EXECUTION COPY
STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT
AMONG
INSIGNIA FINANCIAL GROUP, INC.
and
THE PURCHASERS NAMED HEREIN
Dated as of June 7, 2002
Table of Contents
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Page
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ARTICLE I DEFINITIONS..................................................................................1
1.1. Definitions..................................................................................1
1.2. Terms Generally...............................................................................7
ARTICLE II PURCHASE, SALE AND EXCHANGE OF SHARES.......................................................8
2.1. Agreement to Purchase and Sell...............................................................8
2.2. Agreement to Exchange........................................................................8
2.3. Sale and Exchange Closing....................................................................8
ARTICLE III REPRESENTATION AND WARRANTIES OF THE COMPANY............................................9
3.1. Organization; Power; Qualification...........................................................9
3.2. Capitalization...............................................................................9
3.3. Subsidiaries................................................................................10
3.4. Authorization...............................................................................10
3.5. No Violation; Consents......................................................................11
3.6. Compliance with Law; Governmental Approvals.................................................12
3.7. Litigation..................................................................................12
3.8. SEC Documents, Financial Statements.........................................................12
3.9. Debt and Contingent Obligations.............................................................13
3.10. Tax Returns and Payments....................................................................13
3.11. ERISA.......................................................................................13
3.12. Absence of Defaults.........................................................................15
3.13. Environmental Matters.......................................................................15
3.14. Material Contracts..........................................................................16
3.15. Titles to Properties........................................................................16
3.16. Insurance...................................................................................16
3.17. Employee Relations..........................................................................17
3.18. Material Disclosure.........................................................................17
3.19. No Broker...................................................................................17
3.20. Intellectual Property Matters...............................................................17
3.21. Minute Books................................................................................17
3.22. Liens.......................................................................................17
3.23. Government Regulation.......................................................................17
3.24. Financial Statements........................................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...........................................18
4.1. Organization; Authorization.................................................................18
4.2. No Violation; Consents......................................................................19
4.3. Funds.......................................................................................19
4.4 Title to Existing Preferred Stock...........................................................19
4.5. Status......................................................................................19
4.6. Investment Representation...................................................................20
4.7. No Broker...................................................................................20
4.8. Litigation..................................................................................20
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ARTICLE V COVENANTS OF THE COMPANY....................................................................20
5.1. Securities Compliance........................................................................20
ARTICLE VI ADDITIONAL AGREEMENTS OF THE PARTIES.......................................................21
6.1. Restrictive Legend...........................................................................21
6.2. Limitations on Ownership and Acquisition of Capital Stock....................................21
6.3. Notice of Adjustments of Conversion Price ...................................................22
ARTICLE VII CONDITIONS TO THE SALE AND EXCHANGE CLOSING................................................22
7.1. Conditions to Obligations of the Purchasers.................................................22
7.2. Conditions to Obligations of the Company....................................................24
ARTICLE VIII MISCELLANEOUS............................................................................25
8.1. Survival of Representations, Warranties and Agreements......................................25
8.2. Notices.....................................................................................25
8.3. Complete Agreement..........................................................................26
8.4. Binding Notice of Agreement; No Third Party Beneficiary.....................................26
8.5. Modifications, Amendments and Waivers.......................................................26
8.6. Counterparts................................................................................27
8.7. Expenses....................................................................................27
8.8. Indemnification.............................................................................27
8.9. Nominee; Benefits...........................................................................28
8.10. Governing Law...............................................................................29
8.11. Headings....................................................................................29
8.12. Severability................................................................................29
8.13. Assignment..................................................................................29
EXHIBITS
Exhibit A Form of Series A Certificate of Designation
Exhibit B Form of Series B Certificate of Designation
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Opinion of Proskauer Rose LLP
Exhibit E Form of Exchange Agreement
SCHEDULES
Schedule 2.3(b) Wire Transfer Instructions
Schedule 3.1 Company and Subsidiaries
Schedule 3.2 Capitalization
Schedule 3.7 Litigation
Schedule 3.9 Debt and Contingent Obligations
Schedule 3.11 Employee Benefit Plans
Schedule 3.14 Material Contracts
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STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT
STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT (the "Agreement"), dated as of
June 7, 2002, by and among Insignia Financial Group, a Delaware corporation (the
"Company"), and the Purchasers specified on the signature pages to this
Agreement (the "Purchasers").
WHEREAS, the Company desires to issue and sell 125,000 shares of Series B
Preferred Stock (as defined below) for an aggregate purchase price of
$12,500,000; and
WHEREAS, the Company desires to exchange 250,000 shares of its Series A
Preferred Stock (as defined below) for 250,000 shares of its Existing Preferred
Stock (as defined below); and
WHEREAS, the Purchasers desire to subscribe for and purchase the Series B
Preferred Stock and to exchange the Existing Preferred Stock for the Series A
Preferred Stock upon the terms and subject to the conditions specified herein
(the "Sale and Exchange Transaction").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Actual Knowledge" means information actually known to Xxxxxx X. Xxxxxx,
Chairman of the Board and Chief Executive Officer; Xxxxx X. Aston, Chief
Financial Officer; Xxxxxx Xxxxxx, Chief Operating Officer and Treasurer; Xxxx X.
Xxxxxxx, General Counsel and Secretary; or Xxxxxxx X. Xxxxxx, President, or any
other individual hereafter holding the office of the Company currently held by
such individuals, in each case at the date of determination.
"Affiliate" means, with respect to any Person, any other Person (other than
a Subsidiary of such first Person) which directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, such first Person or any of its Subsidiaries.
"Applicable Law" means in respect of any Person all provisions of
constitutions, statutes, laws, rules, treaties, regulations and orders of all
Governmental Authorities and all orders and decrees of all courts and
arbitrators applicable to such Person.
"Blue Sky Laws" means the state securities and takeover laws.
"Capital Lease" means, with respect to the Company and its Subsidiaries,
any lease of any property that is, in accordance with GAAP, classified and
accounted for as a capital lease on a Consolidated balance sheet of the Company
and its Subsidiaries.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, or any and all
equivalent ownership interests in a Person that is not a corporation.
"Certificates of Designation" means, collectively, the Series A Certificate
of Designation and the Series B Certificate of Designation.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Common Stock" means the common stock, par value $0.01 per share, of the
Company.
"Consolidated" means, when used with reference to financial statements or
financial statement items of the Company and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Contingent Obligation" means, with respect to any Person, without
duplication, any obligation, contingent or otherwise, of such Person pursuant to
which such Person has directly or indirectly guaranteed any Debt or other
material asserted payment obligation of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or indirect, contingent
or otherwise, of such first Person (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation (whether
arising by agreement to keep well, to purchase assets, goods, securities or
services or to take-or-pay) or (b) entered into for the purpose of assuring in
any other manner the obligee of such Debt or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided that the term Contingent Obligation shall not include (i)
endorsements for collection or deposit in the ordinary course of business and
(ii) earn-out obligations (which are included in Debt).
"Credit Agreement" means the Credit Agreement dated as of June 7, 2002, by
and among Insignia Financial Group, Inc., a Delaware corporation, the financial
institutions from time to time party thereto and Xxxxxxxxx L.L.C., a New York
limited liability company, as administrative agent.
"Debt" means, with respect to the Company and its Subsidiaries at any date
and without duplication, the sum of the following calculated in accordance with
GAAP: (a) all Debt for Money Borrowed, (b) all obligations to pay the deferred
purchase price of property or services of any such Person, except trade payables
arising in the ordinary course of business not more than ninety (90) days past
due, (c) all Debt of any Person secured by a Lien on any asset of the Company
and its Restricted Subsidiaries, (d) all Contingent Obligations of any such
Person with respect to Debt, (e) the Company's reasonable estimate of the
aggregate liability of the Company and its Restricted Subsidiaries with respect
to all earn-out obligations and (f) all net obligations incurred by any such
Person pursuant to Hedging Agreements.
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"Debt for Money Borrowed" means, with respect to the Company and its
Restricted Subsidiaries at any date and without duplication, the sum of the
following calculated in accordance with GAAP: (a) all liabilities, obligations
and indebtedness for borrowed money, including, but not limited to, obligations
evidenced by bonds, debentures, notes or other similar instruments of any
Person, (b) all obligations of any Person as lessee under Capital Leases, (c)
all Contingent Obligations of any such Person with respect to Debt for Money
Borrowed, and (d) all obligations, contingent or otherwise, of any such Person
relative to the face amount of letters of credit, whether or not drawn, and
banker's acceptances issued for the account of any such Person.
