incorporation.
6 Representations and Warranties of FMIC. FMIC represents and warrants that each
individual executing this Agreement and any other agreements contemplated hereby
on behalf of FMIC is a duly authorized officer of FMIC and that each such
individual has authority to execute and deliver this Agreement and any other
agreements contemplated hereby on behalf of FMIC, and that the terms hereof are
binding and enforceable upon FMIC in accordance with their respective terms.
FMIC is duly organized and in good standing in the State of Missouri.
7 Covenants of AFI, AFIM and FMIC. AFI, AFIM and FMIC covenant and agree that,
prior to the Closing Date, except as otherwise consented to in writing by the
other parties or as permitted by this Agreement:
7.1 Cooperation. AFI, AFIM and FMIC shall use their best efforts to obtain
all consents and authorizations of third parties and make all filings with and
give all notices to third parties which may be necessary or reasonably required
in order to effect the sale and adoption of the Joint Plans of Reorganization
contemplated by this Agreement and take such additional actions so that the
transactions contemplated by this Agreement may be expeditiously consummated.
8 Conditions Precedent to the Obligations of AFI and AFIM. All obligations of
either AFI or AFIM under this Agreement are subject to the fulfillment, at or
prior to the Closing Date, of each of the following conditions, which conditions
may be waived only by both AFI and AFIM:
8.1 FMIC Representations True At Closing. The representations and
warranties of FMIC herein contained shall be true and correct in all material
respects as of the date hereof and shall continue to be true and correct as of
the Closing Date with the same force and effect as though made as of the Closing
Date.
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8.2 FMIC Performance Prior to Closing. FMIC shall have performed or
complied with all its obligations, agreements and covenants contained herein
that are required to be performed by it prior to the Closing.
8.3 Plan Confirmed. Entry of the Confirmation Order and expiration or the
appeal period for such Order without an appeal having been perfected.
9 Conditions Precedent to the Obligations of FMIC. All obligations of FMIC under
this Agreement are subject to the fulfillment, at or prior to the Closing Date,
of each of the following conditions, which conditions may be waived only by
FMIC:
9.1 AFI Representations True At Closing. The representations and
warranties of both AFI and AFIM herein contained shall be true and correct as of
the date hereof and shall continue to be true and correct as of the Closing Date
with the same force and effect as though made as of the Closing Date.
9.2 AFI Performance Prior to Closing. AFI and AFIM shall have performed or
complied with all the obligations, agreements and covenants of AFI and AFIM
herein contained to be performed by them prior to or as of the Closing Date.
9.3 Plan Confirmed. Entry of the Confirmation Order and expiration of the
appeal period for such Order without an appeal having been perfected.
9.4 Contents of Confirmation Order. The Confirmation Order shall contain:
9.4.1 approval of AFI's cancellation of all existing stock and
warrants.
9.4.2 approval of the recapitalization of AFI's outstanding common
and preferred stock as described herein.
9.4.3 approval of AFI's issuance of sixty percent (60%) of its
common capital stock, as measured immediately after such issuance, to FMIC in
complete satisfaction and release of AFIM's obligations to FMIC under the Second
Mortgage.
9.4.4 approval of AFI's issuance of thirty percent (30%) of its
common capital stock, as measured immediately after such issuance, in complete
satisfaction and release of AFIM's obligations to its creditors under the AFIM
Bankruptcy Proceeding and AFI obligations to its creditors under the AFI
Bankruptcy Proceeding.
9.4.5 approval that ten percent (10%) of AFI's outstanding common
capital stock be reallocated, as measured immediately after such reallocation,
to its pre-recapitalization common and preferred shareholders on a pro rata
basis.
9.4.6 approval of Amendment of Articles of Incorporation.
9.4.7 approval of AFI's issuance of the Option, as provided in
Paragraph 4 above and Exhibit 4, to FMIC.
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9.4.8 approval of AFI's sale of the real property to FMIC.
9.5 Completeness of Confirmation Order. The Confirmation Order shall not
omit any term or condition deemed reasonably necessary by FMIC to obtain the
benefits of the bargain of this agreement nor shall it contain any term which,
in the reasonable opinion of FMIC, causes a material adverse change in this
agreement
9.6 Good Standing. At the Closing Date, AFI and AFIM will be good standing
in their respective states of incorporation and in any other jurisdiction where
they are required to be qualified to do business.
9.7 Subsidiary. AFIM has remained a wholly owned subsidiary of AFI.
9.8 Independent Audit. Completion of an audit by an independent certified
public accountant verifying the amount, expiration schedule and other pertinent
details of AFI's net operating loss carry forward, as defined under the Code.
9.9 Securities and Exchange Commission Filings. Completion and filing, by
AFI, of all of its Security and Exchange Commission filings required to be filed
as of the Closing Date.
10 Termination. Notwithstanding anything to the contrary herein, this Agreement
may be terminated and the transactions contemplated hereby may be abandoned:
10.1 By Mutual Consent. By the mutual consent of AFI, AFIM and FMIC
at any time prior to the Closing Date;
10.2 By FMIC. By FMIC if there exists a material breach of any
representation or warranty made to FMIC or any covenant or agreement to be
performed by AFI or AFIM, or if any condition to the obligation of FMIC
hereunder becomes impossible to fulfill or remains unfulfilled on the Closing
Date, as such may have been extended by mutual written consent of the parties;
or
10.3 By AFI. By AFI or AFIM if there exists a material breach of any
representation or warranty made to either AFI or AFIM, or any covenant or
agreement to be performed by FMIC, or if any condition to the obligation of AFI
hereunder becomes impossible to fulfill or remains unfulfilled on the Closing
Date, as such may have been extended by mutual written consent of the parties.
