Exhibit 2
SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT
by and among
ALTIVA FINANCIAL CORPORATION
and
VALUE PARTNERS, LTD
Dated as of August 31, 1999
THIS AGREEMENT IS SUBJECT TO THE TERMS AND CONDITIONS OF THE
INTERCREDITOR AND COLLATERAL SUBORDINATION AGREEMENT, DATED AUGUST 31, 1999 (THE
"SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE
SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG ALTIVA FINANCIAL CORPORATION, AS
BORROWER, GREENWICH CAPITAL MARKETS, INC. AND GREENWICH CAPITAL FINANCIAL
PRODUCTS, INC., PARTIES TO THE SENIOR AGREEMENTS REFERRED TO IN THE
SUBORDINATION AGREEMENT, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS
ARISING UNDER THE SUBORDINATION LOAN AGREEMENT REFERRED TO IN THE SUBORDINATION
AGREEMENT.
TABLE OF CONTENTS
PAGE
Article I. Definitions............................................................................1
Section 1.1 Definitions...................................................................1
Article II. Purchase and Sale of Notes.............................................................5
Section 2.1 Purchase and Sale of Notes....................................................5
Section 2.2 Closing.......................................................................5
Article III. Representations and Warranties.........................................................6
Section 3.1 Representations and Warranties of the Company.................................6
Section 3.2 Representations and Warranties of the Purchaser..............................14
Article IV. Conditions Precedent to Closing.......................................................17
Section 4.1 Conditions to Obligations of the Parties.....................................17
Section 4.2 Conditions to Obligations of the Purchaser...................................17
Section 4.3 Conditions to Obligations of the Company.....................................18
Article V. Covenants.............................................................................19
Section 5.1 Shareholder Meeting..........................................................19
Section 5.2 Applications.................................................................20
Section 5.3 Investigation and Confidentiality............................................21
Section 5.4 Press Releases...............................................................22
Section 5.5 No Solicitation..............................................................22
Section 5.6 Use of Proceeds..............................................................22
Section 5.7 Current Information..........................................................22
Section 5.8 Rule 144 and Rule 144A Reporting.............................................23
Section 5.9 Stay, Extension and Usury Laws...............................................23
Article VI. Miscellaneous.........................................................................23
Section 6.1 Survival of Provisions.......................................................23
Section 6.2 Termination..................................................................23
Section 6.3 Waiver; Amendments...........................................................24
Section 6.4 Communications...............................................................24
Section 6.5 Costs, Expenses and Taxes....................................................25
Section 6.6 Execution in Counterparts....................................................25
Section 6.7 Binding Effect; Assignment...................................................27
Section 6.8 Governing Law................................................................26
Section 6.9 Usury........................................................................26
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PAGE
Section 6.10 Severability of Provisions...................................................26
Section 6.11 Headings and Gender..........................................................26
Section 6.12 Integration..................................................................27
Section 6.13 Participation Interests......................................................27
Section 6.14 Knowledge Limitation.........................................................27
Exhibit A Name and Address of the Purchaser
Exhibit B Form of Note
Exhibit C Form of Pledge and Security Agreement
Exhibit D Form of Intercreditor and Collateral Subordination Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Matters to be covered by Opinion of Counsel to the Company
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SECURED CONVERTIBLE NOTE
PURCHASE AGREEMENT
Secured Convertible Note Purchase Agreement, dated as of August 31,
1999 (the "Agreement"), by and among Altiva Financial Corporation, a Delaware
corporation, and the other party named on the signature page hereof.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Acquisition" means the Company's acquisition of all of the outstanding
capital stock of MCI pursuant to the Stock Purchase Agreement.
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Secured Convertible Note Purchase Agreement, as
amended, supplemented or modified from time to time.
"Business Day" means any day except a Saturday, Sunday or other day on
which banking institutions in the city of Atlanta, Georgia are authorized by law
to close.
"Capital Securities" of any Person means Capital Stock of the Person
and Stock Equivalents of the Person.
"Capital Stock" of any Person means any and all shares or other equity
interest of such Person.
"Closing" has the meaning set forth in Section 2.2.
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"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended (or any
successor statute in effect from time to time), and the rules and regulations
promulgated thereunder.
"Commission" means the Securities and Exchange Commission and any
successor thereto.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Company" means Altiva Financial Corporation, a Delaware corporation,
together with its successors.
"Company Financial Statements" has the meaning set forth in Section
3.1(i)(i) hereof.
"Environmental Claim" means any written notice from any governmental
authority or third party alleging potential liability (including without
limitation potential liability for investigating costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on, or resulting from the
presence, or release into the environment of any Materials of Environmental
Concern.
"Environmental Laws" means any law, statute, rule or regulation of any
governmental, judicial, legislative, executive, administrative or regulatory
authority of the United States, or of any state, local or foreign government or
any subdivision thereof or of any governmental body or other regulatory or
administrative agency or commission, domestic or foreign (a "Law"), relating to
pollution or protection of the environment (including ambient air, surface
water, groundwater, land surface or subsurface strata), including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, as
amended, and other Laws relating to (i) emissions, discharges or releases of
pollutants, contaminants, chemicals, or industrial toxic or hazardous substances
or wastes (collectively known as "Polluting Substances") or (ii) the handling,
storage, disposal, reclamation, recycling or transportation of Polluting
Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended (or any successor statute in effect from time to time).
"Escrow Agreement" has the meaning set forth in Article I of the
Security Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
and in effect from time to time (or any successor statute in effect from time to
time), and the rules and regulations of the Commission promulgated thereunder.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the date of this Agreement.
"Governmental Entity" means any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended (or any successor statute in effect from time to time), and the
rules and regulations of the Federal Trade Commission promulgated thereunder.
"Intercreditor Agreement" means the Intercreditor and Collateral
Subordination Agreement among the Company, the Purchaser, Greenwich Capital
Markets, Inc. and Greenwich Capital Financial Products, Inc., substantially in
the form of Exhibit D hereto.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in respect of such asset.
"Material Adverse Effect" means any effect that (i) is material and
adverse to the financial condition, results of operations, business or prospects
of the Company and its Subsidiaries taken as a whole or (ii) materially impairs
the ability of the Company to consummate the transactions contemplated by any of
this Agreement or any Related Agreement.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"MCI" means The Money Centre, Inc., a North Carolina corporation,
together with its successors.
"NASD" means National Association of Securities Dealers, Inc.
"Notes" means $7,000,000 principal amount of 12% Secured Convertible
Notes due 2006 to be issued and sold by the Company and purchased by the
Purchaser pursuant to this Agreement, substantially in the form of Exhibit B
hereto, as amended, supplemented or otherwise modified from time to time.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or a political subdivision or an agency or instrumentality thereof.
"Preferred Stock" means the Preferred Stock, par value $.01 per share,
of the Company.
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"Previously Disclosed" means disclosed in a letter dated the date
hereof delivered from the Company to the Purchaser or from the Purchaser to the
Company, as applicable, specifically referring to the appropriate section of
this Agreement and describing in reasonable detail the matters contained
therein.
"Purchaser" means the Person (other than the Company) listed on the
signature pages of this Agreement, and its permitted successors and assigns as
provided herein.
"Real Estate Owned" means the consolidated properties of the Company
acquired by foreclosure on a loan or deed-in-lieu thereof or otherwise included
in the Company's real estate owned for purposes of reporting asset quality of
the Company in its reports filed with the Commission under the Exchange Act.
"Registration Rights Agreement" means the Registration Rights Agreement
by and among the Company and the Purchaser, substantially in the form of Exhibit
E hereto, as amended, supplemented or otherwise modified from time to time.
"Related Agreements" means the Notes, the Security Agreement, the
Escrow Agreement, the Intercreditor Agreement and the Registration Rights
Agreement.