"Employee Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Company or
any ERISA Affiliate or (b) has at any time within the preceding six years been
maintained for the employees of the Company or any current or former ERISA
Affiliate.
"Environmental Laws" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 331 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C.
ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300, et seq.), the
Environmental Protection Agency's regulations relating to underground storage
tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and Health Act
(29 U.S.C. ss. 651 et seq.), analogous state statutes, and the rules and
regulations promulgated under the foregoing as such statutes are amended or
modified from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended or modified from time to time.
"ERISA Affiliate" means any Person which is a Restricted Subsidiary and
which, together with the Company, is treated as a single employer within the
meaning of Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of
ERISA. For purposes of the definition of "Termination Event," and the definition
of "Multiemployer Plan", however, the meaning of "ERISA Affiliate" shall be
determined by disregarding the phrase "which is a Restricted Subsidiary and" in
the immediately preceding sentence.
"Exchange Agreement" shall mean the Exchange Agreement, to be dated as of
the date of the Sale and Exchange Closing, among the Company and the Purchasers,
substantially in the form attached as Exhibit E hereto.
"Existing Preferred Stock" means the Convertible Preferred Stock of the
Company, par value $.01 per share, having a liquidation preference of $100.00
per share and such
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other rights and preferences as are set forth in the Certificate of Designation
filed with the Secretary of State of the State of Delaware on February 3, 2000.
"Financial Statements" means the unaudited condensed Consolidated balance
sheet of the Company and its Subsidiaries as at March 31, 2002 and the related
unaudited condensed Consolidated statements of operations and cash flows of the
Company and its Subsidiaries for the quarter ended on such date.
"GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants or the Financial Accounting
Standards Board, consistently applied and maintained on a consistent basis for
the Company and its Subsidiaries throughout the period indicated and consistent
with the prior financial practice of the Company, provided, however, that any
accounting principle or practice required to be changed by the American
Institute of Certified Public Accounts or the Financial Accounting Standards
Board (or other appropriate board or committee of either) in order to continue
as a generally accepted accounting principle or practice may be so changed.
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any government or any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants, chemical substances or mixtures or toxic substances under any
Environmental Law, (b) which are toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise harmful to human
health or the environment and are or become regulated by any Governmental
Authority, (c) the presence of which require investigation or remediation under
any Environmental Law, (d) the discharge or emission or release of which
requires a permit or license under any Environmental Law or other Governmental
Approval, (e) which are deemed by a court of law or a Governmental Authority to
constitute a nuisance or a trespass or pose a health or safety hazard to persons
or neighboring properties, (f) which are materials consisting of underground or
aboveground storage tanks, whether empty, filled or partially filled with any
substance, or (g) which contain asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement with respect to an interest rate
swap, collar, cap or floor or a forward rate agreement or other agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Company under the Senior Credit
Agreement, and any confirming letter executed pursuant to such hedging
agreement, all as amended or modified.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Material Adverse Effect" means, with respect to the Company and its
Restricted Subsidiaries, a material adverse effect on the properties, business,
operations or condition (financial or otherwise) of such Persons on a
Consolidated basis taken as a whole or the ability of any such Person to perform
the payment or other material obligations under the Transaction Documents to
which it is a party or which would materially impair the validity or
enforceability of any of the Transaction Documents against any Person party
thereto, other than the Purchasers or their Affiliates.
"Material Contract" means (a) any contract or other agreement, written or
oral, of the Company or any of its Restricted Subsidiaries involving monetary
liability of any such Person in an amount in excess of $1,000,000 per annum, or
(b) any other contract or agreement, written or oral, of the Company or any of
its Restricted Subsidiaries the failure to comply with which could reasonably be
expected to have a Material Adverse Effect.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate made (or is
required to make), or accrued (or is required to accrue) an obligation to make,
contributions within the preceding six years.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Company or any ERISA
Affiliates or (b) has at any time within the preceding six years been maintained
for the employees of the Company or any of their current ERISA Affiliates.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust, business trust, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group thereof.
"Preferred Stock" means, collectively, the Series A Convertible Preferred
Stock and the Series B Convertible Preferred Stock of the Company, par value
$.01 per share, having a liquidation preference of $100.00 per share and such
other rights and preferences as are set forth in the Certificates of
Designation.
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
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"Registration Rights Agreement" means the Registration Rights Agreements to
be entered into on the date of the Sale and Exchange Closing by and between the
Company and the Purchasers, substantially in the form attached hereto as Exhibit
C.
"Registration Statement" means any registration statement of the Company
covering any shares of Common Stock to be registered pursuant to the terms of
the Registration Rights Agreement.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Sale and Exchange Closing" has the meaning set forth in Section 2.3
hereof.
"Sale and Exchange Transaction" shall have the meaning set forth in the
recitals hereto.
"SEC" means the United States Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 3.8 hereof.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Senior Credit Agreement" means the Credit Agreement, dated as of May 4,
2001, as amended November 26, 2001, by and among the Company, the lenders party
thereto and First Union National Bank, as administrative agent, and Xxxxxx
Commercial Paper, Inc., as syndication agent, and Bank of America, N.A., as
documentation agent, and any and all agreements refinancing or refunding the
Obligations (as defined therein) and all amendments, renewals, extensions and
modifications thereto, including increases in amount.
"Series A Certificate of Designation" means, the Certificate of Designation
of the Series A Convertible Preferred Stock, attached hereto as Exhibit A, filed
with the Secretary of State of the state of Delaware on June 7, 2002.
"Series B Certificate of Designation" means the Certificate of Designation
of the Series B Convertible Preferred Stock, attached hereto as Exhibit B, filed
with the Secretary of State of the State of Delaware on June 7, 2002.
"Series A Preferred Stock" means, the Series A Convertible Preferred Stock
of the Company, par value $0.01 per share, having a liquidation preference of
$100.00 per share and such other rights and preferences as are set forth in the
Series A Certificate of Designation.
"Series B Preferred Stock" means, the Series B Convertible Preferred Stock
of the Company, par value $0.01 per share, having a liquidation preference of
$100.00 per share and such other rights and preferences as are set forth in the
Series B Certificate of Designation.
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"Subsidiary" means, as to any Person, any corporation, partnership or other
entity of which more than fifty percent (50%) of the outstanding capital stock
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity is at the time, directly or indirectly, owned by such Person
(irrespective of whether, at such time, capital stock or other ownership
interest of any other class or classes shall have or might have voting power by
reason of the happening of any contingency). Unless otherwise qualified,
references to "Subsidiary" or "Subsidiaries" herein shall refer to those of the
Company.
"Termination Event" means: (a) a "Reportable Event" described in Section
4043 of ERISA for which notice has not been waived which results in a Material
Adverse Effect, or (b) the withdrawal of the Company or any ERISA Affiliate from
a Pension Plan during a plan year in which it was a "substantial employer" as
defined in Section 4001(a)(2) of ERISA which results in a Material Adverse
Effect, or (c) the institution of proceedings to terminate, or the appointment
of a trustee with respect to, any Pension Plan by the PBGC which results in a
Material Adverse Effect, or (d) any other event or condition which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan, or (e) the imposition
of a Lien pursuant to Section 412 of the Code or Section 302 of ERISA which
results in a Material Adverse Effect, or (f) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA which results in a Material Adverse Effect, or
(g) any event or condition which results in the termination of a Multiemployer
Plan under Section 4041A of ERISA or the institution by PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA which results in a
Material Adverse Effect.
"Transaction Documents" means, collectively, this Agreement, the
Certificates of Designation, the Exchange Agreement and the Registration Rights
Agreement, and each other document and agreement executed and delivered by the
Company, its Subsidiaries or their counsel in connection with this Agreement or
otherwise referred to herein or contemplated hereby.
"Trust Convertible Preferred Securities" means the 10% Trust Convertible
Preferred Securities of the Company issuable pursuant to and having the terms,
rights and privileges set forth in the trust documents substantially in the form
attached as an exhibit to the Exchange Agreement.