10.4 No Liability. Upon the termination of this Agreement under this
Paragraph 11, no party hereto shall have any further liability or obligation to
any other party hereunder.
11 Miscellaneous. It is further agreed as follows:
11.1 Time. Time is of the essence of this Agreement.
11
11.2 Notice. All notices required hereunder will be in writing and served
by certified mail, return receipt requested, postage prepaid or by an overnight
express mail courier and addressed to the parties at the addresses set forth
below:
11.2.1 FMIC's Address. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President, First
Mortgage Investment Co., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇. With a copy to:
▇▇▇▇▇▇ ▇. Goodman, Shughart, Thomson & ▇▇▇▇▇▇, P.C., Twelve Wyandotte Plaza, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
11.2.2 AFI's Address. ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice
President, Advanced Financial Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇.
With copies to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Hillix, Brewer, Hoffhaus, Whittaker and
▇▇▇▇▇▇, L.L.C., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, P.A.,15031 ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇
11.3 Survival. The covenants, representations and warranties of AFI, AFIM
and FMIC herein contained will be effective on the date hereof and on the
Closing Date and will survive Closing.
11.4 Entire Agreement. This Agreement and all Exhibits hereto constitutes
the entire agreement and understanding between FMIC and AFI and AFIM with regard
to the subject matter hereof and supersedes any prior agreements,
understandings, warranties or representations between AFI, AFIM and FMIC except
as set forth herein.
11.5 Binding Effect. This Agreement will inure to the benefit of and bind
the respective successors and assigns of the parties.
11.6 Amendments. This Agreement may be amended, modified and supplemented
only by written agreement executed by the parties at any time with respect to
any of the terms contained herein and, if prior to the entry of the Confirmation
Order, upon approval by appropriate order of the Bankruptcy Court.
11.7 Expenses. Each of the parties will be responsible for payment of its
own expenses (including legal fees) incurred in connection with the transactions
contemplated by this Agreement, regardless of whether or not such transactions
are consummated.
11.8 Headings. The headings provided in this Agreement are for convenience
only and have no legal significance.
11.9 Construction of Agreement. This Agreement shall be governed by and
interpreted and construed under and by virtue of the laws of the State of
Kansas, regardless of the domicile of either AFI, AFIM or FMIC.
11.10 Counterparts. For the convenience of the parties, this Agreement may
be executed in several counterparts, which are in all respects identical and
each of which shall be deemed to be complete in itself so that any one may be
introduced in evidence or used for any other purpose without the production of
the other counterparts.
12
11.11 No Assumption of AFI's or AFIM's Liabilities. Except as expressly
provided herein, FMIC is acquiring only the Property from AFIM and common
capital stock and the Option from AFI and is not the successor of either AFI or
AFIM. FMIC does not assume or agree to pay, or indemnify either AFI, AFIM or any
other person or entity against, any liability, obligation or expense of either
AFI or AFIM.
IN WITNESS WHEREOF, the parties have hereunto set their hands in duplicate
the day and year first above written.
FMIC
FIRST MORTGAGE INVESTMENT CO., a Missouri corporation.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Vice President
AFI
ADVANCED FINANCIAL, INC., a Delaware corporation.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President
AFIM
AFI MORTGAGE, INC., a Nebraska corporation.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
NAME, TITLE
13
Table of Exhibits
A. Second Mortgage*
1.1 AFI Plan of Reorganization**
1.9 First Mortgage*
1.12 Real Property Description
2.4.1 Title Insurance Requirements
2.4.2 Survey Requirements
4 Option Agreement for FMIC
-------------
*Pursuant to Item 601(b)(2) of Regulation S-K under the Securities Act of 1933,
as amended, these exhibits have been omitted from this filing. The registrant
agrees to furnish supplementally a copy of such omitted exhibits to the
Commission upon request.
**This exhibit is being filed as Exhibit 2.1 to the Form 8-K.
14
Exhibit 1.12
REAL PROPERTY
Property Description:
"Lot ▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ FIRST PLAT, a subdivision in the
City of Shawnee, ▇▇▇▇▇▇▇ County, Kansas."
1
Exhibit 2.4.1
Title Commitment Requirements
1. The Title Commitment shall show that the policy will be issued on an
ALTA Extended Coverage Owner's form, revised 1992 naming Buyer as the
prospective insured and showing as the policy amount the total purchase price
for the Property.
2. The Title Commitment shall contain a legal description of the Property,
which description must be identical with the description of the Property
included in the Survey submitted to Buyer. The legal description shall show as
separately insured parcels any off-premises easements that benefit the Property.
3. The Title Commitment shall list and identify by reference to volume and
page, where recorded, all easements, rights-of-way and other instruments or
matters affecting title to the Property.
4. The Title Commitment must separately from the matters set forth in 3
above, and identify by reference to the volume and page where recorded, all
instruments or matters affecting title to any off-premises easements that
benefit the Property.
5. Legible copies of all instruments affecting title to the Property shall
be submitted with the Commitment.
6. All easements, rights-of-way, set-back requirements, etc., listed as
exceptions to title shall appear on the Survey submitted to Buyer.
7. Additional endorsements (which may take the form of affirmative
insurance covering, for example, restrictive covenants, encroachments, etc.) may
be required, depending upon the state in which the Property is located and the
status of title as shown in the Title Commitment. An ALTA Form 100 endorsement
shall be required where restrictions affect the Property. An ALTA Form 100.29 or
100.30 shall be required where mineral exceptions appear on Schedule B of the
Title Commitment.
