Exhibit 10.1
COMMON STOCK PURCHASE AGREEMENT
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THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of May
30, 2000, by and between Cypress Financial Services, Inc., a Nevada corporation
(the "Company"), and FBR Financial Fund II, L.P., a Delaware limited partnership
(the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
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1.1 Sale and Issuance of Common Stock.
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(a) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the closing (the "Closing") and the Company
agrees to sell and issue to the Investor at the Closing 15,000,000 shares of the
Company's Common Stock, par value $.001 per share (the "Stock"), at a price of
$0.50 per share.
1.2 Closing.
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(a) The purchase and sale of the Stock shall take place at the
offices of Pillsbury Madison & Sutro LLP, 000 Xxxx Xxxxxxxx, Xxxxx 0000, Xxx
Xxxxx, Xxxxxxxxxx, 00000, at 2:00 p.m. on May 30, 2000, or at such other time
and place as the Company and the Investor shall mutually agree, either orally or
in writing (which time and place are designated as the "Closing Date").
(b) At the Closing the Company shall deliver to the Investor a
certificate representing the shares of Stock that the Investor is purchasing
against payment of the purchase price therefor, by check, wire transfer or such
other form of payment as shall be mutually agreed upon by the Investor and the
Company.
2. Representations and Warranties of the Company. The Company represents
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and warrants to the Investor that the statements contained in this Section 2 are
true, correct and complete as of the execution of this Agreement and will be
true, correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for date of execution of this Agreement
throughout this Section), except as set forth on a Schedule of Exceptions (the
"Schedule of Exceptions") delivered to the Investor upon execution of this
Agreement (which exceptions shall be deemed to be a part of the Company's
representations and warranties as if made hereunder).
For purposes of this Agreement, the phrase "Material Adverse Effect" shall
mean any event or occurrence that has or, if it occurred reasonably would be
expected to have, a material adverse effect on the business, condition
(financial or otherwise), results of operations, prospects, assets (including
intangible assets), properties or liabilities (including contingent liabilities)
of a party. As used in this Agreement, "Subsidiary" means any corporation or
other organization, whether incorporated or unincorporated, of which more than
fifty percent (50%) of either the equity interests in, or the voting control of,
such corporation or other organization is, directly or indirectly through
subsidiaries or otherwise, beneficially owned by a party.
2.1 Organization; Good Standing; Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada, has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute and deliver this
Agreement, the Investor's Rights Agreement dated as of the date hereof by and
among the Company and the Investor (the "Investor's Rights Agreement"), the form
of which is attached hereto as Exhibit A, and any other agreement to which the
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Company is a party and the execution and delivery of which is contemplated
hereby (the "Ancillary Agreements"), to issue and sell the Stock and to carry
out the provisions of this Agreement, the Investor's Rights Agreement and any
Ancillary Agreement. Each of the Company and its Subsidiaries is qualified to
transact business as a foreign corporation in each jurisdiction where such
qualification is now required and where the failure to so qualify would have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
2.2 Authorization. All corporate action on the part of the Company,
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its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investor's Rights Agreement and
any Ancillary Agreement, the performance of all obligations of the Company
hereunder and thereunder and the authorization, issuance, sale and delivery of
the Stock being sold hereunder has been taken, and this Agreement, the
Investor's Rights Agreement and any Ancillary Agreement constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
respective terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, (b) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (c) to the extent the indemnification provisions contained in the
Investor's Rights Agreement may be limited by applicable federal or state
securities laws.
2.3 Governmental Consents. No consent, approval, qualification, order
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or authorization of, or filing with, any local, state or federal governmental
authority or securities self-regulatory organization is required on the part of
the Company in connection with the Company's valid execution, delivery or
performance of this Agreement, the Investor's Rights Agreement and the other
Ancillary Agreements or the offer, sale or issuance of the Stock by the Company,
except (i) such filings as have been made prior to the Closing, (ii) any notices
of sale required to be filed with the Securities and Exchange Commission (the
"SEC") under Regulation D of the Securities Act of 1933, as amended (the
"Securities Act"), or (iii) such post-closing filings as may be required under
applicable state securities laws, (noting that filings referenced in clauses
(ii) and (iii) will be timely filed within the applicable periods therefor).