"Unrestricted Subsidiary" means any Subsidiary of the Company and of any
other Subsidiary whose Debt and Contingent Obligations are non-recourse to the
Company and its other Restricted Subsidiaries and which has been designated, in
writing, by the Company as such (without such designation having been rescinded
by the Company). As of the Sale and Exchange Closing, the Unrestricted
Subsidiaries are those set forth as such on Schedule 3.1.
1.2. Terms Generally. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(a) any definition of or reference to any agreement,
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instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
ARTICLE II
PURCHASE, SALE AND EXCHANGE OF SHARES
2.1. Agreement to Purchase and Sell. Upon the terms and subject to the
conditions hereinafter set forth, the Purchasers hereby, severally but not
jointly, subscribe for and agree to purchase from the Company, in the amount for
each Purchaser set forth below such Purchaser's name on the signature pages
hereto, and the Company agrees to issue and sell to the Purchasers in such
amounts, on the date of the Sale and Exchange Closing, an aggregate of 125,000
shares of Series B Preferred Stock for an aggregate cash price (the "Purchase
Price") equal to $12,500,000.
2.2 Agreement to Exchange. Upon the terms and subject to the conditions
hereinafter set forth, each of the Purchasers hereby, severally but not jointly,
agrees to exchange each share of Existing Preferred Stock owned by such
Purchaser for one share of Series A Preferred Stock.
2.3. Sale and Exchange Closing. (a) The closing of the purchase and sale of
the Series B Preferred Stock pursuant to Section 2.1 hereof and the closing of
the exchange pursuant to Section 2.2 hereof (the "Sale and Exchange Closing")
shall take place on June 10, 2002 or on such other date as the parties hereto
may agree. The Sale and Exchange Closing shall be held at the offices of Xxxxxxx
Xxxx & Xxxxx LLP, 919 Third Avenue, New York, New York, or at such other place
as the parties hereto shall mutually agree.
(b) Immediately prior to the Sale and Exchange Closing, the Company shall
declare a special dividend on the Existing Preferred Stock, at the rate per
annum provided for in the Certificate of Designation of the Existing Preferred
Stock, for the period from the most recent date on which a dividend was paid on
the Existing Preferred Stock to the date of the Sale and Exchange Closing. Such
special dividend will be payable to the holders of record of the Existing
Preferred Stock on the date of the Sale and Exchange Closing, at the option of
the Company (as provided for in the Certificate of Designation of the Existing
Preferred Stock), in cash or in shares of Common Stock, within 20 business days
of the date of the Sale and Exchange Closing.
(c) At the Sale and Exchange Closing, (i) the Company shall deliver to each
Purchaser, against payment of the Purchase Price therefor, one or more
certificates for the shares
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of Series B Preferred Stock being purchased by such Purchaser, in definitive
form and registered in the name of such Purchaser or its nominee, which name
shall be designated in writing at least two (2) business days prior to the Sale
and Exchange Closing, representing the Series B Preferred Stock being purchased
by it, (ii) the Purchasers shall deliver to the Company against delivery of the
certificate or certificates representing the Series B Preferred Stock, by wire
transfer to the account set forth on Schedule 2.3(b), the Purchase Price payable
in immediately available funds, (iii) the Company shall deliver to each
Purchaser, against surrender of the certificates evidencing shares of Existing
Preferred Stock being exchanged by such Purchaser, one or more certificates for
the shares of Series A Preferred Stock to be received by it, in definitive form
and registered in the name of such Purchaser or its nominee, which name shall be
designated in writing at least two (2) business days prior to the Sale and
Exchange Closing, (iv) each Purchaser shall deliver and surrender to the
Company, against delivery of the certificate or certificates representing the
Series A Preferred Stock to be received by it, the certificate or certificates
representing the Existing Preferred Stock to be exchanged by such Purchaser, (v)
the Company and each Purchaser shall execute and deliver to the other the
Exchange Agreement and the registration Rights Agreement, and (vi) each party to
this Agreement shall deliver to the other such other documents, instruments and
writings as may be required to be delivered in accordance with this Agreement or
as may be reasonably requested by such other party.
ARTICLE III
REPRESENTATION AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as follows:
3.1. Organization; Power; Qualification. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification and authorization, except
where the failure to so qualify could not reasonably be expected to have a
Material Adverse Effect. The jurisdictions in which the Company and its
Subsidiaries are organized are described on Schedule 3.1.
3.2. Capitalization. (a) Part I of Schedule 3.2 sets forth the number and
par value of the shares of Capital Stock that the Company as of the date hereof
is authorized to issue, has issued, has outstanding and has reserved for
issuance upon conversion of or as dividends on the Preferred Stock and the
Existing Preferred Stock. All the outstanding Capital Stock as of the date
hereof is fully paid and nonassessable. All the outstanding Capital Stock has
been issued in full compliance with applicable law. 1,502,600 shares of the
Common Stock are held in the Company's treasury. The Capital Stock is not
entitled to cumulative voting rights, preemptive rights and antidilution rights,
except as otherwise provided in this Agreement or in the Certificate of
Designation relating to the Existing Preferred Stock. The Capital Stock has the
preferences, voting powers, qualifications, and special or relative rights or
privileges set forth in the Company's Certificate of Incorporation or the
certificate of designation relating to the Existing Preferred Stock. Except as
provided in the Series B Certificate of Designation, the Series A
9
Certificate of Designation, the certificate of designation related to the
Existing Preferred Stock or Part II of Schedule 3.2, the Company has outstanding
no option, warrant or other commitment to issue or to acquire any shares of its
Capital Stock, or any securities or obligations convertible into or exchangeable
for its Capital Stock, nor, has it given any Person any right to acquire from
the Company or sell to the Company any shares of its Capital Stock. Except as
set forth on Schedule 3.2, in the Registration Rights Agreement or in the
Registration Rights Agreement pertaining to the shares of Common Stock issuable
for conversion of shares of Existing Preferred Stock, the Company has no
obligation to register any of its presently outstanding securities or any of its
securities which may thereafter be issued under the Securities Act.
(b) Upon payment of the Purchase Price for the Series B Preferred Stock and
the surrender to the Company of the certificate(s) representing the Existing
Preferred Stock pursuant to the Sale and Exchange Transaction in accordance with
the terms of this Agreement, the Company will deliver to each Purchaser the
certificate(s) representing the Series A Preferred Stock and the Series B
Preferred Stock and transfer to the Purchasers good and valid title to the
Series A Preferred Stock and the Series B Preferred Stock, which shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all preemptive
rights and taxes, liens and charges with respect to the issue thereof and (iii)
entitled to the rights and preferences set forth in the Series A Certificate of
Designation and the Series B Certificate of Designation, respectively. A
sufficient number of shares of Common Stock necessary to provide for the
conversion of the Preferred Stock has been duly authorized and reserved for
issuance upon conversion of the Preferred Stock. Upon conversion in accordance
with the Series A Certificate of Designation or the Series B Certificate of
Designation, as the case may be, such Common Stock will be validly issued, fully
paid and nonassessable and free from all preemptive rights and taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
3.3. Subsidiaries. Each Subsidiary as of the date hereof is listed on
Schedule 3.1. All outstanding shares or other equity interests in such
Subsidiaries have been duly authorized and validly issued and, with respect to
capital stock, are fully paid and nonassessable.
3.4. Authorization. The Company has full corporate power and authority to
execute and deliver this Agreement, the Exchange Agreement and the Registration
Rights Agreement, to execute and file the Certificates of Designation and to
consummate the transactions contemplated hereby and thereby in accordance with
the terms hereof and thereof and to issue the Preferred Stock hereunder or as
dividends on the Preferred Stock and the Common Stock issuable upon conversion
of the Preferred Stock in accordance with the terms of the Certificates of
Designation. The execution and delivery of this Agreement, the Exchange
Agreement and the Registration Rights Agreement, the execution and filing of the
Certificates of Designation and the issuance of the Preferred Stock hereunder or
as dividends on the Preferred Stock and of the Common Stock issuable upon
conversion of the Preferred Stock have been duly authorized by the Board of
Directors of the Company and, except for any required Stockholder Approval
provided for in the Exchange Agreement, no other corporate proceedings on the
part of the Company are necessary to approve and authorize the execution and
delivery of this Agreement, the Exchange Agreement and the Registration Rights
Agreement, the execution and filing of the Certificates of Designation, the
issuance of the Preferred Stock hereunder or as dividends on the Preferred Stock
and the Common Stock issuable upon conversion of the
10
Preferred Stock and the consummation of the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof. This Agreement has been
duly executed and delivered by the Company, the Certificates of Designation have
been duly executed and filed in accordance with the Delaware General Corporation
Law and, when issued in accordance with the terms hereof, the Preferred Stock
will be duly issued, and each of this Agreement and the Certificates of
Designation constitutes, and upon execution and delivery by the Company of the
Exchange Agreement and the Registration Rights Agreement, the Exchange Agreement
and the Registration Rights Agreement will constitute, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except to the extent limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity.