"Securities" means (i) the Notes and (ii) the Common Stock issuable
upon conversion of the Notes.
"Securities Act" means the Securities Act of 1933, as amended (or any
successor statute thereto as in effect from time to time), and the rules and
regulations of the Commission promulgated thereunder.
"Securities Documents" shall mean all reports, offering circulars,
proxy statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended; and the rules and
regulations of the Commission promulgated thereunder.
"Security Agreement" means the Pledge and Security Agreement by and
among the Company and the Purchaser, in its own right and as agent for the
holders of the Notes, substantially in the form of Exhibit C hereto, as amended,
supplemented or otherwise modified from time to time.
"State" means each of the states of the United States, the District of
Columbia and the Commonwealth of Puerto Rico.
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"Stock Equivalents" means, with respect to any Person, options,
warrants, calls, contracts or other rights entered into or issued by such Person
which confer upon the holder thereof the right (whether or not contingent) to
acquire any Capital Stock, voting securities or securities convertible into or
exchangeable for Capital Stock or voting securities of such Person.
"Stock Option Plan" means the 1999 Stock Incentive Plan of the Company.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated as
of July 7, 1999, by and among the Company and each of the stockholders of MCI,
as in effect as of the date hereof.
"Subsidiary" means with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital 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 such
Person or one or more Subsidiaries of such Person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or one or more Subsidiaries of such Person (or
any combination thereof).
"Taxes" means all taxes, charges, fees, levies or other governmental
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs, dues, fees, assessments or charges
of any kind whatsoever, together with any interest and any penalties, additions
to tax or additional amounts imposed by any taxing authority (domestic or
foreign).
"Tax Returns" means all foreign, federal, State and local returns
relating to Taxes.
"▇. ▇▇▇▇ Price" means ▇. ▇▇▇▇ Price Recovery Fund, II, L.P.
ARTICLE II
PURCHASE AND SALE OF NOTES
SECTION 2.1 PURCHASE AND SALE OF NOTES. Subject to the terms and
conditions herein set forth, the Company agrees that it will issue and sell to
the Purchaser and the Purchaser agrees that it will purchase from the Company
the principal amount of Notes set forth opposite such Purchaser's name on
Exhibit A hereto at a price equal to such principal amount.
SECTION 2.2 CLOSING. Subject to the satisfaction or waiver of all
of the conditions to the parties' obligations hereunder specified in Article IV
of this Agreement, the purchase and sale of the Notes will take place at a
closing (the "Closing") to be held at the offices of Venable, ▇▇▇▇▇▇▇ and
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▇▇▇▇▇▇, LLP, in Baltimore, Maryland, at such time and on such day as the parties
hereto mutually agree upon. The date on which the Closing is to occur is
referred to herein as the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except
as Previously Disclosed, the Company represents and warrants to each of the
Purchasers as follows:
(a) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 400,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock. As of the date hereof, there are (i) 3,656,666 shares of Common Stock
issued and outstanding and no shares of Common Stock are held as treasury shares
and (ii) 62,500 shares of Series A Convertible Preferred Stock are issued and
outstanding and no shares of Preferred Stock are held as treasury shares. All
outstanding shares of Capital Stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable and none of the outstanding
shares of Capital Stock of the Company has been issued in violation of the
preemptive rights of any Person. Except as contemplated by this Agreement or as
Previously Disclosed, there are no Stock Equivalents authorized, issued or
outstanding with respect to the Capital Stock of the Company as of the date
hereof.
(b) ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY. The Company is
a corporation duly organized and validly existing under the laws of Delaware
with full corporate power and authority to own or lease all of its properties
and assets and to carry on its business as now conducted and is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
its ownership or leasing of property or the conduct of its business requires
such licensing or qualification and where the failure to be so licensed,
qualified or in good standing would have a Material Adverse Effect. The Company
has heretofore delivered true and complete copies of the Certificate of
Incorporation and Bylaws of the Company as in effect as of the date hereof to
each Purchaser which has requested the same.
(c) OWNERSHIP OF SUBSIDIARIES. The Company does not own or have the
right to acquire, directly or indirectly, any outstanding Capital Stock or other
voting securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The outstanding
shares of Capital Stock of each Subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and are
directly owned by the Company free and clear of all Liens. No Stock Equivalents
are authorized, issued or outstanding with respect to the Capital Stock of any
Subsidiary of the Company and there are no agreements, understandings or
commitments relating to the right of the Company to vote or to dispose of such
Capital Stock.
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(d) ORGANIZATION, STANDING AND AUTHORITY OF SUBSIDIARIES. Each
Subsidiary of the Company (i) is duly organized and validly existing under the
laws of the jurisdiction in which it is organized, (ii) has full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and (iii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership or
leasing of property or the conduct of its business requires such qualification,
except where the failure to be so licensed, qualified or in good standing would
not have a Material Adverse Effect. The Company has heretofore delivered true
and complete copies of the articles of incorporation and bylaws or equivalent
documents of each Subsidiary of the Company as in effect as of the date hereof
to each Purchaser which has requested the same.
(e) AUTHORITY; DUE EXECUTION. The Company has full corporate power and
authority to perform its respective obligations under this Agreement and each of
the Related Agreements, and the execution, delivery and performance by the
Company of this Agreement and each Related Agreement have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes, and each of the
Related Agreements, when duly executed and delivered by the Company, will
constitute, a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except (i) rights to indemnity and
contribution under the Registration Rights Agreement may be limited by
applicable law, (ii) enforceability may be limited by bankruptcy, insolvency,
moratorium and similar laws affecting creditors' rights generally and (iii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability.
(f) NO CONFLICT. Neither the execution and delivery of this Agreement
and each of the Related Agreements, nor consummation of the transactions
contemplated hereby and thereby, nor compliance by the Company with any of the
provisions hereof or thereof, (i) does or will conflict with or result in a
breach of any provisions of the Certificate of Incorporation or Bylaws of the
Company or the equivalent documents of any Company Subsidiary, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon any property or asset of the Company or a Company Subsidiary pursuant
to, any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected, or (iii) subject to the compliance referred to in
clauses (i) and (ii) of the succeeding sentence, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or a
Company Subsidiary. Except for (i) compliance with applicable federal and State
securities laws in connection with this Agreement and the performance by the
Company of its obligations under the Registration Rights Agreement and (ii) any
required compliance by the Company with applicable federal and State securities
laws and/or the HSR Act in connection with the issuance of shares of Common
Stock upon conversion of the Notes in accordance with their terms, no consent,
approval, order or other authorization of any Governmental Entity or of any
third party is required by or on behalf of the Company or a Subsidiary of the
7
Company in connection with the execution, delivery and performance of this
Agreement and each of the Related Agreements. The representations and warranties
contained in this Section 3.1(g), insofar as they relate to federal and State
securities laws requirements, are made in reliance on the representations and
warranties of the Purchaser contained in Section 3.2 of this Agreement.
(g) STATUS OF SECURITIES. The Securities have been authorized by all
necessary corporate action on the part of the Company. When delivered to the
Purchasers at the Closing against payment therefor as provided herein, the Notes
will be duly authorized and validly issued and will not be issued in violation
of the preemptive rights of any Person. Subject to the approvals and compliance
referred to in the second sentence of Section 3.1(f) hereof, shares of Common
Stock issued by the Company upon conversion of the Notes in accordance with
their terms will be duly authorized, validly issued and non-assessable at the
time of issuance and will not be issued in violation of the preemptive rights of
any Person. The representations and warranties contained in this Section 3.1(g),
insofar as they relate to federal and State securities laws requirements, are
made in reliance on the representations and warranties of the Purchaser
contained in Section 3.2 of this Agreement.