2.4 Capitalization and Voting Rights. The authorized capital of the
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Company consists of:
(a) Preferred Stock. 5,000,000 shares of Preferred Stock, par
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value $.001 per share (the "Preferred Stock"), of which 345,000 have been
designated Series A Preferred Stock (the "Series A Preferred Stock"), all of
which shares of Series A Preferred Stock are issued and outstanding. The rights,
privileges and preferences of the Series A Preferred Stock are as stated in the
Amended and Restated Articles of Incorporation of the Company, as filed by the
Nevada Secretary of State on December 7, 1995, as amended by that
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certain Certificate of Determination of the Company, as filed by the Nevada
Secretary of State on December 11, 1996 (collectively, the "Articles of
Incorporation").
(b) Common Stock. 30,000,000 shares of Common Stock, par value
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$.001 per share (the "Common Stock"), of which 6,493,904 shares are issued and
outstanding.
Except for (i) the conversion privileges of the Series A Preferred Stock,
(ii) the rights provided in this Agreement and the Investor's Rights Agreement,
(iii) warrants to purchase up to 400,000 shares of the Company's Common Stock
(the "Warrants"), (iv) those certain options granted pursuant to the Company's
1995 Stock Option Plan ("the "Plan"), representing options to purchase, in the
aggregate, 742,050 shares of Common Stock and (v) the rights provided in the
draft versions of the documents with respect to the CPS Acquisition (as defined
below), there are not outstanding any options, warrants, rights (including
conversion or preemptive rights and rights of first refusal) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock.
The Company has reserved 3,250,000 shares of its Common Stock for purchase upon
exercise of options outstanding and options to be granted pursuant to the Plan.
All corporate action on the part of the Company, its officers, directors and
stockholders necessary for the approval and adoption of the Plan and the
reservation of shares of Common Stock for issuance upon the exercise of stock
options granted pursuant to the Plan has been taken, except for filing an
Information Statement with the SEC and distributing it to the Company's
shareholders, as required under Rule 14c-2. The Company will complete the SEC
filing and distribute the Information Statement to its shareholders within
thirty (30) days of the Closing. Except for the voting agreement described in
Section 4.9, the Company is not a party or subject to any agreement or
understanding, and there is no agreement or understanding between any persons
that affects or relates to the voting or giving of written consents with respect
to any security or the voting by a director of the Company.
2.5 Valid Issuance of Preferred and Common Stock. All of the issued
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and outstanding shares of Common Stock and Preferred Stock are duly and validly
issued, fully paid and nonassessable. The Stock that is being purchased by the
Investor hereunder, when issued, sold and delivered in accordance with the terms
of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable, and will be free of restrictions
on transfer other than restrictions on transfer under applicable state and
federal securities laws. The certificate representing the Stock, when issued in
accordance with this Agreement, will be in due and proper form as authorized by
the Company Board of Directors and will be duly and validly executed by
representatives of the Company authorized by the Company Board of Directors to
execute such certificate.
2.6 Charter Documents. The copies of the Articles of Incorporation
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and the Bylaws of the Company which have been provided to the Investor are true
and complete copies of such instruments as amended to date, and such instruments
are in full force and effect on the date hereof.
2.7 SEC Reports and Financial Statements. The Company has made
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available to the Investor a true and complete copy of each form, report,
schedule, registration statement, definitive proxy statement and other document
(together with all amendments thereof and supplements thereto) filed by the
Company with the SEC since January 1, 1998 (as such
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documents have since the time of their filing been amended or supplemented, the
"SEC Reports"), which are all the documents (other than preliminary material)
that the Company was required to file with the SEC since such date. As of their
respective dates, the SEC Reports (i) complied as to form in all material
respects with the requirements of the Securities Act or the Securities Exchange
Act of 1934, as amended, as the case may be, and (ii) did not contain any untrue
statement of a material fact or omit 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. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
SEC Reports (the "Financial Statements") complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-QSB of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments which are not expected to be, individually
or in the aggregate, materially adverse to the Company and its Subsidiaries
taken as a whole) the consolidated financial position of the Company and its
consolidated Subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows for the respective
periods then ended.
2.8 Absence of Undisclosed Liabilities. Neither the Company nor its
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Subsidiaries has any debts, liabilities or obligations of any nature (whether
absolute, accrued, unliquidated, contingent or otherwise, whether known or
unknown, and whether due or to become due) which are likely to have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole, other than
those which (a) are set forth in the Financial Statements or (b) have been
incurred since the date of the most recent Financial Statements in the ordinary
course of business in amounts and on terms consistent, individually and in the
aggregate, with the past practices of the Company and its Subsidiaries.