3.5. No Violation; Consents. (a) Assuming the making or receipt of all
filings, notices, registrations, consents, approvals, permits and authorizations
described in the following paragraph and any required Stockholder Approval
provided for in the Exchange Agreement and that the Purchasers' representations
in Article IV are true and correct, the execution and delivery of this
Agreement, the Exchange Agreement and the Registration Rights Agreement, the
execution and filing of the Certificates of Designation by the Company, the
issuance of the Preferred Stock hereunder or as dividend on the Preferred Stock
and the Common Stock issuable upon conversion of the Preferred Stock by the
Company, the consummation of the transactions contemplated hereby, by the
Exchange Agreement and by the Registration Rights Agreement or by the
Certificates of Designation, the compliance by the Company with any of the
provisions hereof, of the Exchange Agreement or of the Registration Rights
Agreement or the Certificates of Designation will not (i) conflict with, violate
or result in any breach of the Certificate of Incorporation, by-laws or other
charter documents of the Company, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default or
give rise to any right of termination, cancellation or acceleration under, or
result in the creation of any Lien on or against any of the properties of the
Company pursuant to any of the terms or conditions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which the
Company is a party or by which any of them or any of their properties or assets
may be bound, or (iii) violate any statute, law, rule, regulation, writ,
injunction, judgment, order or decree of any Governmental Authority, binding on
the Company or any of their properties or assets, excluding from the foregoing
clauses (i) and (ii) conflicts, violations, breaches, defaults, rights of
termination, cancellation or acceleration, and Liens which, individually or in
the aggregate, would not have a Material Adverse Effect, would not prevent or
materially delay consummation of the transactions contemplated hereby and would
not affect the validity of the issuance of the Preferred Stock hereunder or as
dividend on the Preferred Stock or of the Common Stock issuable upon conversion
of the Preferred Stock.
(b) Except for (i) the filing of the Certificates of Designation in
accordance with the Delaware General Corporation Law, (ii) applicable
requirements, if any, under Blue Sky Laws, (iii) the filing and effectiveness of
a Registration Statement as set forth in the Registration Rights Agreement, (iv)
the listing on the New York Stock Exchange of the Common Stock issuable upon
conversion of the Preferred Stock, and (v) if so required at any future date in
connection with the conversion of the Preferred Stock, the filing of a statement
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and
the expiration or termination of any waiting period thereunder, no filing,
consent, approval, permit, authorization,
11
notice, registration or other action of or with any Governmental Authority, is
required to be made or obtained by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement and
the Registration Rights Agreement by the Company, the issuance of the Preferred
Stock hereunder or as dividends on the Preferred Stock and the Common Stock
issuable upon conversion of the Preferred Stock by the Company or the
consummation by the Company of the transactions contemplated hereby and thereby.
3.6. Compliance with Law; Governmental Approvals. Each of the Company and
its Subsidiaries (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its business, each of which is in full force and effect,
is final and not subject to review on appeal and is not the subject of any
pending or, to the best of its knowledge, threatened attack by direct or
collateral proceedings, except for such Governmental Approvals the absence of
which could not reasonably be expected to have a Material Adverse Effect and
(ii) is in compliance with each Governmental Approval applicable to it and in
compliance with all other Applicable Laws relating to it or any of its
respective properties, except in each case where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
3.7. Litigation. Except for matters existing as of the date hereof and set
forth either in the public filings of the Company with the Securities and
Exchange Commission made prior to the Sale and Exchange Closing or on Schedule
3.7, there are no actions, suits or proceedings pending nor, to the knowledge of
the Company, threatened against or in any other way relating adversely to or
affecting the Company or any Subsidiary thereof or any of their respective
properties in any court or before any arbitrator of any kind or before or by any
Governmental Authority which individually or in the aggregate could reasonably
be expected to have a Material Adverse Effect or that seek to have, or are
reasonably likely to have the effect of making illegal, materially delaying or
otherwise directly or indirectly prohibiting or materially restraining or making
materially more costly the Sale and Exchange Transaction.
3.8. SEC Documents, Financial Statements. (i) The Common Stock is
registered pursuant to Section 12(b) of the Securities Exchange Act and the
Company has filed all reports, schedules, forms, statements and other documents,
together with all exhibits, financial statements, schedules and any amendments
thereto required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act, including material filed pursuant
to Section 13(a) or 15(d) (all of the foregoing, whether heretofore or hereafter
filed with the SEC, and the Registration Statement, when declared effective,
being hereinafter referred to as the "SEC Documents"). The Company has not
provided to the Purchasers any information which, according to applicable law,
rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions
contemplated by this Agreement. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Securities
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and as of their
respective dates, none of the SEC Documents, as amended, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of the date of
delivery by the Purchasers of the prospectus contained in the Registration
Statement in connection with sales of Common Stock by the Purchasers, such
12
prospectus will comply in all material respects with the requirements of the
Securities Act and the rules and regulations of the SEC promulgated thereunder,
and other federal, state and local laws, rules and regulations applicable to
such prospectus. The financial statements of the Company included (or
incorporated by reference) in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(ii) During the three years preceding the date hereof, the SEC has not
issued an order preventing or suspending the use of any prospectus relating to
the offering of any shares of Common Stock or instituted proceedings for that
purpose.
3.9. Debt and Contingent Obligations. Schedule 3.9 is a complete and
correct listing of all Debt and Contingent Obligations of the Company and its
Subsidiaries as of the date hereof in excess of $1,000,000. The Company and its
Subsidiaries have performed and are in material compliance with all of the terms
of such Debt and Contingent Obligations and all instruments and agreements
relating thereto.
3.10. Tax Returns and Payments. Each of the Company and its Subsidiaries
has duly filed or caused to be filed all material federal, state, local and
other tax returns required by Applicable Law to be filed, and has paid, or made
adequate provision for the payment of, all material federal, state, local and
other taxes, assessments and governmental charges or levies upon it and its
property, income, profits and assets which are due and payable (other than
taxes, assessments and governmental charges or levies which are being challenged
in good faith by the Company and are adequately reserved for in accordance with
GAAP). No Governmental Authority has asserted any Lien or other material claim
against the Company or any Subsidiary with respect to unpaid taxes which could
reasonably be expected to have a Material Adverse Effect. The charges, accruals
and reserves on the books of the Company and its Subsidiaries in respect of
federal, state, local and other taxes for all fiscal years and portions thereof
since the organization of the Company and its Subsidiaries are in the judgment
of the Company adequate, and the Company does not anticipate any additional
taxes or assessments for any of such years, the result of which could reasonably
be expected to have a Material Adverse Effect.
3.11. ERISA.
(i) Neither the Company nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee
Benefit Plans other than those identified on Schedule 3.11;
13
(ii) the Company and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and the
regulations and published interpretations thereunder with
respect to all Employee Benefit Plans except for any
required amendments for which the remedial amendment period
as defined in Section 401(b) of the Code has not yet
expired. No material liability has been incurred by the
Company or any ERISA Affiliate which remains unsatisfied for
any taxes or penalties with respect to any Employee Benefit
Plan or any Multiemployer Plan;
(iii) No Pension Plan of the Company has been terminated, and to
the knowledge of the Company no Pension Plan of any ERISA
Affiliate has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code)
been incurred (without regard to any waiver granted under
Section 412 of the Code), nor has any funding waiver from
the Internal Revenue Service been received or requested with
respect to any Pension Plan, nor has the Company or any
ERISA Affiliate failed to make any contributions or to pay
any amounts due and owing as required by Section 412 of the
Code, Section 302 of ERISA or the terms of any Pension Plan
prior to the due dates of such contributions under Section
412 of the Code or Section 302 of ERISA, nor has there been
any event requiring any disclosure under Section
4041(c)(3)(C) or 4063(a) of ERISA with respect to any
Pension Plan, in each case which could reasonably be
expected to result in a Material Adverse Effect;
(iv) Neither the Company nor any ERISA Affiliate has: (A) engaged
in a nonexempt prohibited transaction described in Section
406 of the ERISA or Section 4975 of the Code, (B) incurred
any liability to the PBGC which remains outstanding other
than the payment of premiums and there are no premium
payments which are due and unpaid, (C) failed to make a
required contribution or payment to a Multiemployer Plan, or
(D) failed to make a required installment or other required
payment under Section 412 of the Code;
(v) No Termination Event has occurred or, to the knowledge of
the Company, is reasonably expected to occur; and
(vi) No proceeding, claim, lawsuit and/or investigation (other
than routine claims for benefits in the ordinary course) is
existing or, to the best knowledge of the Company after due
inquiry, threatened concerning or involving any (A) employee
welfare benefit plan (as defined in Section 3(1) of ERISA)
currently maintained or contributed to by the Company or any
ERISA Affiliate or (B) Pension Plan.