(h) SECURITIES REPORTS. The Company has filed all Securities Documents
required to be filed by it under the Securities Laws on a timely basis or has
received a valid extension of such time of filing, and all such Securities
Documents complied in all material respects with the requirements of the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, at the time and in light of the
circumstances under which they were made, not misleading.
(i) FINANCIAL STATEMENTS.
(i) The Company has previously delivered to each Purchaser (x)
statements of financial condition of the Company as of August 31, 1998 and 1997
and statements of operations, changes in stockholders' equity and cash flows of
the Company for each of the years ended August 31, 1998, 1997 and 1996,
accompanied by the related audit report of Deloitte & Touche LLP, and (y) an
unaudited balance sheet of the Company as of May 31, 1999 and unaudited
statements of operations, changes in shareholders' equity and cash flows of the
Company for the three and nine months ended May 31, 1999 and 1998. The foregoing
financial statements, as well as the financial statements of the Company
included in the Securities Documents to be delivered to the Purchaser pursuant
to Section 5.7 hereof or otherwise required to be delivered to the Purchaser
pursuant to such section (collectively the "Company Financial Statements"),
fairly present or will fairly present, as the case may be, in all material
respects the consolidated financial condition of the Company as of the
respective dates set forth therein, and the consolidated results of operations,
changes in shareholders' equity and cash flows of the Company for the respective
periods or as of the respective dates set forth therein in accordance with GAAP.
(ii) Each of the Company Financial Statements has been or will
be, as the case may be, prepared in accordance with GAAP consistently applied
during the periods involved, except as stated therein. The books and records of
the Company and its Subsidiaries are being maintained
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in material compliance with applicable legal and accounting requirements, and
such books and records accurately reflect in all material respects all dealings
and transactions in respect of the business, assets, liabilities and affairs of
the Company and its Subsidiaries.
(iii) Except to the extent (x) reflected, disclosed or
provided for in the Securities Documents filed by the Company prior to the date
hereof and (y) of liabilities incurred since May 31, 1999 in the ordinary course
of business, neither the Company nor any Subsidiary of the Company has any
liabilities, whether absolute, accrued, contingent or otherwise, which has had
or could reasonably be expected to have a Material Adverse Effect.
(j) MATERIAL ADVERSE CHANGE. Since May 31, 1999, (i) the Company and
the Subsidiaries of the Company have conducted their respective businesses in
the ordinary and usual course (excluding the incurrence of expenses in
connection with this Agreement and the Stock Purchase Agreement and the
transactions contemplated hereby and thereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
(k) ENVIRONMENTAL MATTERS.
(i) The Company is in compliance with all Environmental Laws,
except for any violations of any Environmental Law which, individually or in the
aggregate, has not had and could not reasonably be expected to have a Material
Adverse Effect. The Company has not received any communication alleging that the
Company or any Company Subsidiary is not in such compliance and, to the
knowledge of the Company, there are no present circumstances that would prevent
or interfere with the continuation of such compliance.
(ii) None of the properties owned, leased or operated by the
Company or the any Company Subsidiary has been or is in violation of or liable
under any Environmental Law, except for any such violations or liabilities
which, individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect.
(iii) To the knowledge of the Company, there are no past or
present actions, activities, circumstances, conditions, events or incidents that
could reasonably form the basis of any Environmental Claim or other claim or
action or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or any Company
Subsidiaries or against any Person whose liability for any Environmental Claim
the Company or any Company Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such as, individually or in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect.
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(l) TAX MATTERS.
(i) The Company and the Company Subsidiaries have timely filed
all Tax Returns required by applicable law to be filed by them (including,
without limitation, estimated tax returns, income tax returns, information
returns and withholding and employment tax returns) and have paid, or where
payment is not required to have been made, have set up an adequate reserve or
accrual for the payment of, all Taxes required to be paid in respect of the
periods covered by such Tax Returns, except in all cases where the failure to do
so, individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect. As of the date hereof, there is no
audit examination, assessed deficiency, deficiency litigation or refund
litigation with respect to any Taxes of the Company or any Company Subsidiary.
All Taxes due with respect to completed and settled examinations or concluded
litigation relating to the Company have been paid in full or adequate provision
has been made for any such Taxes on the Company's consolidated statement of
financial condition in accordance with GAAP. The Company has not executed an
extension or waiver of any statute of limitations on the assessment or
collection of any Tax that is currently in effect.
(ii) Neither the Company nor any Company Subsidiary (i) is a
party to any agreement providing for the allocation or sharing of taxes, (ii) is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by the
Company or a Company Subsidiary (nor does the Company have any knowledge that
the Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
(iii) There has been no "ownership change," as defined under
Section 382 of the Code and regulations thereunder, of the Company since August
31, 1998, and consummation of the transactions contemplated by the Stock
Purchase Agreement, the issuance of the Notes pursuant to this Agreement and, to
the knowledge of the Company, any subsequent conversion of the Notes, will not
result in such an ownership change of the Company.
(m) ERISA. The Company is in compliance in all material respects with
all presently applicable provisions of ERISA; to the knowledge of the Company,
no "reportable event" (as defined in ERISA) has occurred with respect to any
"pension plan" (as defined in ERISA) for which the Company would have any
material liability; the Company has not incurred and does not expect to incur
liability under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 (whether or not waived)
or 4971 of the Code; and each "pension plan" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and to the knowledge of the Company
nothing has occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
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(n) LITIGATION. There are no actions, suits, investigations or legal
proceedings instituted, pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or against any asset, interest or
right of the Company or any Company Subsidiary, or against any director, officer
or employee of any of them that in any such case, if decided adversely, could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. Neither the Company nor any Company Subsidiary is a party to any
order, judgment or decree which has had or could reasonably be expected to have
a Material Adverse Effect.
(o) COMPLIANCE WITH LAWS. The Company and each Company Subsidiary has
all permits, licenses, certificates of authority, orders and approvals of, and
has made all filings, applications and registrations with, federal, State, local
and foreign governmental or regulatory bodies that are necessary in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could reasonably be expected to have a Material Adverse Effect;
all such permits, licenses, certificates of authority, orders and approvals are
in full force and effect; and to the best knowledge of the Company, no
suspension or cancellation of any of the same is threatened.
(p) NO DEFAULT OR VIOLATION. Neither the Company nor any Company
Subsidiary currently is in violation of its Certificate of Incorporation or
Bylaws or equivalent documents, or of any applicable federal, State or local law
or ordinance or any order, rule or regulation of any Governmental Entity
(including, without limitation, all securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any Governmental Entity, any of which violations or
defaults could, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect, and neither the Company nor any Company Subsidiary
has received any notice or communication from any Governmental Entity asserting
that the Company or any Company Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Company Subsidiary is subject to any regulatory or
supervisory cease and desist order, agreement, written directive, memorandum of
understanding or written commitment, and none of them has received any written
communication requesting that they enter into any of the foregoing.
(q) CERTAIN FEES. No fees or commissions will be payable by the Company
to brokers, finders, investment bankers or banks pursuant to any agreement
entered into by the Company with respect to the offer and sale of the Notes or
any of the other transactions contemplated hereby, by any Related Agreement or
by the Stock Purchase Agreement.
(r) PATENTS, TRADEMARKS, ETC. The Company and each of its Subsidiaries
owns or possesses all legal rights to use all proprietary rights, including
without limitation all trademarks, trade names, service marks and copyrights,
that are material to the conduct of their existing businesses. Neither the
Company nor any of its Subsidiaries is bound by or a party to any options,
licenses or agreements of any kind with respect to any trademarks, service marks
or trade names which it claims to own. Neither the Company nor any of its
Subsidiaries has received any
11
communications alleging that any of them has violated or would violate any of
the patents, trademarks, service marks, trade names, copyrights or trade secrets
or other proprietary rights of any other Person.