8. With regard to the standard printed exceptions and other common
exceptions generally included in Title Commitments, (i) there shall be no
exceptions for "any lien", or right to a lien, for services, or material
heretofore or hereafter furnished, imposed by law and now shown by the public
records," (ii) the exception for ad valorem taxes or special assessments shall
reflect only taxes and special assessments for the current year and shall be
annotated "Net yet due and payable", (iii) the exception for survey or
"encroachments, overlaps, boundary line disputes, and any other matters which
would be disclosed by an accurate survey and inspection of the Premises" shall
be deleted, (iv) there shall be no exception for "easements or claims of
easements not shown by the public records" or the like (although exception may
be made to a specified unrecorded exception shown on a specified
survey), (v) there shall be no exception for "rights of parties in
possession not shown by the public records" although there may be an exception
for "rights of tenants under unrecorded leases, as tenant only", and (vi) any
restrictive covenants shown on the Title Commitment shall provide affirmative
insurance that "there are no current violations of any covenants and/or
restrictions and any future violation shall not result in a forfeiture of
Buyer's title.
Exhibit 2.4.2
Survey Requirements
The Survey shall be prepared by a licensed surveyor and shall show the
following:
(a) The boundary line of the Property and all appurtenant easements
by courses and distances showing the area of the Property, and each parcel
thereof, in square feet. If the Property is composed of all or portions of
several lots or other legal subdivisions, the boundaries of each shall be
indicated by dotted lines and the proper lot number or legal subdivision
designation shown. If the survey comprises more than one parcel, it shall
show interior lines and facts sufficient to insure contiguity. Points of
beginning used in the description of the Property shall be identified.
(b) The location of all easements and rights-of-way affecting or
benefiting the Property (each of which shall be identified by reference to
the volume and page where recorded).
(c) The location of all building set-back lines on the Property.
(d) All encroachments, conflicts, or protrusions and specifically
listing such items on the Survey.
(e) All abutting dedicated public streets providing access to the
Property, showing the width, the location of the right-of-way lines, and
the name thereof and all sidewalks, parkways, curbs, and driveways
adjoining the Property. All street address numbers shall be shown where
they exist.
(f) All fences (both perimeter and cross) and all walls and other
improvements along the property lines with dimensions. All party walls or
buildings or other structures on the property line indicating the
thickness of the portions thereon on each side of the Property and the
nature of the use of said walls on each side.
(h) All wires and cables crossing, entering or leaving the Property,
indicating the amount of cross arm or wire overhand and all anchors and or
guy wires affecting the Property.
(i) A legal description (monuments, courses and distances) of the
Property which shall coincide with the boundaries shown on the survey and
which shall be identical with the description of the Property contained in
the Title Commitment.
(k) All utilities serving the Property, including electric, gas,
water and sewer.
(l) The boundaries and dimensions of any flood plain, flood prone
area or a flooding of any body of water.
(m) A certification signed and sealed by the surveyor, which shall
be in substantially the following form:
-----------------------------------------------------------------------
I hereby certify that on the _____ day of ____________________, 1995.
(a) this survey was made on the ground as per the field notes shown
on this survey and correctly shows (i) the boundaries and areas of the
Property, (ii) the location of all rights-of-way, easements, and any other
matters of record (or of which I have knowledge or have been advised
whether or not of record) affecting or benefiting the Property, (iii) all
abutting dedicated public streets providing access to the Property,
together with the width and name thereof, and (iv) all other significant
items of the Property;
(b) except as specifically set forth below, there are no (i)
encroachments upon the Property by improvements on adjacent property, (ii)
encroachments on any easements or on adjacent streets, or alleys by any
improvements on the Property, (iii) party walls, (iv) conflicts or
protrusions. The exceptions to the above statements are as follows: (if
not, so state).
(c) Adequate ingress to and egress from the Property is provided by
(name of streets), the same being paved, dedicated public right(s)-of-way
maintained by (name of maintaining authority).
(d) All required building set-back lines on the Property are located
as shown hereon.
(e) A statement as to whether or not the Property is located within
a flood plain or flood prone area. If the Property is located within a
flood prone area, the statement shall also identify the official maps from
which the flood plan or flood prone area was taken.
(f) This survey is made in accordance with the "Minimum Standard
Detail Requirements for Land Title Surveys, jointly established and most
recently adopted by ALTA and ASCM."
-----------------------------------
Signature of Surveyor
Registered Public Surveyor
Registration No. __________________
(Name, address, telephone number and
job number of Surveyor)
(Seal of Surveyor)
EXHIBIT 4
STOCK OPTION AGREEMENT
BETWEEN
FIRST MORTGAGE INVESTMENT CO.
AND
ADVANCED FINANCIAL, INC.
Table of Contents
1. Capitalized Terms......................................................1
2. Grant of Option........................................................1
3. Option Exercise Price..................................................2
4. Exercise of Option.....................................................3
5. Term of Option.........................................................3
6. Expiration.............................................................4
7. Manner of Exercise.....................................................4
8. Stockholder Rights of Holder...........................................5
9. Amendment and Termination..............................................5
10. Transferability........................................................5
11. Adjustments of Shares Purchasable and Option Price.....................6
12. Rights of Holders and the Corporation..................................8
13. Other Provisions Relating to Rights of the Option Holder...............9
14. Dissolution or Liquidation............................................11
15. Compliance with Securities Act........................................11
16. Notices...............................................................11
17. Binding Effect........................................................12
18. Governing Law.........................................................12
19. Entire Agreement......................................................12
20. Modification..........................................................12
Table of Exhibits...........................................................15
i
ADVANCE FINANCIAL, INC.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made and entered into as of the ___ day of
_________, 1998, by and between ADVANCED FINANCIAL INC., a Delaware corporation
(hereinafter sometimes referred to as "AFI" or the "Corporation") and FIRST
MORTGAGE INVESTMENT CO, a Missouri Corporation, (hereinafter sometimes referred
to as "FMIC" or the "Holder"). The Recitals are an integral part of this Stock
Option Agreement (hereinafter sometimes referred to as "Agreement").