14
3.12. Absence of Defaults. No event has occurred or is continuing which
constitutes, or which with the passage of time or giving of notice or both would
constitute, a default or event of default by the Company or any Subsidiary
thereof under any Material Contract or judgment, decree or order to which the
Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries or any of their respective properties may be bound, which could
reasonably be expected to have a Material Adverse Effect or which would require
the Company or any of its Subsidiaries to make any payment thereunder prior to
the scheduled maturity date therefor, aggregating in excess of $1,000,000.
3.13. Environmental Matters.
(i) To the Company's Actual Knowledge, the properties owned or
managed by the Company and its Subsidiaries do not contain,
and to their Actual Knowledge have not previously contained,
any Hazardous Materials in amounts or concentrations which
(A) constitute or constituted a violation of, or (B) could
give rise to liability under, applicable Environmental Laws,
in each case which could reasonably be expected to have a
Material Adverse Effect;
(ii) To the Company's Actual Knowledge, such properties and all
operations of the Company and its Subsidiaries are conducted
in compliance in all respects, and have been in compliance
in all respects, with all applicable Environmental Laws the
violation of which could reasonably be expected to have a
Material Adverse Effect, and the Company and its
Subsidiaries have not caused contamination at, under or
about such properties or such operations which could
reasonably be expected to have a Material Adverse Effect;
(iii) Neither the Company nor any Subsidiary (a) has received any
notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to
any of their properties or their operations, or (b) have
Actual Knowledge that any such notice will be received or is
being overtly threatened, in each case which could
reasonably be expected to have a Material Adverse Effect;
(iv) To the Company's Actual Knowledge, the Company and its
Subsidiaries have not caused Hazardous Materials to be
transported or disposed of from the properties of the
Company and its Subsidiaries in violation of, or in a manner
or to a location which gives rise to liability under,
Environmental Laws, which violation or liability could
reasonably be expected to have a Material Adverse Effect,
nor to the Company's Actual Knowledge have the Company and
its Subsidiaries caused any Hazardous Materials to be
generated, treated, stored or disposed of at, on or
15
under any of such properties in violation of, or in a manner
that could give rise to liability under, any applicable
Environmental Laws which could reasonably be expected to
have a Material Adverse Effect;
(v) No judicial proceedings or governmental or administrative
action is pending, or, to the Actual Knowledge of the
Company, overtly threatened, under any Environmental Law to
which the Company or any Subsidiary is or will be named as a
party with respect to such properties or operations of the
Company and its Subsidiaries conducted thereon, nor are
there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other
administrative or judicial requirements outstanding under
any Environmental Law with respect to such properties or
such operations which in each case could reasonably be
expected to have a Material Adverse Effect; and
(vi) To the Company's Actual Knowledge, neither the Company nor
its Subsidiaries have caused any release, or to the
Company's Actual Knowledge, the threat of release, of
Hazardous Materials at or from such properties, in violation
of or in amounts or in a manner that gives rise to liability
under Environmental Laws, in each case which could
reasonably be expected to have a Material Adverse Effect.
3.14. Material Contracts. Schedule 3.14 sets forth a complete and accurate
list of all Material Contracts of the Company and its Subsidiaries in effect as
of the date hereof; other than as set forth in Schedule 3.14, each such Material
Contract is, and after giving effect to the consummation of the transactions
contemplated by the Transaction Documents will be, in full force and effect on
the Sale and Exchange Closing in accordance with the terms thereof. The Company
and its Subsidiaries have delivered to the Purchasers a true and complete copy
of each Material Contract required to be listed on Schedule 3.14 or any other
Schedule hereto.
3.15. Titles to Properties. Each of the Company and its Subsidiaries has
such title to the real property owned by it as is necessary or desirable to the
conduct of its business and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the March
31, 2002 balance sheets of the Company and its Subsidiaries referred to in the
Financial Statements, except those which have been disposed of by the Company or
its Subsidiaries subsequent to such date which dispositions have been in the
ordinary course of business or as otherwise expressly permitted hereunder.
3.16. Insurance. All current primary, excess and umbrella policies of
insurance owned or held by or on behalf of or providing insurance coverage to
the Company or any of its Subsidiaries are in full force and effect. With
respect to all such insurance policies providing insurance coverage to the
Company or any of its Subsidiaries, no premiums are in arrears, no notice or
cancellation or termination has been received with respect to any such policy,
other than notices of cancellation or termination routinely sent at the end of a
policy term. The
16
Company believes that the insurance coverage of the Company and its Subsidiaries
is consistent with the coverage generally maintained by corporations of similar
size and engaged in similar lines of business.
3.17. Employee Relations. Each of the Company and its Subsidiaries has an
adequate work force in place and is not, as of the date hereof, party to any
collective bargaining agreement nor has any labor union been recognized as the
representative of its employees. The Company knows of no pending or threatened
strikes, work stoppage or similar collective labor actions involving its
employees or those of its Subsidiaries, which could reasonably be expected to
have a Material Adverse Effect.
3.18. Material Disclosure. To the best knowledge of the Company, there is
no fact, transaction or development which the Company has not disclosed to the
Purchasers in writing (including pursuant to the SEC Documents filed prior to
the date hereof) which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
3.19. No Broker. No broker, finder, agent or similar intermediary has acted
for or on behalf of the Company in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, or similar fee or other
commission in connection therewith based on any contract or other agreement with
the Company or any action taken by the Company.
3.20. Intellectual Property Matters. Each of the Company and its
Subsidiaries owns or possesses rights to use all franchises, licenses,
copyrights, copyright applications, patents, patent rights or licenses, patent
applications, trademarks, trademark rights, service marks, service xxxx rights,
trade names, trade name rights and rights with respect to the foregoing which
are required to conduct its business, except where the failure to so own or
possess such rights could not reasonably be expected to have a Material Adverse
Effect. No event has occurred which permits, or after notice or lapse of time or
both would permit, the revocation or termination of any such rights, and, to the
best of its knowledge, neither the Company nor any Subsidiary thereof is liable
to any Person for infringement under Applicable Law with respect to any such
rights as a result of its business operations, the result of which could
reasonably be expected to have a Material Adverse Effect.
3.21. Minute Books. The minute books of the Company contain a complete
summary of all meetings of directors and stockholders since the time of
incorporation and reflect accurately in all material respects all transactions
referred to in such minutes.
3.22. Liens. None of the properties and assets of the Company or any
Subsidiary is subject to any Lien, except Liens permitted pursuant to Section
10.3 of the Senior Credit Agreement.
3.23. Government Regulation. Neither the Company nor any Subsidiary thereof
is an "investment company" or a company "controlled" by an "investment company"
(as each such term is defined or used in the Investment Company Act of 1940, as
amended).
3.24. Financial Statements.
17
(i) The Financial Statements, copies of which have been furnished to
the Purchasers, are complete and correct and fairly present the financial
condition of the Company and its Subsidiaries as of the respective dates
thereof and the results of operations of the Company and its Subsidiaries
for the quarter covered thereby, in each case in accordance with GAAP,
subject in the case of unaudited statements to normal year-end adjustments
and except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements,
to the extent they may not include footnotes or may be condensed or summary
statements. As of March 31, 2002, the Company and its Subsidiaries had no
Debt, obligation or other unusual forward or long-term commitment which was
not fairly reflected on the March 31, 2002 balance sheets of the Company
and its Subsidiaries referred to in the Financial Statements or in the
notes thereto.