2.9 Changes. Since December 31, 1999, there has been no event or
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change which has had or may reasonably be expected to have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole.
2.10 Registration Rights. Except as provided in the Investor's Rights
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Agreement, the Warrants and that certain Registration Rights Agreement between
the Company and the parties named therein dated September 30, 1996 the Company
is not obligated to register under the Securities Act any of its presently
outstanding securities or any of its securities that may subsequently be issued.
2.11 Permits. Each of the Company and its Subsidiaries (i) has all
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franchises, permits, licenses and any similar authority and has posted all bonds
necessary for the conduct of its business as now being conducted by it, the lack
of which could reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, and (ii) believes it can obtain,
without undue burden or expense, any similar authority or bond for the conduct
of its business as planned to be conducted. None of the Company or its
Subsidiaries is in default in any material respect under any of such franchises,
permits, licenses or bonds.
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2.12 Compliance. Neither the Company nor any of its Subsidiaries is
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in violation or default of any provision of its Articles of Incorporation or
Bylaws or in any material respect of any provision of any mortgage, agreement,
instrument or contract to which it is a party or by which it is bound or of any
federal or state judgment, order, writ, decree, statute, rule or regulation
applicable to the Company or its Subsidiaries. The execution, delivery and
performance by the Company of this Agreement, the Investor's Rights Agreement
and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of the Company or its Subsidiaries or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to the Company, its business or operations,
or any of its assets or properties.
2.13 Litigation. Except as disclosed in the SEC Reports filed prior
to the date of this Agreement, (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company, threatened against,
relating to or affecting, nor are there any governmental or regulatory authority
investigations or audits pending or, to the knowledge of the Company, threatened
against, relating to or affecting, the Company or its Subsidiaries or any of
their respective assets and properties which, individually or in the aggregate,
would be reasonably expected to have a Material Adverse Effect on the Company
and its Subsidiaries, taken as a whole, or that questions the ability of the
Company to consummate the transactions contemplated by this Agreement, (ii)
neither the Company nor any of its Subsidiaries is subject to any order of any
governmental or regulatory authority which, individually or in the aggregate, is
having or would be reasonably expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, and (iii) there is no action,
suit, arbitration or proceeding by the Company or its Subsidiaries currently
pending or that the Company or its Subsidiaries currently intends to initiate.
2.14 Title to Property and Assets; Leases. Except as disclosed in the
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SEC Reports and (i) for liens for current taxes not yet delinquent, (ii) for
liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, (iii) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation or (iv) for minor defects in title,
none of which, individually or in the aggregate, materially interferes with the
use of such property, each of the Company and its Subsidiaries owns its property
and assets free and clear of all mortgages, liens, claims and encumbrances. With
respect to the property and assets it leases, each of the Company and its
Subsidiaries is in compliance with such leases and holds a valid leasehold
interest free of any liens, claims or encumbrances, subject to clauses(i)-(iv)
above.
2.15 Intellectual Property Rights. Each of the Company and its
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Subsidiaries owns and possesses sufficient title to, or has sufficient valid and
enforceable licenses to, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, domain names, URLs, websites or other
proprietary rights of any material kind (collectively, "Intellectual Property
Rights") which are necessary for the operation of its business as presently
conducted. There have been no claims made against the Company or its
Subsidiaries asserting the invalidity, misuse or unenforceability of any of the
Intellectual Property Rights
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owned or used by the Company or its Subsidiaries and, to the Company's
knowledge, there is no basis for any such claim. The conduct of the Company's
and its Subsidiaries' business has not infringed, misappropriated or conflicted
with and, to the Company's knowledge, does not infringe, misappropriate or
conflict with any Intellectual Property Rights of any third party.
2.16 Employees; Employee Compensation. There is no strike, labor
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dispute or union organization activities pending or threatened between the
Company and its Subsidiaries and their respective employees. None of the
Company's or its Subsidiaries' employees belongs to any union or collective
bargaining unit. Each of the Company and its Subsidiaries has complied in all
material respects with all applicable state and federal equal opportunity and
other laws related to employment. Except (i) as disclosed in the SEC Reports and
(ii) for the Plan and any options granted pursuant thereto, neither the Company
nor its Subsidiaries is a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company and its
Subsidiaries is terminable at the will of the Company.