RECITALS
WHEREAS, Corporation is entering a Plan of Reorganization under Chapter
11 of Title 11 of the United States Code;
WHEREAS, the parties are simultaneously entering into an Acquisition
Agreement;
WHEREAS, as a condition of the Plan of Reorganization, the Corporation
hereby grants Holder an Option to acquire voting common stock in the
Corporation;
WHEREAS, upon confirmation of the Plan of Reorganization, it is expected
and anticipated that the Corporation will have issued and outstanding the sum of
3,000,000 Common Shares, being the only class of stock of Corporation, of which
FMIC will own 1,800,000 shares;
NOW THEREFORE, in consideration of the premises and of the respective
covenants and agreements of the parties herein contained, and of other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
parties, intending legally to be bound, agree as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein have
the meaning given them under the Acquisition Agreement.
2. Grant of Option. For value received, the Corporation hereby grants Holder a
voting common stock Option (hereinafter sometimes referred to as "Option")
subject to the terms set forth below, to subscribe for and purchase from the
Corporation the number of shares determined in this paragraph, each of which
shares shall be fully paid and non-assessable shares (hereinafter sometimes
referred to as "Option Shares"), of voting common stock of the Corporation.
1 of 15
2.1 FMIC is granted the right to acquire that number of shares of AFI's
common capital stock necessary to increase FMIC's ownership from sixty percent
(60%) to eighty percent (80%) of the issued and outstanding shares of common
capital stock of AFI. Assuming that upon Confirmation of the Plan of
Reorganization, the then aggregate outstanding stock totals 3,000,000 shares and
that FMIC then owns 1,800,000 shares, as set forth in the recitals, then such
Option shall grant FMIC the right to acquire an additional Three Million
(3,000,000) shares, to increase its ownership from one million eight hundred
thousand (1,800,000) shares to four million eight hundred thousand shares
(4,800,000), thereby increasing the percentage of issued and outstanding shares
owned by FMIC from 60% to 80%; provided however,
2.2 The number of shares provided in paragraph 2.1 above shall be limited
to that number of shares of AFI's common stock which, when taken together with
all other transactions relevant to a "change of control" under ss. 382(g) of the
Internal Revenue Code, would be one share less than that number which would
trigger such a "change in control."
2.3 The number of Option Shares and the Option Price per Option Share are
subject to adjustment pursuant to paragraph 11 of this Agreement.
2.4 This Option shall be registered in the Holder's name on the books of
the Corporation at its principal executive office to be maintained by the
Corporation and such Option shall be transferable only as provided herein. Until
this Option is transferred on the books of the Corporation, the Corporation
shall treat the registered Holder hereof as absolute owner of this Option for
all purposes, notwithstanding any notice to the contrary.
3. Option Exercise Price. The Option Exercise Price for the Option Shares shall
be One Million Five Hundred Thousand and No/100 Dollars ($1,500,000) for the
number of shares described in paragraph 2.1 above. Such price may be payable in
whole or in part as follows:
3.1 In the form of one or more business units which had an accumulated net
fair market value at their respective dates of contribution of One Million Five
Hundred Thousand and No/100 Dollars ($1,500,000.00); or
3.2 By cash or certified funds equal the difference between One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00) and the fair market
value of any business units, Option payments or the Extension Consideration
previously contributed by FMIC to AFI or AFIM.
3.3 In the event FMIC contributes one or more businesses with an aggregate
net fair market value less than One Million Five Hundred Thousand and No/100
Dollars ($1,500,000), then FMIC shall receive a pro rata portion of the maximum
number of shares available under paragraph 2.1 above. Such pro rata portion
shall include pro rata portion of stock for the Extension Consideration, if any
was paid pursuant to paragraph 5.2.2 below.
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3.4 In the event FMIC contributed cash in exercise of the Option, no
appraisal shall be required. In the event FMIC acquired one or more business
units in an arms length acquisition within sixty (60) days of contribution, no
appraisal shall be required. The amount paid for such business shall be its fair
market value for the purpose of determining net fair market value. In the event
FMIC contributes a business unit which it did not purchase in an arm's length
transaction within sixty (60) days of such contribution, an appraisal of such
business unit shall be obtained at FMIC's expense to determine net fair market
value.
3.5 In the event that the fair market value of a business unit contributed
by FMIC shall, when taken in conjunction with all prior transfers of cash and/or
business units pursuant to the Option Agreement, exceed $1,500,000, then AFI
shall issue its promissory note to FMIC for the difference between the actual
fair market value of property and cash contributed and $1,500,000.
The terms of such a note, if any, shall be as follows;
3.5.1 It shall be for a term of five years, with interest payable
quarterly in arrears for the first two years and thereafter principal and
interest payments quarterly which are sufficient to amortize the balance of the
note by the end of its term.
3.5.2 It shall bear interest at the prime rate of NationsBank for
its best 90 day commercial borrowers plus two percent, said rate to be adjusted
on the first day of each calendar quarter to the rate prevailing at the close of
NationsBank's business on the immediately preceding business day.
3.5.3 It shall be secured by a lien against the assets which were
transferred which gave rise to the existence of the note.
4. Exercise of Option. This Option is exercisable at any time during its term
and before its expiration at 5:00 p.m., Kansas City, Missouri time on the date
determined under paragraph 6 below, upon tender of the Option Exercise Form,
attached as Exhibit A, and payment thereof of the Option Exercise Price as set
forth in paragraph 3.