(ii) Since March 31, 2002, there has been (A) no material adverse
change in the business, operations, prospects or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, and (B) no
event has occurred or condition arisen that could be reasonably expected to
have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASERS
Each Purchaser hereby, severally but not jointly, represents and warrants,
on behalf of itself and each Person for whom it is a nominee, to the Company as
follows:
4.1. Organization; Authorization. Such Purchaser is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has full power and authority to execute and deliver this Agreement, the
Exchange Agreement and the Registration Rights Agreement, to purchase the Series
B Preferred Stock, to exchange the Existing Preferred Stock for the Series A
Preferred Stock and to consummate the transactions contemplated hereby and
thereby in accordance with the terms hereof and thereof. The execution and
delivery of this Agreement, the Exchange Agreement and the Registration Rights
Agreement, the purchase by such Purchaser of the Series B Preferred Stock, the
exchange of the Existing Preferred Stock for Series A Preferred Stock and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by such Purchaser, and no other proceedings on the part of such
Purchaser are necessary to approve and authorize the execution and delivery of
this Agreement, the Exchange Agreement and the Registration Rights Agreement,
the purchase by such Purchaser of the Series B Preferred Stock, the exchange by
such Purchaser of the Existing Preferred Stock for Series A Preferred Stock and
the consummation of the transactions by such Purchaser contemplated hereby and
thereby in accordance with the terms hereof and thereof. This Agreement has been
duly executed and delivered by such Purchaser and constitutes, and upon
execution and delivery of the Exchange Agreement and the Registration Rights
Agreement by each Purchaser the Exchange Agreement and the Registration Rights
Agreement will constitute, valid and binding obligations of such
18
Purchaser, enforceable against such Purchaser in accordance with their terms,
except to the extent limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights generally and (ii) general principles of equity.
4.2. No Violation; Consents. (a) Assuming the making or receipt of all
filings, notices, registrations, consents, approvals, permits and authorizations
described in the following paragraph, neither the execution and delivery by such
Purchaser of this Agreement, the Exchange Agreement and the Registration Rights
Agreement, nor the purchase by such Purchaser of the Series B Preferred Stock,
nor the exchange by such Purchaser of Existing Preferred Stock for Series A
Preferred Stock, nor the consummation by such Purchaser of the transactions
contemplated hereby or thereby will (i) conflict with, violate or result in a
breach of the governing documents of such Purchaser, (ii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default or give rise to any right of termination, cancellation or
acceleration under, or result in the creation of any Lien on or against any of
the properties of such Purchaser pursuant to, any of the terms or conditions of
any note, bond, mortgage, indenture, license, agreement or other instrument or
obligation to which such Purchaser is a party or by which it or any of its
properties or assets may be bound, or (iii) violate any statute, law, rule,
regulation, writ, injunction, judgment, order or decree of any Governmental
Authority, binding on such Purchaser or any of its properties or assets,
excluding from the foregoing clause (ii) violations, breaches and defaults that
individually or in the aggregate, would not prevent or materially delay
consummation of or justify rescission of the transactions contemplated hereby.
(b) Except for the filing and effectiveness of a Registration Statement for
the resale of the Common Stock contemplated by the Registration Rights
Agreement, no filing, consent, approval, permit, authorization, notice,
registration or other action of or with any Governmental Authority is required
to be made or obtained by or with respect to such Purchaser in connection with
the execution and delivery of this Agreement, the Exchange Agreement and the
Registration Rights Agreement, the purchase of the Series B Preferred Stock, the
exchange of Existing Preferred Stock for Series A Preferred Stock or the
consummation by such Purchaser of the transactions contemplated hereby and
thereby.
4.3. Funds. Such Purchaser has the funds necessary to consummate the
purchase of the Series B Preferred Stock to be purchased by it hereunder.
4.4 Title to Existing Preferred Stock. Upon the exchange of the Existing
Preferred Stock contemplated herein, the Purchasers will transfer to the Company
good, valid and marketable title to the Existing Preferred Stock free and clear
of any and all liens, security interests, pledges, charges, claims, restrictions
and other encumbrances (collectively, the "Encumbrances").
4.5. Status. Such Purchaser has sufficient knowledge and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the Preferred Stock, and is capable of bearing the
economic risks of such investment, including a complete loss of such investment.
19
4.6. Investment Representation. Each Person for whom any of the Purchasers
is a nominee is a "qualified institutional buyer," as such term is defined in
Rule 144A promulgated under the Securities Act. Such Purchaser is purchasing the
Preferred Stock for its own account or for the account of such "qualified
institutional buyer" for which it is acting as nominee. Such Purchaser has no
present intention to sell any Preferred Stock (whether purchased hereunder or
received as dividends on the Preferred Stock) or the Common Stock issued upon
conversion of the Preferred Stock in accordance with the terms of the
Certificates of Designation, and such Purchaser has no present arrangement
(whether or not legally binding) at any time to sell Preferred Stock (whether
purchased hereunder or received as dividends on the Preferred Stock) or such
Common Stock to or through any Person or entity; provided, however, that by
making the representations herein, no Purchaser agrees to hold the Preferred
Stock (whether purchased hereunder or received as dividends on the Preferred
Stock) or the Common Stock issued upon conversion of the Preferred Stock in
accordance with the terms of the Certificate of Designation for any minimum or
other specific term and each Purchaser reserves the right to dispose of all
Preferred Stock (whether purchased hereunder or received as dividends on the
Preferred Stock) or Common Stock at any time in accordance with federal and
state securities laws applicable to any such disposition. Such Purchaser
acknowledges that each certificate representing the Preferred Stock shall
contain a legend relating to restrictions on resale arising under the Securities
Act and Blue Sky Laws as provided in Section 6.1 hereof until such time as such
shares are registered under the Securities Act or, in the opinion of counsel
reasonably satisfactory to the Company, such legend may be removed.
4.7. No Broker. No broker, finder, agent or similar intermediary has acted
for or on behalf of the Purchasers in connection with this Agreement or the
transactions contemplated hereby, and no broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, or similar fee or other
commission in connection therewith based on any contract or other agreement with
the Purchasers or any action taken by the Purchasers.
4.8. Litigation. There are no actions, suits or proceedings pending nor, to
the knowledge of such Purchaser, threatened against or in any other way relating
adversely to or affecting such Purchaser that seek to have, or are reasonably
likely to have the effect of making illegal, materially delaying or otherwise
directly or indirectly prohibiting or materially restraining or making
materially more costly the Sale and Exchange Transaction.
ARTICLE V
COVENANTS OF THE COMPANY
5.1. Securities Compliance.
(a) The Company shall take all necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation for the legal and
valid issuance of the Preferred Stock to the Purchasers.
(b) The Company will cause the Common Stock to continue to be registered
under Section 12(b) of the Securities Exchange Act (or successor provision of
such act or successor act), will comply in all respects with its reporting and
filing obligations pursuant to the
20
Securities Exchange Act, and will not take any action to terminate or suspend
its reporting and filing obligations under the Securities Exchange Act. The
Company will take all action necessary to continue the listing or trading of the
Common Stock (including, upon issuance, all of the Common Stock issued upon
conversion of the Preferred Stock) on the NYSE or on the Nasdaq National Market;
and will comply in all material respects with the Company's reporting, filing
and other obligations under the bylaws or rules of the NYSE or the Nasdaq
National Market.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES
6.1. Restrictive Legend.
(a) Each certificate representing the Preferred Stock shall contain a
legend relating to restrictions on resale arising under the Securities Act and
Blue Sky Laws substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH
SECURITIES HAVE BEEN REGISTERED UNDER THAT ACT OR THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY TO THE
EFFECT THAT AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
(b) In addition to the legend set forth in paragraph (a) above, each
certificate representing the Preferred Stock shall contain a legend
substantially in the following form:
EACH HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
THE TERMS AND CONDITIONS OF THE SUBSCRIPTION AND EXCHANGE AGREEMENT, DATED
AS OF JUNE 7, 2002, BY AND AMONG THE COMPANY AND THE OTHER PARTIES THERETO
AND OF THAT CERTAIN EXCHANGE AGREEMENT, DATED JUNE __, 2002, BY AND AMONG
THE COMPANY AND HOLDERS FROM TIME TO TIME OF THE COMPANY'S SERIES A
CONVERTIBLE PREFERRED STOCK AND SERIES B CONVERTIBLE PREFERRED STOCK.