(s) LOAN MATTERS
(i) Each loan agreement, note or borrowing arrangement,
including without limitation portions of outstanding lines of credit and loan
commitments on the books and records of the Company and its Subsidiaries
(collectively, "Loans") that was made by the Company and to the knowledge of the
Company that was made by any third party was made, and has been serviced in all
material respects in accordance with, the Company's underwriting standards and
the relevant Loan documentation in the ordinary course of business, is evidenced
in all material respects by appropriate and sufficient documentation and, to the
best knowledge of the Company, constitutes the legal, valid and binding
obligation of the obligor named therein, subject to bankruptcy, insolvency,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditor's rights and to general equity principles.
(ii) None of the agreements pursuant to which the Company or
any Subsidiary has sold Loans or pools of Loans or participations in Loans or
pools of Loans contain any obligation to repurchase such Loans or interests
therein on account of a payment default by the obligor on any such Loans.
Neither the Company nor any of its Subsidiaries is in default under any such
agreement or has received any notice alleging default.
(iii) To the knowledge of the Company, all brokers and other
third parties who originate or have originated Loans have all required licenses
and approvals from all jurisdictions requiring licenses and approvals and have
complied with and are not in violation of any applicable law, regulation, order,
rule, policy or guidelines of any Governmental Entity.
(iv) The practices of the Company and its Subsidiaries with
respect to compensation paid to mortgage brokers comply with the policy
statement issued by the Department of Housing and Urban Development in March
1999.
(t) CERTAIN ASSETS. The Company has Previously Disclosed a true and
correct listing of the following assets of the Company and its Subsidiaries as
of May 31, 1999: (i) all non-performing Loans, securities or other assets (i.e.,
all assets on which the Company has ceased recognizing interest under GAAP or as
to which any payments of principal or interest are past due 90 or more days as
of such date), (ii) all Loans, securities or other assets as to which any
payments of principal or interest are past due 60 or more days, (iii) all Loans,
securities or other assets not included in the foregoing which have been
classified special mention, substandard, doubtful or loss, or otherwise
classified adversely, by management of the Company or regulatory examiners, and
(iv) each parcel of Real Estate Owned (excepting such parcels as may have been
disposed of in the ordinary course of business subsequent to such date),
including an identification of the amount of reserves which have been
established with respect to each such parcel and its net carrying value.
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(u) YEAR 2000 COMPLIANCE. All computer hardware and software owned,
used or licensed by the Company or any of its Subsidiaries, including but not
limited to system and application programs, files, databases and computer
services, the failure or disfunctionality of which would individually or in the
aggregate have a Material Adverse Effect is Year 2000 Complaint. "Year 2000
Complaint" means that such hardware and software will (i) correctly process date
data from at least January 1, 1900 through December 31, 2000 without error or
interruption due to date, (ii) maintain functionality with respect to the input,
storing, processing or output of records or data containing dates falling on or
after January 1, 2000, and (iii) be interoperable with other Year 2000 compliant
hardware or software owned, used or licensed by the Company or any of its
Subsidiaries which may deliver records to, receive records from or otherwise
interact with such hardware or software in the course of processing records or
data.
(v) LABOR MATTERS. Neither the Company nor any of its Subsidiaries is a
party to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is the
Company or any of its Subsidiaries the subject of a proceeding naming the
Company or any Subsidiary as a defendant asserting that the Company or any such
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act) or seeking to compel the Company or any such
Subsidiary to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other material labor dispute or disputes
involving it or any of its Subsidiaries pending, or to the Company's knowledge,
threatened, nor the Company aware of any activity involving its or any of its
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(w) INSURANCE. The Company believes that it and each Company Subsidiary
is insured, and during each of the past three calendar years has been insured,
for reasonable amounts with financially sound and reputable insurance companies
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations. All of the
policies and bonds maintained by the Company and its Subsidiaries are in full
force and effect and all claims thereunder have been filed in a due and timely
manner and, to the Company's knowledge, no such claim has been denied.
(x) PROPERTIES. All real and personal property owned by the Company or
a Company Subsidiary or presently used by any of them in its respective business
is in an adequate condition (ordinary wear and tear excepted) and is sufficient
to carry on its business in the ordinary course of business consistent with its
past practices. The Company has good and marketable title free and clear of all
Liens (other than equities of redemption under applicable foreclosure laws) to
all of the material properties and assets, real and personal, reflected on the
consolidated statement of financial condition of the Company as of May 31, 1999
included in the Company Financial Statements or acquired after such date, other
than properties sold by the Company in the ordinary course of business, except
(i) Liens for current taxes not yet due or payable, (ii) pledges to secure
deposits and other liens incurred in the ordinary course of its banking
business, (iii) such imperfections of title, easements and encumbrances, if any,
as are not material in character, amount or extent and (iv) as
13
reflected on the consolidated statement of financial condition of the Company as
of May 31, 1999 included in the Company Financial Statements. All real and
personal property which is material to the Company's business and leased or
licensed by the Company or a Company Subsidiary is held pursuant to leases or
licenses which are valid and enforceable in accordance with their respective
terms.
(y) INVESTMENT COMPANY ACT OF 1940. The Company is not, and will not
become upon consummation of the transactions contemplated hereby and by the
Stock Purchase Agreement, an "investment company" or an entity "controlled" by
an "investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
(z) PRIVATE OFFERING. Neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the offering,
issuance or sale of the Notes to the registration requirements of the Securities
Act or comparable provisions of any applicable State securities laws.
(aa) EXERCISE OF WARRANTS; STOCKHOLDER APPROVAL. After taking into
account the 600,000 shares of Common Stock to be issued in connection with the
Acquisition but without regard to the shares of Common Stock issuable upon
conversion of the Notes, an aggregate of 11,027 shares of Common Stock may be
issued by the Company in connection with the Acquisition and the transactions
contemplated hereby without compliance with the stockholder approval
requirements of the NASD. The affirmative vote of the holders of a majority of
the shares of Company Common Stock present in person or by proxy at a duly
called meeting of the stockholders of the Company at which a quorum, consisting
of the holders of a majority of the outstanding shares of Company Common Stock
present in person or by proxy, is present is the only vote of the stockholders
of the Company necessary to approve the conversion features of the Notes in
their entirety.
(bb) STOCK PURCHASE AGREEMENT. The Company has heretofore delivered a
true and complete copy of the Stock Purchase Agreement, including the related
disclosure schedules, to the Purchaser.
(cc) DISCLOSURE. None of the representations and warranties of the
Company or any of the information or documents which have been Previously
Disclosed to the Purchaser pursuant hereto are false or misleading in any
material respect or contain any untrue statement of a material fact, or omit to
state any material fact required to be stated or necessary to make any such
information or document, at the time and in light of the circumstances, not
misleading. Copies of all documents referred to in this Section 3.1 are true,
correct and complete copies thereof and include all amendments, supplements and
modifications thereto and all waivers thereunder.
SECTION 3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
(a) INVESTMENT INTENT. The Purchaser represents and warrants to the
Company that the Securities to be acquired by it hereunder are being acquired
for its own account for investment and
14
with no intention of distributing or reselling such Securities or any part
thereof or interest therein in any transaction which would be in violation of
federal or State securities laws, without prejudice, however, to the Purchaser's
right, subject to the provisions of this Agreement and the Registration Rights
Agreement, at all times to sell participation interests in the Notes in
accordance with Section 6.13 hereof and/or to sell or otherwise dispose of all
or any part of such Securities under an effective registration statement under
the Securities Act and other applicable State securities laws or under an
exemption from such registration, and subject, nevertheless, to the disposition
of the Purchaser's property being at all times within its control.