This Option may be exercised in whole or in part at any time during its
term. Upon partial exercise, the number of shares represented by the
consideration tendered shall be issued as provided herein.
5. Term of Option. The term of the Option shall be as follows:
5.1 During a one year period commencing upon the Closing Date, ("First
Option Year") FMIC may exercise the Option, or any part thereof, upon payment of
the relevant Option Exercise Price as set forth in paragraph 3.
3 of 15
5.2 FMIC may extend the term of the Option for one additional year
("Second Option Year") if during the First Option Year, it has done one of the
following:
5.2.1 Under the terms described herein, FMIC has contributed to AFI
or AFIM a business unit with a fair market value of not less than Five Hundred
Thousand Dollars ($500,000); or
5.2.2 FMIC has contributed One Hundred Thousand Dollars ($100,000)
in cash or certified funds to AFI or AFIM as non-refundable consideration
("Extension Consideration") to extend the Option for one additional year.
6. Expiration. The Option shall expire by its terms if it has not been exercised
during the First Option Year, or if extended, during the Second Option Year.
7. Manner of Exercise. Within ten (10) business days of the exercise of all or
any part of this Option by the Holder, as herein provided, the Corporation shall
cause to be issued in the name of and delivered to the Holder a certificate or
certificates for the Option Shares of voting common stock so purchased. The
Corporation covenants and agrees that all the Option Shares of the voting common
stock which may be issued and delivered upon the due exercise of this Option by
the Holder shall, upon such issuance and delivery, be fully paid and
non-assessable. The Corporation agrees at all times to reserve and hold
available a sufficient number of Option Shares of the authorized but unissued
voting common stock of the Corporation, or the voting common stock of the
Corporation held as treasury stock, to cover the Option Shares of the voting
common stock issuable upon the exercise of this Option.
The Holder by acceptance of this Option hereby agrees that at the
time of any exercise of this Option he will sign a written agreement with the
Corporation in which he represents that he is then purchasing the Option Shares
of the voting common stock being thus purchased for investment and not with a
view to the offer for sale or the distribution thereof and agrees not to assign,
hypothecate, pledge, sell or otherwise transfer with or without consideration
such Option Shares except pursuant to an effective registration statement (which
shall be effective with the United States Securities and Exchange Commission
and/or any applicable laws of any State) or in a transaction which is exempt
from registration.
In order to enforce the restrictions imposed upon any Option Shares
issued by the Corporation pursuant to this Agreement, the Corporation may cause
a legend(s) to be placed on any certificate representing Option Shares, which
legend(s) shall make appropriate reference to the restrictions imposed upon the
Option Shares. The legend(s) shall substantially conform to the following
legend:
THE HOLDER OF THESE SHARES ACKNOWLEDGES AND AGREES THAT HE HAS REQUESTED
AND HAS RECEIVED ALL FINANCIAL AND OTHER INFORMATION ON THE CORPORATION
WHICH HOLDER DEEMS NECESSARY; THAT HE IS ACQUIRING SHARES FOR HIS OWN
4 of 15
ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE
THEREOF; THAT THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE BLUE SKY LAWS; THAT THE SHARES MAY NOT BE SOLD,
PLEDGED, ASSIGNED OR TRANSFERRED EXCEPT UPON THE TERMS AND THE CONDITIONS
OF THE VOTING COMMON STOCK OPTION AGREEMENT BETWEEN CORPORATION AND HOLDER
AND UNLESS EITHER SUCH SHARES ARE REGISTERED UNDER THE SECURITIES ACT OF
1933 AND THE APPROPRIATE STATE BLUE SKY LAWS OR, IN THE OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, SUCH TRANSACTION INVOLVING THE
SHARES IS EXEMPT FROM THE REGISTRATION PROVISIONS OF SUCH LAWS.
An Option shall be exercisable by delivery of (1) a duly signed
subscription form in writing, generally conforming to the notice set out in
Exhibit A which is incorporated herein by reference, to such effect and (2) the
full purchase price of the number of Option Shares being purchased pursuant to
the exercise of the Option to the treasurer of the Corporation or to any other
officer of the Corporation appointed for the purpose of receiving the same;
provided, however, that this Option may not be exercised at any time when the
exercise thereof violates any law or governmental order or regulation.
8. Stockholder Rights of Holder. The Holder does not have any rights or
privileges of a stockholder of the Corporation with respect to any Option Shares
issuable upon the exercise of such Option until certificates representing such
Option Shares shall have been issued and delivered to such person.
9. Amendment and Termination. In the event that this Option has not been
exercised on or before two years from the date of the Closing, the Option shall
terminate and shall no longer be exercisable. In no event may the Option be
exercised after the expiration of this term.
The termination of the Option shall not affect any restrictions previously
imposed on Option Shares issued pursuant to the Option.
10. Transferability. The transferability of the Option and Option Shares are
governed by the provisions of this paragraph 10.
10.1 This Option shall be freely transferable provided the Transferee
honors all terms and conditions hereof and provided that the Transferee may not
obtain any more shares than FMIC would have been entitled to. The Corporation
may treat the registered Holder of this Option as the absolute owner hereof for
all purposes notwithstanding any notice to the contrary.
5 of 15
11. Adjustments of Shares Purchasable and Option Price. In order to prevent
dilution of the rights granted hereunder, the Option Price as set forth above
and the number of Option Shares shall be subject to adjustment from time to time
in accordance with this paragraph 11.