COPIES OF SUCH AGREEMENTS MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY.
6.2. Limitations on Ownership and Acquisition of Capital Stock. Except as
set forth in the proviso to this sentence, each of the Purchasers covenants and
agrees that it will not, and will not cause any other Person to, at any time
hereafter,
21
directly or indirectly, by itself or through any Person or group (within the
meaning of Section 13(d)(3) of the Securities Exchange Act), (i) acquire, own or
control, (ii) offer or agree to purchase, or (iii) make any solicitation for,
more than 25% of the Common Stock or more than 25% of the aggregate voting power
of the capital stock of the Company entitled to vote in the election of members
of the Board of Directors of the Company, and will not otherwise act, directly
or indirectly, alone or in concert with others, to seek control or influence in
any manner the management, policies or affairs of the Company; provided,
however, that notwithstanding the foregoing, at any time or from time to time,
the Purchasers shall be entitled to convert the Series A Convertible Preferred
Stock or the Series B Convertible Preferred Stock into Common Stock (and to own
such Common Stock) and shall be entitled to own any securities that may be
issued pursuant to the Exchange Agreement, or convert or exchange any such
security into any other security (and to own such other security), in each case
without regard to the limitations set forth in this Section 6.2. This Section
6.2 shall not bind any transferee of the Preferred Stock or of the Common Stock
issuable upon conversion of the Preferred Stock that is not an Affiliate of
Xxxxxxxxx L.L.C.
6.3 Notice of Adjustments of Conversion Price. So long as any Preferred
Stock is outstanding, whenever the conversion price with respect to the Trust
Convertible Preferred Securities or the Series C Preferred Stock that may be
issued pursuant to the Exchange Agreement is adjusted in accordance the terms
thereof, the Company shall compute the adjusted conversion price and shall
prepare a certificate signed by the Chief Financial Officer or the Treasurer of
the Company setting forth the adjusted conversion price and showing in
reasonable detail the facts upon which such adjustment is based, and such
certificate shall forthwith be delivered to all record holders of the Preferred
Stock at their last addresses as they appear on the transfer books of the
Company.
ARTICLE VII
CONDITIONS TO THE SALE AND EXCHANGE CLOSING
7.1. Conditions to Obligations of the Purchasers. The obligation of the
Purchasers to purchase the Series B Preferred Stock and to exchange the Existing
Preferred Stock for the Series A Preferred Stock hereunder pursuant to the Sale
and Exchange Transaction is subject to the satisfaction or waiver at, or prior
to, the Sale and Exchange Closing of the following conditions:
(a) Representations and Warranties; Agreements and Covenants. (i) The
representations and warranties of the Company contained in this Agreement and in
any certificate or agreement of the Company delivered pursuant hereto shall be
true and correct in all material respects, and if qualified by materiality,
shall be true and correct, in each case as of the date of the Sale and Exchange
Closing, except for such representations and warranties that address matters
only as of a particular date, which shall be true and correct as of such date,
(ii) the Company shall have performed or complied with in all material respects
all agreements and covenants contained in this Agreement and in any certificate
or agreement of the Company
22
delivered pursuant hereto to be performed or complied with by the Company at or
before the Sale and Exchange Closing, and (iii) the Purchasers shall have
received a certificate of the Company, signed by the President or a Vice
President thereof, on behalf of the Company, as to the fulfillment of the
conditions set forth in the foregoing clauses (i) and (ii).
(b) Principal Market. Trading in the Common Stock shall not have been
suspended by the SEC or the NYSE (except for any suspension of trading of
limited duration agreed to between the Company and the NYSE, solely to permit
dissemination of material information regarding the Company), and trading in
securities generally as reported by the NYSE shall not have been suspended or
limited or minimum prices shall not have been established on securities whose
trades are reported by the NYSE.
(c) Litigation. There shall have been no order or preliminary or permanent
injunction entered in any action or proceeding before any Governmental
Authority, nor other action taken by any Governmental Authority, nor any
statute, rule, regulation, legislation, interpretation, judgment or order
enacted, entered, enforced, promulgated, amended, issued or deemed applicable to
the Purchasers, the Company or any of its Subsidiaries, by any Governmental
Authority that shall have remained in effect and that in the good faith judgment
of a majority of the Purchasers shall have had, or threaten to have or would be
reasonably likely to have the effect of (i) making illegal, materially delaying
or otherwise directly or indirectly prohibiting or materially restraining or
making materially more costly the Sale and Exchange Transaction, (ii)
prohibiting or materially limiting the ownership or operation by the Company or
any of its Subsidiaries of all or any material portion of its respective
businesses or assets, or compelling the Company or any of its Subsidiaries to
dispose of or hold separate all or any material portion of its respective
businesses or assets, (iii) imposing or confirming material limitations on the
ability of the Purchasers to effectively exercise full rights of ownership of
the Preferred Stock to be acquired pursuant to this Agreement, including,
without limitation, the right to vote any Common Stock subsequently acquired
upon conversion of or as dividends on the Preferred Stock on all matters
properly presented to stockholders; (iv) requiring divestiture by the Purchasers
of any of the Preferred Stock; or (v) causing a Material Adverse Effect.
(d) No Action or Proceeding. No action, suit, claim or proceeding by or
before any Governmental Authority shall have been commenced and be pending that
seeks to have, or is reasonably likely to have, any of the effects described in
clauses (i) through (v) of Section 7.1(c) above.
(e) Bankruptcy; Insolvency; etc. The Company or any of its Restricted
Subsidiaries shall not be the subject of a case under the Bankruptcy Code, and
no proceeding shall have been instituted (and not dismissed) or consented to by
or against the Company or any of its Restricted Subsidiaries seeking to
adjudicate it as bankrupt or insolvent, or seeking liquidation, winding-up,
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for any
of the Company or of its Restricted Subsidiaries or any substantial part of any
of their property and neither the Company nor any of its Restricted Subsidiaries
shall have taken any corporate action to authorize any such proceeding.
23
(f) Material Adverse Change. No change, condition or event shall have
occurred that has had, or would be reasonably likely to have, a Material Adverse
Effect.
(g) Opinion of Counsel, etc. The Purchasers shall have received a written
opinion in form and substance (including qualifications) satisfactory to the
Purchasers, dated as of the date of the Sale and Exchange Closing, from
Proskauer Rose LLP, substantially in the form of Exhibit D hereto, and such
other certificates, opinions of other counsel, and documents, as the Purchasers
or their counsel shall reasonably require (including any side letter necessary
to qualify the investment by the Purchasers as a venture capital operating
company investment).
(h) Registration Rights Agreement. The Registration Rights Agreement shall
have been duly executed and delivered by the Company.
(i) Credit Agreement. The Credit Agreement and any ancillary documents
provided therein to be executed and delivered prior to or simultaneously with
the Credit Agreement shall have been duly executed and delivered by the Company
and the other parties thereto, other than the Purchasers.
(J) Exchange Agreement. The Exchange Agreement shall have been duly
executed and delivered by the Company.
7.2. Conditions to Obligations of the Company. The obligation of the
Company to issue and sell the Series B Preferred Stock and to exchange the
Series A Preferred Stock for Existing Preferred Stock hereunder pursuant to the
Sale and Exchange Transaction is subject to the satisfaction or waiver at, or
prior to, the Sale and Exchange Closing of the following conditions:
(a) Representations and Warranties, Agreements And Covenants. (i) The
representations and warranties of the Purchasers contained in this Agreement and
in any certificate or agreement of the Purchasers delivered pursuant hereto
shall be true and correct in all material respects as of the date of the Sale
and Exchange Closing, except for such representations and warranties that
address matters only as of a particular date, which shall be true and correct as
of such date, and (ii) the Purchasers shall have performed or complied with in
all material respects all agreements and covenants contained in this Agreement
and in any certificate or agreement of the Purchasers delivered pursuant hereto
to be performed or complied with by the Purchasers, at or before the Sale and
Exchange Closing, and (iii) the Company shall have received a certificate of
each Purchaser, signed by an officer thereof, on behalf of such Purchaser, as to
the fulfillment of the conditions set forth in the foregoing clauses (i) and
(ii).