(b) TRANSFER RESTRICTIONS. If the Purchaser should decide to dispose of
any of the Securities, such Purchaser understands and agrees that it may do so
only as set forth below: (i) to the Company or (ii) to any Person reasonably
believed by such Purchaser to be a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in compliance with Rule 144A under the
Securities Act. In connection with any transfer of any Securities. In connection
with any transfer pursuant to clause (ii) above, the Company may request
reasonable certification as to the status of the transferor's transferee as a
qualified institutional buyer. The Purchaser agrees to the imprinting, so long
as appropriate, (i) on the Notes of the legend set forth on the form of Note
included as Exhibit B hereto and (ii) on certificates representing the Common
Stock issuable upon conversion of the Notes of a legend substantially similar to
such legend. The Notes and certificates evidencing the Common Stock issuable
upon conversion of the Notes also shall bear any other legends required by
applicable federal or State securities laws, which legends may be removed when,
in the opinion of counsel to the Company experienced in the applicable
securities laws, the same are no longer required under the applicable
requirements of such securities laws. The Company agrees that it will provide
the Purchaser, upon request, with a substitute document evidencing the
Securities not bearing such legend at such time as such legend is no longer
applicable.
(c) STOP TRANSFER INSTRUCTIONS. The Purchaser agrees that the Company
shall be entitled to make a notation on its records and give instructions to any
transfer agent of the Securities in order to implement the restrictions on
transfer set forth in Section 3.2(b) of this Agreement.
(d) ACCREDITED INVESTOR, ETC. The Purchaser represents and warrants to,
and covenants and agrees with, the Company that (i) at the time it was offered
the Notes, it was, (ii) at the date hereof, it is, and (iii) at the Closing, it
will be, a "qualified institutional buyer" as defined in Rule 144A under the
Securities Act, and has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Notes, and has so evaluated the
merits and risks of such investment, is able to bear the economic risk of such
investment and, at the present time, is able to afford a complete loss of such
investment.
(e) DUE EXECUTION. The Purchaser represents and warrants to the Company
that this Agreement has been, and each Related Agreement to which it will become
a party will be, duly executed and delivered by it or on its behalf and
constitutes, or will constitute, as applicable, a valid and binding obligation
of such Purchaser, enforceable against the Purchaser in accordance with its
15
terms, except that (i) rights to indemnity and contribution under the
Registration Rights Agreement may be limited by applicable law, (ii)
enforceability may be limited by bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights generally and (iii) rights of acceleration and
the availability of equitable remedies may be limited by equitable principles of
general applicability.
(f) NO CONFLICT. The Purchaser represents and warrants to the Company
that neither the execution and delivery of this Agreement and each of the
Related Agreements to which the Purchaser is or will become a party, nor
consummation of the transactions contemplated hereby and thereby, nor compliance
by the Purchaser with any of the provisions hereof or thereof, (i) does or will
conflict with or result in a breach of any provisions of the articles of
incorporation or bylaws or equivalent documents of the Purchaser, (ii) violate,
conflict with or result in a breach of any term, condition or provision of, or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
Lien upon my property or asset of the Purchaser pursuant to any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Purchaser is a party, or by which any of
its properties or assets may be bound or affected, or (iii), subject to the
compliance referred to in clause (i) and (ii) of the succeeding sentence,
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Purchaser. Except for (i) compliance with applicable federal
and State securities laws in connection with the performance by the Purchaser of
its obligations under the Registration Rights Agreement and (ii) any required
compliance by the Purchaser with applicable federal and State securities laws
and the HSR Act in connection with the issuance of shares of Common Stock upon
conversion of the Notes in accordance with their terms, the Purchaser represents
and warrants to the Company that no consent, approval, order or other
authorization of any Governmental Entity or of any third party is legally
required by or on behalf of the Purchaser in connection with the execution,
delivery and performance of this Agreement and each Related Agreement to which
it will become a party.
(g) ACCESS TO INFORMATION. The Purchaser acknowledges that prior to the
date hereof it has been afforded (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Notes and the
merits and risks of investing in the Notes and (ii) access to information about
the Company and the Company's financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment in the Notes.
(h) RELIANCE. The Purchaser understands and acknowledges that (i) the
Notes are being offered and sold without registration under the Securities Act
in a transaction that is exempt from the registration provisions of the
Securities Act and (ii) such exemption depends in part on, and that the Company
will rely upon, the accuracy and truthfulness of the foregoing representations
and warranties of such Purchaser, and such Purchaser hereby consents to such
reliance.
16
ARTICLE IV
CONDITIONS PRECEDENT TO THE CLOSING
SECTION 4.1 CONDITIONS TO OBLIGATIONS OF THE PARTIES. The
respective obligations of each of the parties hereto to fulfill their
obligations under Section 2.1 hereof at the Closing shall be subject to the
satisfaction or waiver prior to the Closing of the following conditions:
(a) All requirements prescribed by law which are necessary to the
consummation of the transactions contemplated by this Agreement shall have been
satisfied.
(b) No party hereto shall be subject to any order, decree or injunction
of a court or agency of competent jurisdiction which enjoins or prohibits the
consummation of any of the transactions contemplated by this Agreement.
(c) No statute, rule or regulation shall have been enacted, entered,
promulgated, interpreted, applied or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of any of the transactions
contemplated by this Agreement.
(d) Each of the parties hereto shall have received (i) a counterpart to
this Agreement, duly executed and delivered by the parties hereto, and (ii) a
counterpart of each Related Agreement (other than the Notes), substantially in
the form attached hereto as an exhibit, which shall have been duly executed and
delivered by the Company, the Purchaser and in the case of the Intercreditor
Agreement the other party or parties thereto.
SECTION 4.2 CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The
obligations of the Purchaser to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) Each of the representations and warranties of the Company contained
in this Agreement shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as if made on the Closing Date
(or on the date when made in the case of any representation or warranty which
specifically relates to an earlier date); the Company shall have performed, in
all material respects, each of its covenants and agreements contained in this
Agreement to be performed prior to the Closing; and the Purchaser shall have
received a certificate signed by the Chief Executive Officer and the Chief
Financial Officer of the Company, dated the Closing Date, to the foregoing
effect.
(b) The Company shall have delivered to the Purchaser a duly executed
Note, registered in the name of the Purchaser, sufficient to evidence the Note
to be issued and sold by the Company and purchased by the Purchaser, as set
forth on Exhibit A hereto, against payment therefor to the Company in an amount
equal to the principal amount thereof.
17
(c) The Purchaser shall have received, in form and substance reasonably
satisfactory to it, (i) opinions, addressed to the Purchaser and dated the
Closing Date, of King & Spalding and ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, LLP special
counsel to the Company, with respect to the indicated matters set forth in
Exhibit F hereto and (ii) the opinions delivered pursuant to Sections 8.11 and
9.05 of the Stock Purchase Agreement, addressed to the Purchaser or otherwise
indicated therein or in an accompanying document that they may be relied upon by
the Purchasers as if addressed directly to them.
(d) No party to this Agreement (other than the Purchaser) shall be in
material breach of this Agreement unless such breach shall have been waived in
writing by each of the other parties to this Agreement.
(e) The Company shall have obtained in writing all consents of third
parties necessary to permit the consummation of the transactions contemplated by
this Agreement and the Related Agreements, as Previously Disclosed pursuant to
Section 3.1(f) hereof, and no such consent shall contain any term or condition
that the Purchaser reasonably deems to be materially disadvantageous to the
Company or the Purchaser.
(f) Each of City National Bank of West Virginia and Sovereign Bancorp,
Inc. shall have waived any adjustments to the terms of the stock options issued
to them pursuant to the Stock Option Agreement, dated May 29, 1998, between the
Company and each such entity, that may be required pursuant to Section 7 of such
Stock Option Agreements as a result of the issuance of the Notes or the
conversion thereof to shares of Common Stock, in each case in form and substance
reasonably satisfactory to the Purchaser.