2.17 Taxes. Each of the Company and its Subsidiaries has timely filed
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or caused to be timely filed all federal, state, local and foreign income and
other Tax returns required under applicable law to be filed on or before the
Closing Date (or obtained extensions to file) and to the Company's knowledge,
all such returns are true and correct in all material respects. Each of the
Company and its Subsidiaries has paid or made provision for all Taxes and other
charges which have or may become due for the periods covered by such returns.
There have been no material adverse adjustments as a result of any examination
or investigation of any period for which any such return was or should have been
filed or any Tax matter relating thereto, and none of the Tax returns or reports
of the Company or its Subsidiaries is currently under investigation or
examination. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax return for any period.
There are no material liens for Taxes upon any property or assets of the Company
or its Subsidiaries, except for liens for taxes not yet due. All Taxes owed by
the Company or its Subsidiaries or which the Company or its Subsidiaries is
obligated to withhold from amounts owing to any employee, creditor or third
party have been paid or reserved for payment. For purposes of this Agreement the
term "Taxes" means all federal, state, and local income, gross receipts, sales,
use, transfer, franchise, profits, social security, withholding, payroll,
excise, property, or other taxes together with any interest and any penalties
with respect thereto, and the term "Tax" means any one of the foregoing Taxes.
2.18 Environmental Regulations. Neither the Company nor any of its
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Subsidiaries has been associated with any spill, disposal, storage, discharge or
release of any Hazardous Materials into or upon or over any real property
(including, without limitation, the Premises) or into or upon ground or surface
water and neither the Company nor its Subsidiaries has incurred any liability
with respect thereto. For the purposes of this Agreement, the term "Hazardous
Materials" shall mean any hazardous or toxic substance, material or waste which
is regulated by any local government authority, the State of California or the
government of the United States of America.
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2.19 Minute Books. The copy of the minute books of the Company made
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available to the Investor contains minutes of all meetings of directors and
stockholders and all actions by written consent without a meeting by the
directors and stockholders since October 31, 1995 and reflects all actions by
the directors (and any committee of directors) and stockholders with respect to
all transactions referred to in such minutes accurately in all material
respects.
2.20 Client Relations. No (i) client with net fees in excess of
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$100,000 over the past twelve (12) months nor (ii) clients with aggregate net
fees in excess of $500,000 over the past twelve (12) months has raised any
material claim, dispute or controversy with respect to any of the services
provided by the Company or any of its Subsidiaries, nor does the Company have
any knowledge that any of such clients may totally or partially terminate or
suspend the use of the Company's or such Subsidiaries' services or otherwise
reduce their current monthly placements in the foreseeable future. Neither the
Company nor any of its Subsidiaries has in any respect misrepresented its
services or employed misleading or deceptive practices in connection with the
sale of its services.
2.21 Distributions. Since September 30, 1999, there has been no
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declaration or payment by the Company or its Subsidiaries of any dividend, nor
any other distribution by the Company or its Subsidiaries of any assets of any
kind, to any of its stockholders.
2.22 Brokers. No broker, finder or investment banker has acted
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directly or indirectly for the Company or its Subsidiaries in connection with
this Agreement or the transactions contemplated hereby.
2.23 Offering. Subject in part to the truth and accuracy of the
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Investor's representations set forth in this Agreement, the offer, sale and
issuance of the Stock as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and neither the Company nor any
authorized agent acting on its behalf will take any action hereafter that would
cause the loss of such exemption.
2.24 Disclosure. The Company has made available to the Investor all
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the information reasonably available to it without undue expense that the
Investor has requested for deciding whether to purchase the Stock. Neither this
Agreement nor any other written statements or certificates made or delivered in
connection herewith contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements herein or therein not
misleading.
3. Representations and Warranties of the Investor. The Investor
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represents and warrants to the Company that the statements contained in this
Section 3 are true, correct and complete as of the execution of this Agreement
and will be true, correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for date of execution of
this Agreement throughout this Section):
3.1 Organization; Good Standing; Qualification. The Investor is a
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limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, has all requisite power and authority to own,
lease and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted, to execute
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and deliver this Agreement, the Investor's Rights Agreement and any Ancillary
Agreements to which the Investor is a party and to carry out the provisions of
this Agreement, the Investor's Rights Agreement and any Ancillary Agreement. The
Investor is qualified to transact business as a foreign corporation in each
jurisdiction where such qualification is now required and where the failure to
so qualify would have a Material Adverse Effect on the Investor.