11.1 Appropriate and equitable adjustment shall be made in the number of
Option Shares of voting common stock subject to each outstanding Option or the
Option Price or both, in the event of any changes subsequent to the effective
date hereof in the outstanding voting common stock by reason of stock dividends,
stock splits, recapitalizations, reorganizations, mergers, or consolidations, it
being the purpose of this provision to insure that, in the event of an
occurrence of such nature, the terms of the Option shall be adjusted to give the
Holder, upon exercise of the Option, rights equivalent to the rights of a person
who had held Shares of the Corporation's voting common stock in the amount
subject to the Option immediately prior to the effective date of such
occurrence. This paragraph shall apply, if equitable, in addition to paragraph
11.3 with respect to any transaction described therein.
11.2 Upon any adjustment of the Option Price per share pursuant to
paragraph 11.1, this Option shall thereupon evidence the right to purchase that
number of Option Shares (calculated to the nearest hundredth) obtained by
multiplying the number of Option Shares immediately prior to such adjustment by
the Option Price per share in effect immediately prior to such adjustment and
dividing the product so obtained by the Option Price per share in effect
immediately after such adjustment.
11.3 Change in Corporation or Shares.
11.3.1 In case of any consolidation with or merger of the
Corporation into another entity (other than a merger or consolidation in which
the Corporation is the continuing entity), such successor shall execute in favor
of the Holder hereof a supplement to this Option:
(a) providing that the Holder of this Option shall receive,
upon exercise of this Option, in lieu of each Option Share of the Corporation
deliverable upon such exercise immediately prior to such event, the kind and
amount of property (or securities or cash, if any) receivable upon such
consolidation or merger, by a holder of each share of the Corporation;
(b) setting forth the Option Price for the property (or
securities or cash, if any so receivable for each Option Share of the
Corporation, which (except as contemplated by paragraph 11.1) shall be an amount
equal to the Option Price per Option Share immediately prior to such event; and
(c) providing that such successor entity assumes the due
and punctual performance and observance of each and every covenant and condition
of this Option to be performed or observed by the Corporation (including,
without limitation, provisions for adjustment of the Option Price), as nearly as
may be in relation to any Option Shares of stock, securities, or property
thereafter deliverable upon the exercise hereof.
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11.3.2 In case of any reclassification or change of the shares or in
case of any consolidation or merger of another entity into the Corporation in
which the Corporation is the continuing entity and in which there is a
reclassification or change of the shares, the Corporation shall execute in favor
of the Holder hereof a supplement to this Option:
(a) providing that the Holder of this Option, upon exercise
of this Option, in lieu of each Option Share of the Corporation deliverable upon
such exercise immediately prior to such event, shall receive the kind and amount
of property (or securities or cash, if any) receivable upon such
reclassification, change, consolidation or merger by a holder of one share of
the Corporation; and
(b) setting forth the Option Price for the property (or
securities or cash, if any) so issuable for each Option Share of the
Corporation, which (except as contemplated by paragraph 11.1) shall be an amount
equal to the Option Price per Option Share immediately prior to such event.
11.3.3 A copy of the supplement referred to in subsections (a) and
(b) of this paragraph 11.3 shall be sent by the Corporation to the Holder of
this Option as soon as practicable but no longer than 60 days after the
execution thereof.
11.4 Whenever the Option is adjusted as herein provided, the Corporation
shall compute an adjusted Option Price and the adjusted number of Option Shares
in accordance with this paragraph 11 and prepare a certificate setting forth the
adjusted Option Price and the adjusted number of Option Shares based upon such
computation, showing in reasonable detail the facts (and computations) upon
which such adjustments are based, and the Corporation shall cause to be mailed
to the Holder hereof a notice stating that the Option Price and the number of
Option Shares have been adjusted, with a copy of such certificate attached. If
the Holder disagrees with the computations made by the Corporation, the Holder
may request a nationally recognized public accounting firm ("Holder's Accounting
Firm") to confirm such computations and to prepare and mail to the Corporation
and the Holder its results. In the event such results agree with the
Corporation's computations, the expense of the computations prepared by the
Holder's Accounting Firm shall be borne by the Holder. If the Holder's
Accounting Firm's computations disagree with the computations prepared by the
Corporation, the Corporation's regular public accounting firm ("Corporation's
Accounting Firm") and the Holder's Accounting Firm shall appoint another
nationally recognized public accounting firm ("Third Party Accounting Firm") to
verify the computations. The Third Party Accounting Firm decision shall be
final. If the Third Party Accounting Firm verifies the Corporation's
computations, the Holder shall be responsible for the expense of the
computations of the Holder's Accounting Firm and the Third Party Accounting
Firm. If, however, the Third Party Accounting Firm agrees with the computation
prepared by the Holder's Accounting Firm, the Corporation shall bear the expense
of the preparation of the computations by the Holder's Accounting Firm and the
Third Party Accounting Firm.
11.5 If at any time after the date of this Option:
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11.5.1 the Corporation shall declare a distribution on its shares,
other than a distribution of cash out of its undistributed net income paid at an
established annual or quarterly rate; or
11.5.2 the Corporation shall authorize the granting to the holders
of its shares of rights to subscribe for or purchase any shares of any class or
of any other rights; or
11.5.3 there is a reclassification of the shares, or any
consolidation or merger to which the Corporation is a party, or any lease, sale
or conveyance to another entity of the property of the Corporation as an
entirety or substantially as an entirety and for which approval of any
stockholders of the Corporation is required; or
11.5.4 there is a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; or
11.5.5 the Corporation proposes to take any other action which would
require an adjustment of the Option Price pursuant to paragraph 11 hereof; then
the Corporation shall cause to be mailed to the Holder of this Option at least
twenty (20) days prior to any applicable record date specified by the
Corporation, a notice stating:
(a) the date on which a record is to be taken for the
purpose of such distribution or rights, or, if a record is not to be taken, the
date as of which the holders of shares of record to be entitled to such
distribution or rights are to be determined; or
(b) the date on which such distribution, reclassification,
consolidation, merger, lease, sale, conveyance, dissolution, liquidation or
winding up is expected to become effective; and
(c) the date as of which it is expected that holders of
shares as shown on registration books maintained by the Corporation shall be
entitled to receive such distribution or exchange their shares for securities
or other property, deliverable upon such distribution, reclassification,
consolidation, merger, lease, sale, conveyance, dissolution, liquidation or
winding up; and the date on which it shall be determined which stockholders of
record are entitled to vote on such transaction.