(g) The Purchaser and ▇. ▇▇▇▇ Price shall have entered into a
Participation Agreement, substantially in the form previously provided by the
Purchaser to the Company, pursuant to which ▇. ▇▇▇▇ Price shall purchase a
$2,000,000 participation interest in the Notes issued to the Purchaser pursuant
to this Agreement.
(h) The Purchaser shall have received such other certificates,
opinions, documents and instruments related to the transactions contemplated
hereby (including without limitation the Acquisition) as may have been
reasonably required by it and are customary for transactions of this type, and
all corporate and other proceedings, and all documents, instruments and other
legal matters in connection with the transactions contemplated by this
Agreement, shall be reasonably satisfactory in form and substance to it and its
counsel.
SECTION 4.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to fulfill its obligations under Section 2.1 hereof
shall be subject to the satisfaction or waiver prior to the Closing of the
following conditions:
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and as
18
of the Closing Date as if made on the Closing Date (or on the date when made in
the case of any representation and warranty which specifically relates to an
earlier date), and the Company shall have received a certificate signed by a
duly authorized representative of each Purchaser to the foregoing effect.
(b) The Purchaser shall have delivered to the Company a dollar amount
equal to the principal amount of the Notes to be issued and sold by the Company
and purchased by the Purchaser pursuant to this Agreement, as set forth on
Exhibit A hereto, such amount to be payable (i) by wire transfer of immediately
available funds to an account with a bank designated by the Company, by notice
to the Purchaser to be provided no later than two Business Days prior to the
Closing Date, or (ii) a federal (same day) funds check payable to the order of
the Company.
(c) No party to this Agreement (other than the Company) shall be in
material breach of this Agreement unless such breach shall have been waived in
writing by each of the other parties to this Agreement.
(d) The Company shall have obtained in writing all consents of third
parties necessary to permit the consummation of the transactions contemplated by
this Agreement and the Related Agreements (other than the consents referred to
in Section 4.2(f) hereof) and no such consent shall contain any term or
condition that the Company reasonably deems to be materially disadvantageous to
the Company.
(e) The Company shall have received such other certificates, opinions,
documents and instruments related to the transactions contemplated hereby as may
have been reasonably required by the Company and are customary for transactions
of this type, and all corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement, shall be reasonably satisfactory in form and
substance to the Company and its counsel.
ARTICLE V
COVENANTS
SECTION 5.1 SHAREHOLDER MEETING. The Company shall (i) take all
action necessary (including without limitation the preparation, filing and
dissemination of requisite proxy materials) to have its shareholders approve in
accordance with the requirements of the NASD the issuance of the number of
shares of Common Stock issuable upon conversion of the Notes to be sold pursuant
to this Agreement which may not be issued without such approval (the
"Stockholder Approval") at the first annual meeting of the shareholders of the
Company held after the date hereof or at a special meeting of shareholders which
is called for the purpose prior to the holding of such annual meeting of
shareholders, (ii) recommend that its shareholders approve the issuance of such
Common Stock
19
and use its reasonable best efforts to obtain, as promptly as practicable, such
approval and (iii) reasonably cooperate and consult with the Purchasers with
respect to the foregoing matters.
SECTION 5.2 APPLICATIONS.
(a) Notwithstanding any other provision hereof to the contrary, the
right of a holder, whether on its own behalf or on behalf of a holder of a
participation interest in the Notes, to convert the principal amount of any
Note, or any portion thereof, and the obligation of the Company to issue any
shares of Common Stock upon the exercise of such conversion right, are subject
to the condition that, if upon receipt by the Company of written notice of
conversion from any holder, whether on its behalf or on behalf of a holder of
participation interest in the Notes, outside counsel advises the Company in
writing (a copy of which shall be provided to the converting holder) that in its
opinion the Company, such holder and/or any participant on behalf of whom such
holder is attempting to exercise conversion rights are required under applicable
law to make a filing under the HSR Act in connection with such conversion and
issuance of shares of Common Stock, no shares of Common Stock shall be issued to
such holder until all applicable filings under the HSR Act are made by the
Company and, if required under the HSR Act, by such holder and any other person
or persons and all applicable waiting periods under the HSR Act have expired or
been terminated. As soon as practicable after the receipt from any holder of the
Notes, whether on its behalf or on behalf of a holder of a participation
interest in the Notes (collectively the "Notice Giver"), of notice of an intent
to convert an amount of Notes sufficient to require a filing under the HSR Act,
but in any event no later than the tenth Business Day after receipt of such
notice, the Company will (i) prepare and file with the Antitrust Division of the
U.S. Department of Justice (the "DOJ") and the Federal Trade Commission (the
"FTC") the Notification and Report Form (accompanied by all documentary
attachments contemplated thereby) required by the HSR Act, (ii) upon the request
of any Notice Giver, request early termination of the waiting period imposed by
the HSR Act, (iii) coordinate and cooperate with the Notice Giver in responding
to formal and informal requests for additional information and documentary
material from the DOJ and the FTC in connection with such filing, (iv) use its
reasonable best efforts to take, or cause to be taken, all reasonable action and
to do, or cause to be done, all things reasonably necessary and appropriate to
permit the issuance to the Notice Giver of the shares of Common Stock issuable
upon the conversion of the Notes with respect to which any filing is required
under the HSR Act and (v) reimburse the holders of the Notes for the entire
amount of any filing fee or any other costs and expenses incurred by holders of
the Notes in connection therewith (including legal fees) or as required to be
paid under the HSR Act. The Notice Giver agrees to provide to the Company all
reasonable cooperation in connection with the making of such filings under the
HSR Act; provided, however, that neither the Company nor any such Notice Giver
shall be required in connection with any such filing to enter into any
agreement, or take or refrain from taking any action, as a condition to
obtaining any approval required under the HSR Act if, in the judgment of such
party, such condition could have a material adverse effect on such party or its
business. In the event that despite their reasonable efforts, the Company and
such Notice Giver do not receive all approvals required under the HSR Act in
connection with such conversion, such holder's notice of conversion shall be
deemed to be rescinded and the Company shall not be
20
obligated to take any further action with respect to the conversion of such Note
pursuant to such notice of exercise.
(b) In the event that any other approval, consent or non-objection need
be obtained by the Company from, or a notice or other filing need be filed by
the Company with, any Governmental Entity in connection with (i) the execution,
delivery and performance of this Agreement or any Related Agreement by the
Company or (ii) the Company's issuance of Common Stock upon conversion of the
Notes, the Company shall take all actions reasonably necessary to obtain any
such approval, consent or non-objection or file such notice or other filing as
promptly as practicable, and the Purchaser agrees to cooperate with the Company
in obtaining or filing the same. The Company shall provide copies of any notice,
application or other document required to be filed pursuant to this Section 5.2
(excluding any confidential information) to the holder(s) seeking to convert a
Note or Notes into Common Stock for review not less than three Business Days
prior to the making of such filing and shall keep such holder apprised of the
status of such filing and the consideration thereof by the relevant Governmental
Entity.
SECTION 5.3 INVESTIGATION AND CONFIDENTIALITY.
(a) The Company shall permit the Purchaser and its representatives
reasonable access during normal business hours to its properties and personnel,
and shall disclose and make available to the Purchaser all books, papers and
records relating to the assets, stock ownership, properties, operations,
obligations and liabilities of the Company and its Subsidiaries, including, but
not limited to, all books of account (including the general ledger), tax
records, minute books of meetings of boards of directors (and any committees
thereof) and shareholders, organizational documents, bylaws, material contracts
and agreements, filings with any regulatory authority, accountants' work papers,
litigation files, loan files, plans affecting employees, and any other business
activities or prospects in which the Purchaser may have a reasonable interest in
connection with an investment in the Securities, provided that such access shall
be reasonably related to the transactions contemplated hereby and not unduly
interfere with normal operations, and provided further that in the event that
any of the foregoing are in the control of any third party, the Company shall
use its reasonable best efforts to cause such third party to provide access to
such materials to the Purchaser who shall request the same. In the event that
the Company is prohibited by law from providing any of the access referred to in
the preceding sentence to the Purchaser, it shall use its reasonable best
efforts to obtain promptly waivers thereof so as to permit such access. The
Company shall make the directors, officers, employees and agents and authorized
representatives (including counsel and independent public accountants) of the
Company and its Subsidiaries available to confer with the Purchaser and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and not unduly interfere with normal
operations.