(b) Litigation. There shall have been no order or preliminary or permanent
injunction entered in any action or proceeding before any Governmental
Authority, nor other action taken by any Governmental Authority nor any statute,
rule, regulation, legislation, interpretation, judgment or order enacted,
entered, enforced, promulgated, amended, issued or deemed applicable to the
Company or any of its Subsidiaries by any Governmental Authority that shall have
remained in effect and that shall have had the effect of making illegal,
materially delaying or otherwise directly or indirectly prohibiting or
materially restraining or making materially more costly the Sale and Exchange
Transaction.
24
(c) No Action or Proceeding. No action, suit, claim or proceeding by or
before any Governmental Authority shall have been commenced and be pending that
seeks to have, or is reasonably likely to have the effect of making illegal,
materially delaying or otherwise directly or indirectly prohibiting or
materially restraining or making materially more costly the Sale and Exchange
Transaction.
(d) Registration Rights Agreement. The Registration Rights Agreement shall
have been duly executed and delivered by each Purchaser.
(e) Credit Agreement. The Credit Agreement and any ancillary documents
provided therein to be executed and delivered prior to or simultaneously with
the Credit Agreement shall have been duly executed and delivered by each
Purchaser and the other parties thereto, other than the Company.
(f) Exchange Agreement. The Exchange Agreement shall have been duly
executed and delivered by each Purchaser.
ARTICLE VIII
MISCELLANEOUS
8.1. Survival of Representations, Warranties and Agreements. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the execution of this Agreement until the date that the
Purchasers have sold or otherwise disposed of all shares of Preferred Stock, any
securities issuable upon exchange or conversion of the Preferred Stock, and any
other securities issuable upon exchange or conversion of any of the foregoing.
8.2. Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, telecopier, any
courier guaranteeing overnight delivery or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to the applicable
party at the address set forth below or such other address as may hereafter be
designated in writing by such party to the other parties in accordance with the
provisions of this Section:
(i) If to the Company, to:
Insignia Financial Group, Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Esq.
Telecopy: 000-000-0000
Telephone: 000-000-0000
25
With a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxxxxx, Esq.
Telecopy: 000-000-0000
Telephone: 000-000-0000
(ii) If to the Purchasers, to the addresses specified on the signature
pages hereto.
With a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxxxxx, Esq.
Xxxxxxx X. Xxxxxxxxxx, Esq.
Telecopy: 000-000-0000
Telephone: 000-000-0000
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when receipt is
acknowledged, if telecopied; on the next business day, if timely delivered to a
courier guaranteeing overnight delivery; and five days after being deposited in
the mail, if sent first class or certified mail, return receipt requested,
postage prepaid.
8.3. Complete Agreement. This Agreement, the Registration Rights Agreement
and the Certificates of Designation contain the entire understanding of the
parties with respect to the transactions contemplated hereby and supersede all
prior agreements, arrangements or understandings with respect thereto. There are
no restrictions, agreements, promises, representations, warranties, covenants or
undertakings by or on behalf of any party hereto with respect to the
transactions contemplated hereby or thereby, other than those expressly set
forth herein or therein.
8.4. Binding Notice of Agreement; No Third Party Beneficiary. This
Agreement shall be binding upon and inure to the benefits of the parties hereto,
their successors and assigns. Except as provided in Section 8.8 and 8.9 hereof,
nothing herein express or implied is intended to or shall be construed to confer
upon or give to any Person, corporation, group or other entity (of any nature)
other than the parties hereto, their successors or assigns any rights or
remedies under or by reason of this Agreement.
8.5. Modifications, Amendments and Waivers. Any term or provision of this
Agreement may be waived by the party which is entitled to the benefits thereof.
No waiver shall be deemed to have been made by any party hereto of any of its
rights hereunder or any provision or term hereof unless the same shall be in
writing and is signed on its behalf by its authorized officer or representative.
Any such waiver or extension shall constitute a waiver or extension
26
only with respect to the specific matter described in such writing and shall in
no way impair the rights of the party granting such waiver in any other respect
or any other time. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have in law or equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracies in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the act,
omission, occurrence or other state of fact upon which any claim of any such
inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement as
to which there is no inaccuracy or breach. The representations and warranties of
the Company contained in this Agreement shall not be affected or deemed waived
by reason of any investigation made by or on behalf of the Purchasers or its
representatives or by reason of the fact that the Purchasers or such
representatives knew or should have known that any such representation or
warranty is or might be inaccurate.
8.6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
8.7. Expenses. The fees and expenses of counsel for the Purchasers in
connection with this Agreement and the Credit Agreement, not to exceed $200,000
in the aggregate, shall be paid by the Company. The foregoing payment shall be
in addition to, and not in lieu of, the fees and expenses payable by the Company
to the holders of Preferred Stock pursuant to the terms of the Registration
Rights Agreement.
8.8. Indemnification. (a) The Company agrees to indemnify and hold harmless
each Purchaser, its directors and officers and each Person, if any, who controls
each Purchaser within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against any and all losses,
claims, suits, damages, causes of action, liabilities, costs and expenses
(including, without limitation, any legal or other expenses reasonably incurred
in connection with defending or investigating any such action or claim) to which
such Purchaser or other Person may become subject to under the Securities Act or
under the Securities Exchange Act or otherwise, arising from or relating to the
Company's breach of any representation, warranty, covenant or agreement
contained in this Agreement.
(b) Each Purchaser agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors and officers and each Person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act, from and against any and all
losses, claims, suits, damages, causes of action, liabilities, costs and
expenses (including, without limitation, any legal or other expenses reasonably
incurred in connection with defending or investigating any such action or claim)
to which the Company or such Person may become subject to under the Securities
Act or under the Securities Exchange Act or otherwise, arising from or relating
to the Purchasers' breach of any representation, warranty, covenant or agreement
contained in this Agreement.
27
(c) In case any proceeding (including any governmental investigation) shall
be instituted involving any Person in respect of which indemnity may be sought
pursuant to paragraph (a) or (b) of this Section 8.8, such Person (the
"indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of other counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them;
provided, however, that it is understood that the indemnifying party shall not,
in respect of the legal expenses of any indemnified party in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for each indemnified party, its directors, officers and all Persons, if
any, who control each indemnified party within the meaning of either Section 15
of the Securities Act or Section 20 of the Securities Exchange Act, and that all
such fees and expenses shall be reimbursed as they are incurred. In the case of
any such separate firm, such firm shall be designated in writing by a majority
of all the indemnified parties. All such fees and expenses shall be reimbursed
as they are incurred; provided, however, that if it is subsequently determined
that such indemnified party was not entitled to such indemnification, then the
indemnified party shall promptly reimburse the indemnifying party for all such
fees and expenses previously paid by the indemnifying party. The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by this
paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(d) The indemnity provisions contained in this Section 8.8 shall remain
operative and in full force and effect regardless of (i) any termination of this
Agreement, (ii) any investigation made by or on behalf of the Purchasers, their
officers or directors or any Person controlling the Purchasers; or the Company,
its officer or directors or any Person controlling the Company and (iii)
acceptance of any payment for any of the Preferred Stock.
8.9. Nominee; Benefits. All references to Purchasers in this Agreement
shall include the Person or Persons for whom the Purchasers are a nominee, and
the benefits of and
28
rights and obligations under the Agreement shall accrue to such Person or
Persons which have a beneficial interest in the Preferred Stock being acquired
hereunder and for whom the Purchasers are a nominee. The Purchaser makes the
representations in Article IV for all such Persons for whom the Purchaser is a
nominee.
8.10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to applicable
principles of conflicts of law thereof.
8.11. Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
8.12. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement, except to the extent that such prohibition or invalidity
would constitute a material change in the terms of this Agreement taken as a
whole.
8.13. Assignment. The Purchasers may assign their rights hereunder to any
of their Affiliates, provided that such assignment shall not release the
Purchasers from their obligations hereunder.
29
IN WITNESS WHEREOF, the parties hereto have caused this Stock Subscription
and Exchange Agreement to be executed as of the day and year first above
written.
COMPANY:
INSIGNIA FINANCIAL GROUP, INC.
By: /s/
------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
30
STOCK SUBSCRIPTION AND EXCHANGE AGREEMENT
-----------------------------------------
PURCHASERS:
XXXXXXXXX L.L.C.
By: /s/
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
Address for notices:
--------------------
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx
Telecopy: 000-000-0000
Telephone: 000-000-0000
Subscription Amount: $12,500,000.00
---------------