12. Rights of Holders and the Corporation. Except as provided in paragraph 11, a
Holder shall have no rights by reason of any subdivision, or consolidation of
shares of stock of any class of stock or the payment of any stock dividend or
any other increase or decrease in the number of shares of stock of any class or
by reason of any dissolution, liquidation, merger or consolidation or spin-off
of assets or stock of another corporation, and any issuance by the Corporation
of shares of stock of any class or securities convertible into shares of stock
of any class.
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The grant of an Option pursuant to this Agreement shall not affect in any
way the right or power of the Corporation to make adjustments, reclassification,
reorganizations, or changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate, or sell or transfer all or any part of its
business or assets.
13. Other Provisions Relating to Rights of the Option Holder.
13.1 No Holder of this Option, as such, shall be entitled to vote, to
receive distributions or to be deemed the Holder of Option Shares of the
Corporation nor shall anything contained in this Option be construed to confer
upon the Holder hereof, as such, any of the rights of a stockholder of the
Corporation, except as specifically provided herein, or any right to vote for
the election of the board of directors of the Corporation or upon any matters
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any action of the Corporation (whether upon any recapitalization, issue of
shares, reclassification of shares, consolidation, merger, sale, lease,
conveyance or otherwise), receive notice of meetings or other action affecting
stockholders (except for notices expressly provided for in this Option), receive
distribution or subscription rights, or otherwise (except as provided for in the
Option) until this Option shall have been exercised and the Option Shares shall
have been issued and delivered as provided in this Option; provided, however,
that the Corporation acknowledges the Option Holder's right to acquire voting
common stock of the Corporation pursuant to the terms hereof and agrees that
until the expiration, cancellation or exercise hereof the rights of such Holder
to acquire voting common stock of the Corporation shall be recognized and shall
entitle such Holder to the same general protections afforded a stockholder of
the Corporation against the breach of any fiduciary or other duty of good faith
and fair dealing owed to a stockholder of the Corporation, by the Corporation,
its officers or its directors.
13.2 Corporation Registration.
13.2.1 Tag Along Rights. If the Corporation determines to register
any of its securities either for its own account or the account of any security
holder or holders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to a transaction pursuant to Rule 145
of the Commission (or substantially similar successor rule) or a registration on
any registration form which does not permit secondary sales or does not include
substantially the same information regarding the Corporation as would be
required to be included in a registration statement covering the sale of the
Option Shares, the Corporation will:
(a) promptly give to the Holder written notice thereof
(which shall include the name of the managing underwriter or underwriters, if
any, of the offering); and
(b) use its best efforts to include in such registration
all Option Shares, as specified in a written request or requests given by the
Holder of Option Shares within 15 days after such written notice from the
Corporation described in clause (i) above is given, except as set forth in
paragraph 13.2.2 below.
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13.2.2 Underwriting. The right of the Holder to include Option
Shares in a registration pursuant to paragraph 13.2 involving an underwritten
public offering shall be conditioned upon the inclusion of such securities in
the underwriting to the extent provided herein. Notwithstanding any other
provision of this paragraph 13.2, if the managing underwriter or underwriters
determine that marketing factors require a limitation on the number of shares to
be underwritten, the underwriter may exclude from such registration and
underwriting some or all of the Option Shares requested to be included by the
Holder. In such event, the Corporation shall so advise the Holder, and the
Option Shares held by the Holder shall, to the extent necessary, be excluded
from such registration. If the Holder disapproves of the terms of any such
underwriting, the Holder may elect to withdraw therefrom by written notice to
the Corporation and the underwriter. Any Option Shares excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
13.2.3 Expenses of Registration. The Corporation shall bear all
registration expenses incurred in connection with all registrations pursuant to
paragraph 13.2, except expenses described as professional fees and related
expenses customarily paid for by such Shareholders who participate in such
registrations.
13.2.4 Information by Holders of Securities. The Holder shall
furnish to the Corporation such information regarding the Holder and the
proposed distribution, and execute any and all necessary documents and
indemnifications, as the Corporation may reasonably request in writing and as
shall be reasonably required in connection with any registration, qualification
or compliance referred to in paragraph 13.2.
13.2.5 Transfer of Registration Rights. The rights to cause the
Holder to register the Option Shares under paragraph 13.2 may be assigned by the
Holder to assignees of the Option Shares provided, however, that such assignees
in the aggregate must, after giving effect to such transfer, hold or demand to
hold at least Ten Thousand (10,000) shares of Option Shares; and provided,
further, that the Corporation is given written notice at the time of or within a
reasonable time after such transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned; and provided, further, that any such
transferee or assignee of such rights assumes the obligations of the transferor
under paragraph 13.2.
13.2.6 "Market Stand-Off" Agreement. The Holder, if requested by the
Corporation and the underwriter of any public offering of the Corporation, shall
agree not to sell or otherwise transfer or dispose of any Option Shares during a
reasonable period following the effective date of the registration statement
covering the public offering. Such agreements shall be in writing in a form
satisfactory to the Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the securities subject to the
foregoing restrictions until the end of said period.
13.3 The Corporation shall at all times have reserved and kept available
an authorized number of Option Shares sufficient to permit the exercise in full
of this Option.