(b) All information furnished to the Purchaser by the Company
previously in connection with the transactions contemplated by this Agreement or
pursuant hereto shall be treated as the sole property of the Company and the
Purchaser covenants, severally and not jointly and as to itself only, that it
shall use its best efforts to keep confidential all such information and shall
not directly or
21
indirectly use such information for any purpose other than in connection with
the transactions contemplated hereby. The obligation to keep such information
confidential shall continue for five years from the date hereof but shall not
apply to (i) any information which the Purchaser can establish by convincing
evidence (x) was already in its possession prior to the disclosure thereof by
the Company; (y) was then generally known to the public; or (z) became known to
the public through no fault of the Purchaser; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the Purchaser shall use its reasonable best efforts
to give the Company prior notice thereof as promptly as practicable but in any
event not less than five Business Days prior to such disclosure and shall limit
such disclosure to the minimum amount required by such legal requirement or
court order.
SECTION 5.4 PRESS RELEASES. The Company and the Purchaser shall
agree with each other as to the form and substance of any press release related
to this Agreement or the transactions contemplated hereby, and consult with each
other as to the form and substance of other public disclosures which may relate
to the transactions contemplated by this Agreement, provided, however, that
nothing contained herein shall prohibit any party, following prior notification
to such other parties, from making any disclosure which it determines in good
faith is required by law or regulation. For purposes of the foregoing, the
Company may treat a law firm designated from time to time by the Purchaser as
the authorized representative of the Purchaser.
SECTION 5.5 NO SOLICITATION. Prior to the Closing, neither the
Company nor any of the directors, officers, employees, representatives or agents
of the Company shall solicit or encourage inquiries or proposals with respect
to, furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition, lease or purchase of all or a
substantial portion of the assets of, or any equity interest in, the Company, or
any business combination with the Company, other than as contemplated by this
Agreement. The Company will immediately notify the Purchaser orally and in
writing if any such inquiries or proposals are received by, or such information
is requested from, or any such negotiations or discussions are sought to be
initiated with, the Company.
SECTION 5.6 USE OF PROCEEDS. On the Closing Date the Company
shall use the net proceeds from the sale of the Notes pursuant to this Agreement
to repay the Amended and Restated Promissory Notes, dated July 30, 1999, by and
between the Company and each of the Purchaser and ▇. ▇▇▇▇ Price Recovery Fund
II, L.P., plus interest thereon to the date of repayment, which repayment shall
occur concurrently with the issuance of the Notes upon transfer of the Amended
and Restated Promissory Notes to the Company. Any remainder of such net proceeds
shall be available to the Company for general corporate purposes.
SECTION 5.7 CURRENT INFORMATION. Between the date hereof and the
Closing, the Company shall provide to the Purchaser (i) promptly following the
filing thereof, copies of each Securities Document filed by the Company under
the Securities Laws and (ii) concurrently with the mailing thereof, copies of
each communication sent by the Company to its shareholders generally.
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SECTION 5.8 RULE 144 AND RULE 144A REPORTING. With a view to
making available to holders of Securities the benefits of certain rules and
regulations of the Commission which may permit the sale of the Securities to the
public without registration, the Company agrees at all times to:
(a) make and keep public information available, as those terms are
understood and defined in Rules 144 and 144A under the Securities Act (or any
successors thereto); and
(b) use its reasonable best efforts to file with the Commission in a
timely manner all Securities Documents required to be filed by the Company under
the Securities Laws.
SECTION 5.9 STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law or other
law which would prohibit or forgive the Company from paying all or any portion
of the principal of, premium, if any, or interest on the Notes, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of its obligations under the Notes, and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefits or
advantages of any such law.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 SURVIVAL OF PROVISIONS. The representations,
warranties, covenants and agreements of the Company and the Purchaser made
herein shall remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of the Purchaser or the Company, as the case
may be, (ii) acceptance of any of the Securities and payment by the Purchaser
therefor and retirement thereof, (iii) the transfer of any Securities or
interest therein by the Purchaser or (iv) any termination of this Agreement.
SECTION 6.2 TERMINATION. This Agreement may be terminated:
(a) by mutual agreement of the Company and the Purchaser;
(b) by the Company by written notice to the Purchaser if any of the
conditions specified in Sections 4.1 and 4.3 of this Agreement has not been met
or waived by it pursuant to the terms of this Agreement by 5:00 p.m., Eastern
Time, on August 31, 1999, provided, however, that the right to terminate this
Agreement pursuant to this Section 6.2(b) shall not be available to the Company
to the extent that any action by the Company or failure by the Company to
fulfill any obligation
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under this Agreement has been a cause of, or resulted in, the failure of any one
or more of the conditions specified in Sections 4.1 and 4.3 of this Agreement
not being fulfilled by such date; or
(c) by the Purchaser by written notice to the Company if any of the
conditions specified in Sections 4.1 and 4.2 of this Agreement has not been met
or waived by such Purchaser pursuant to the terms of this Agreement by 5:00
p.m., Eastern Time, on August 31, 1999, provided, however, that the right to
terminate this Agreement pursuant to this Section 6.2(c) shall not be available
to the Purchaser to the extent that any action by such Purchaser or failure by
such Purchaser to fulfill any obligation under this Agreement has been a cause
of, or resulted in, the failure of any one or more of the conditions specified
in Sections 4.1 and 4.2 of this Agreement not being fulfilled by such date.
SECTION 6.3 WAIVER; AMENDMENTS.
No failure or delay on the part of the Company or the Purchaser in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Purchaser at law or in equity. No waiver of or consent to any departure by
the Company or the Purchaser from any provision of this Agreement shall be
effective unless signed in writing by the party entitled to the benefit thereof.
Except as otherwise provided herein, no amendment, modification or termination
of any provision of this Agreement shall be effective unless signed in writing
by or on behalf of the Company and the Purchaser. Any amendment, supplement or
modification of or to any of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure from the terms of any provision of
this Agreement, shall be effective only in the specific instance and for the
specific purpose for which made or given. Except where notice is specifically
required by this Agreement, no notice to or demand on any party hereto in any
case shall entitle another party hereto to any other or further notice or demand
in similar or other circumstances.
SECTION 6.4 COMMUNICATIONS. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or air courier
guaranteeing overnight delivery:
(i) if to the Purchaser, initially at the address set forth
below its name on Exhibit A hereto, and thereafter at such other
address, notice of which is given in accordance with this Section 6.4,
with a copy to ▇. ▇▇▇▇ Price at ▇. ▇▇▇▇ Price Recovery Fund, II, L.P.,
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
(ii) if to the Company, initially at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief Financial Officer;
and thereafter at such other address notice of which is given in
accordance with this Section 6.4.
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All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being sent by certified mail, return receipt requested, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 6.5 COSTS, EXPENSES AND TAXES. The Company agrees to pay
(i) all costs and expenses incurred by it in connection with the negotiation,
preparation, typing, reproduction, execution, delivery and performance of this
Agreement and the Related Agreements and any amendment or supplement or
modification hereof or thereof (except to the extent otherwise provided in the
Registration Rights Agreement), including without limitation, attorneys fees and
expenses and all reasonable costs and expenses incurred by it in connection with
the Company's administration of this Agreement and any Related Agreement, and
(ii) the expenses of the Purchaser and ▇. ▇▇▇▇ Price incurred in connection with
the transactions provided for herein, including reasonable fees and expenses
payable to counsel to the Purchaser and ▇. ▇▇▇▇ Price in connection with the
negotiation, preparation, typing, reproduction, execution and delivery of this
Agreement and the Related Agreements, provided that such fees and expenses of
counsel in this clause (ii) shall not exceed $200,000. The Company shall pay all
reasonable costs and expenses (including, without limitation, attorneys' fees
and expenses), if any, incurred by the Purchaser in connection with any waiver,
amendment or modification of any provision of this Agreement or any Related
Agreement with respect to an obligation of, or requested by, the Company. In
addition, the Company shall pay any and all stamp, transfer and other similar
taxes payable in connection with the execution and delivery of this Agreement or
the original issuance of any of the Securities, and shall save and hold the
Purchaser harmless from and against any and all liabilities with respect to or
resulting from any delay in paying, or omission to pay, such taxes.
SECTION 6.6 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
SECTION 6.7 BINDING EFFECT; ASSIGNMENT. Prior to the Closing, the
rights and obligations of any Purchaser under this Agreement may not be assigned
to any other Person except with the prior written consent of the Company, and
after the Closing the rights and obligations of the Purchaser may be assigned by
such Purchaser to any Person purchasing Securities from the Purchaser
contemporaneously with such assignment (provided the rights so assigned shall
apply to the Securities so purchased), subject to the provisions of Section
3.2(b). The rights and obligations of the Company under this Agreement may not
be assigned by the Company without the consent of the Purchaser. Except as
expressly provided in this Agreement, this Agreement shall not be construed so
as to confer any right or benefit upon any Person other than the parties to this
Agreement, and their respective successors and permitted assigns. This Agreement
shall be binding upon the Company and the Purchaser and their respective
permitted successors and assigns.
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SECTION 6.8 GOVERNING LAW. THE PARTIES HERETO ACKNOWLEDGE THAT
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE NOTES BEAR A REASONABLE
RELATION TO THE STATE OF MARYLAND IN THAT, INTERALIA, ▇. ▇▇▇▇ PRICE HAS ITS
PRINCIPAL PLACE OF BUSINESS IN THE STATE OF MARYLAND, PART OF THE NEGOTIATIONS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY HAS OCCURRED IN THE STATE OF
MARYLAND AND THE CLOSING WILL OCCUR IN SUCH STATE. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
MARYLAND, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
SECTION 6.9. USURY.
All agreements between the Company and the holders of the Notes,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
the maturity of the Notes or otherwise, shall the interest contracted for,
charged, received, paid or agreed to be paid to the Noteholders exceed the
maximum amount permissible under the laws of the State of Maryland (hereinafter
the "Applicable Law"). If, from any circumstance whatsoever, interest would
otherwise be payable to the holders of the Notes in excess of the maximum amount
permissible under the Applicable Law, the interest payable to the holders of the
Notes shall be reduced to the maximum amount permissible under the Applicable
Law, and if from any circumstance the holders of the Notes shall ever receive
anything of value deemed interest by the Applicable Law in excess of the maximum
amount permissible under the Applicable Law, an amount equal to the excessive
interest shall be applied to the reduction of the principal of the Notes and not
to the payment of interest, or if such excessive amount of interest exceeds the
unpaid principal amount of the Notes, such excess shall be refunded to the
Company. All interest paid or agreed to be paid to the holders of the Notes
shall, to the extent permitted by the Applicable Law, be amortized, prorated,
allocated and spread throughout the full term of the Notes (including any
renewal or extension) until payment in full of the principal so that the
interest on the Notes for such full term shall not exceed the maximum amount
permissible under the Applicable Law. The Purchaser expressly disavows any
intent to contract for, charge or receive interest in an amount which exceeds
the maximum amount permissible under the Applicable Law. This paragraph as well
as similar paragraphs set forth in the Notes and the Collateral Documents shall
control all agreements between the Company and the holders of the Notes.
SECTION 6.10 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability only without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 6.11 HEADINGS AND GENDER. The Article and Section headings
and Table of Contents used or contained in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement. Use of a
particular gender herein shall be considered to represent the masculine,
feminine or neuter gender whenever appropriate.
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SECTION 6.12 INTEGRATION. This Agreement (including documents
delivered pursuant hereto), the Related Agreements and the Agreement among the
Company, the Purchaser and ▇. ▇▇▇▇ Price, dated the date hereof, constitute the
entire agreement among the parties with respect to the subject matter thereof
and there are no promises or undertakings with respect thereto not expressly set
forth or referred to herein or therein.
SECTION 6.13 PARTICIPATION INTERESTS. The Company acknowledges and
agrees that immediately following the consummation of the transactions
contemplated hereby the Purchaser will sell an undivided participation interest
in the Note or Notes acquired by it in the principal amount of $2,000,000 to ▇.
▇▇▇▇ Price Recovery Fund II, L.P. ("▇. ▇▇▇▇ Price") pursuant to a Participation
Agreement of even date herewith, and that the Purchaser or any other registered
holder of a Note shall have the right to sell additional participation interests
to ▇. ▇▇▇▇ Price and/or any other third party (individually a "Participant" and
collectively the "Participants") on such terms as it may determine in its sole
discretion. The Company acknowledges that the original intent of the parties
hereto and ▇. ▇▇▇▇ Price was for ▇. ▇▇▇▇ Price to be a party to this Agreement
and an acquirer of a Note or Notes with an aggregate principal amount of
$2,000,000, that the Purchaser entered into this Agreement on the condition that
▇. ▇▇▇▇ Price be permitted to purchase a participation interest in such amount
and that the transaction was restructured to provide for ▇. ▇▇▇▇ Price's
acquisition of a participation interest in the Notes in such amount solely
because the Company is not eligible under the terms of certain of the
mortgage-related securities included in the collateral subject to the Security
Agreement to pledge an interest in such collateral directly to ▇. ▇▇▇▇ Price.
Accordingly, the Company covenants and agrees that (i) the Purchaser or any
other registered holder of a Note shall be entitled to obtain on behalf of an
applicable Participant the benefits of this Agreement and each Related Agreement
and (ii) the Company shall take such action as may be necessary or advisable in
order to enable the Purchaser or any other registered holder of a Note to do the
same and shall not at any time insist upon, plead or in any manner whatsoever
claim that a Participant is not indirectly entitled to a right or benefit
available to a registered holder of a Note under this Agreement or any Related
Agreement because it is a Participant and not such a registered holder. Without
in any way limiting the foregoing, the Company acknowledges and agrees that its
obligations under the Registration Rights Agreement are for the benefit of both
the holders of the Notes and Participants and that any shares of Common Stock
acquired by a Participant upon conversion of a Note or Notes in which such
Participant holds a participation interest shall be subject to the terms of the
Registration Rights Agreement until such shares are no longer "Transfer
Restricted Securities," as such term is defined therein.
SECTION 6.14 KNOWLEDGE LIMITATION. All representations and
warranties of the Company that directly or indirectly relate to MCI contained in
Article III of this Agreement are based on the actual knowledge of the Company.
For this purpose, "actual knowledge of the Company" shall be deemed to mean the
actual knowledge of the Company's Chief Executive Officer and its Executive Vice
President and Chief Financial Officer after the conduct of such inquiry,
including without limitation a review of this Agreement and related schedules
and the Stock Purchase Agreement and related schedules, as they deem necessary
or appropriate in order to ensure the accuracy of such representations and
warranties in all material respects.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive Officer
VALUE PARTNERS, LTD
By: ▇▇▇▇▇ & PARTNERS,
General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Partner
28