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13.4 Notwithstanding anything contained herein to the contrary, the
Corporation shall not be required to issue any fraction of an Option Share in
connection with the exercise of this Option. All fractional share amounts shall
be rounded off to the nearest whole share.
14. Dissolution or Liquidation. Except as otherwise provided herein, a
dissolution or liquidation of the Corporation shall cause each outstanding
Option to terminate. At least twenty (20) days notice of the record date for
determining stockholders entitled to participate in such liquidation or
dissolution shall be given the Holder as required in paragraph 11.5.5.
15. Compliance with Securities Act. Notwithstanding anything contained herein to
the contrary, no Option granted under this Agreement shall be exercised, and the
Corporation may postpone the issuance and delivery of shares upon any purported
exercise of an Option, until (a) the completion of a registration with the
Securities and Exchange Commission or other qualification of such shares under
any state or federal law, rule or regulation as the Corporation shall determine
to be necessary or advisable, or (b) counsel for the Corporation shall have
opined that the issuance of such Option Shares does not require registration
under any Federal Securities Act, and, insofar as any local Blue Sky law might
affect the issuance of such Option Shares, either the local Blue Sky
Commissioner shall have ruled or counsel for the Corporation shall have opined
that the issue is not subject to such local law or that such Option Shares shall
have been duly qualified under such law. Any person exercising an Option shall
make such representations and furnish such information as may in the opinion of
counsel for the Corporation be appropriate to permit the Corporation, in the
light of the then existence or non-existence of an effective Registration
Statement under the Securities Act of 1933, as from time to time amended, with
respect to such Option Shares, to issue the Option Shares in compliance with the
provisions of that or any comparable law. The Corporation shall not have any
liability with respect to any Option the exercise of which is delayed in good
faith by the provisions of this paragraph 15.
16. Notices. Any notice or other communication to the Corporation or to the
Holder of this Option shall be in writing and such notice or communication shall
be deemed duly given or made if mailed by registered or certified mail, return
receipt requested, postage prepaid and if to such Corporation to:
Advanced Financial, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as the Corporation may designate by notice to the Holder
and if to such Holder to:
First Mortgage Investment Co
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
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cc: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ Thomson & ▇▇▇▇▇▇, PC
▇▇▇ ▇. ▇▇▇▇ ▇▇.
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
or at such other address as the Holder may designate by notice to the
Corporation.
17. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the Corporation and Holder and his respective heirs, executors,
administrators, legal representatives and successors.
18. Governing Law. This Agreement shall be governed by and be construed in
accordance with the laws of the state of Delaware.
19. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties, and supersedes all prior Agreements and understandings relating to
the subject matter of this Agreement.
20. Modification. This Agreement may be amended or modified only by written
instrument executed by both Corporation and Holder.
IN WITNESS WHEREOF, Corporation has caused this Agreement to be signed in
its corporate name under its corporate seal by its president and its corporate
seal to be hereunto affixed and the execution hereof to be attached by its
secretary as of this _____ day of ______________, 1998
ADVANCED FINANCIAL, INC.
ATTEST:
______________________________ By:______________________________
Secretary ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President
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HOLDER:
ATTEST: FIRST MORTGAGE INVESTMENT CO
______________________________ By:__________________________
Secretary ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
Vice President
ACKNOWLEDGMENT
STATE OF ________________ )
) ss:
COUNTY OF ______________ )
On this ____ day of ________, 1998, before me, the undersigned, a Notary
Public in and for said County and State personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ___________________________________, the Senior Vice President and
Secretary, respectively, of ADVANCED FINANCIAL, INC., known to me to be the
persons who executed the within instrument in behalf of said Corporation and
acknowledged to me that they executed the same for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
---------------------------------
Notary Public within and for said
My Commission Expires: County and State
--------------------- ---------------------------------
Type Notary's Name Here
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ACKNOWLEDGMENT
STATE OF ________________ )
) ss:
COUNTY OF ______________ )
On this ____ day of ________, 1998, before me, the undersigned, a Notary
Public in and for said County and State personally appeared ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ and ________________ _____________________, the Vice President and
Secretary, respectively, of FIRST MORTGAGE INVESTMENT CO, known to me to be the
persons who executed the within instrument in behalf of said Corporation and
acknowledged to me that they executed the same for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year last above written.
---------------------------------
Notary Public within and for said
My Commission Expires: County and State
--------------------- ---------------------------------
Type Notary's Name Here
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Table of Exhibits
4 Advance Financial, Inc. Stock Option Agreement
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EXHIBIT A
ELECTION TO PURCHASE
To be executed by the Holder only if he desires to exercise options
evidenced by the within Option Agreement.
TO: ADVANCED FINANCIAL, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
The undersigned hereby (1) irrevocably elects to exercise
the within Option, and to purchase thereunder _____________ Shares issuable upon
exercise of said Option, (2) makes payment in full of the Purchase Price of such
Shares in accordance with paragraph 3 of the Option (3) requests that
certificates for the Shares be issued in the name of:
-------------------------------------------------
Please print Social Security or Tax Identification Number:
------------------------------
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(Please print name and address)
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and (4)if said number of Options Shares shall not be all the Option Shares
subject to the within Option, the Holder requests that a new Option evidencing
the right to acquire any remaining Option Shares be issued in the name of and
delivered to:
-----------------------------------------------------------------
(Please print name and address)
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Dated: __________________, 19___.
Signature:____________________________
1
NOTICE: The above signature must correspond with the name as written upon
the face of the within Option Agreement in every particular,
without alteration or enlargement or any change whatsoever or if
signed by any other person a form of assignment must be duly
executed.
2