3.2 Authorization. All action on the part of the Investor necessary
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for the authorization, execution and delivery of this Agreement, the Investor's
Rights Agreement and any Ancillary Agreement and the performance of the
Investor's obligations hereunder and thereunder has been taken or will be taken
prior to the Closing, and this Agreement, the Investor's Rights Agreement and
any Ancillary Agreement constitute valid and legally binding obligations of the
Investor, enforceable in accordance with their respective terms except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (b) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (c) to the extent
the indemnification provisions contained in the Investor's Rights Agreement may
be limited by applicable federal or state securities laws.
3.3 Voting Rights. Except for the voting agreement described in
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Section 4.9 below, the Investor is not a party or subject to any agreement or
understanding, and there is no agreement or understanding between any persons
that affects or relates to the voting or giving of written consents with respect
to any security or the voting by a director of the Investor.
3.4 Changes. Since the formation of the Investor, there has been no
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event or change which has or may reasonably be expected to have a Material
Adverse Effect on the Investor.
3.5 Charter Documents. The copies of the Investor's Certificate of
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Partnership and Partnership Agreement which have been provided to the Company
are true and complete copies of such instruments as amended to date, and such
instruments are in full force and effect on the date hereof.
3.6 Compliance. The Investor is not in violation or default of any
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provision of its Certificate of Partnership or Partnership Agreement or in any
material respect of any provision of any mortgage, agreement, instrument or
contract to which it is a party or by which it is bound or of any federal or
state judgment, order, writ, decree, statute, rule or regulation applicable to
the Investor. The execution, delivery and performance by the Investor of this
Agreement, the Investor Rights Agreement and any Ancillary Agreement, and the
consummation of the transactions contemplated hereby and thereby will not result
in any such violation or be in material conflict with or constitute, with or
without the passage of time or giving of notice, either a material default under
any such provision or an event that results in the creation of any material
lien, charge or encumbrance upon any assets of the Investor or the suspension,
revocation, impairment, forfeiture or nonrenewal of any material permit,
license, authorization or approval applicable to the Investor, its business or
operations, or any of its assets or properties.
3.7 Purchase Entirely for Own Account. This Agreement is made with
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the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's
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execution of this Agreement the Investor hereby confirms, that the Stock to be
purchased by the Investor will be acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same.
By executing this Agreement, the Investor further represents that the Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to such person or to any third
person with respect to any of the Stock.
3.8 Investment Experience. The Investor is experienced in evaluating
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and investing in companies such as the Company. The Investor has had an
opportunity to ask questions and receive answers from the Company regarding
matters relevant to the Company and an investment therein. In addition, the
Investor has been given access to all books, records and other information of
the Company which the Investor has desired to review and analyze in connection
with the Investor's purchase of the Stock. The foregoing, however, does not
limit or modify the representations and warranties of the Company in Section 2
of this Agreement or the right of the Investor to rely thereon.
3.9 Accredited Investor. The Investor is an "accredited investor"
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within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.10 Restricted Securities. The Investor understands that the Stock
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may not be sold, transferred or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Stock or an available exemption
from registration under the Securities Act, the Stock must be held indefinitely.
In particular, the Investor is aware that the Stock may not be sold pursuant to
Rule 144 promulgated under the Securities Act unless all of the conditions of
that Rule are met.
3.11 Legends. It is understood that the certificates evidencing the
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Stock may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OF SUCH ACT."
(b) Any legend required by the "blue sky" laws of any state or
any other jurisdiction.
4. Conditions to Investor's Obligations at Closing. The obligations of
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the Investor under Section 1.1 of this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions, any one or more of
which may be waived by written agreement of the parties:
4.1 No Restriction. No injunction or restraining order shall be in
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effect to forbid or enjoin, and no suit, action or proceeding shall be pending
or threatened to prohibit,
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nullify or otherwise materially adversely affect the consummation of the
transactions contemplated by this Agreement or the consideration to be received
hereunder.
4.2 No Material Adverse Change. Since December 31, 1999 and the
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Closing Date, no event or change shall have occurred which has or may reasonably
be expected to have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
4.3 Representations and Warranties. The representations and
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warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing Date.
4.4 Performance. The Company shall have performed and complied with
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all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing Date.
4.5 Compliance Certificate. If the Closing occurs later than the date
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hereof, the President of the Company shall deliver to the Investor at the
Closing a certificate certifying that the representations and warranties of the
Company contained herein are true and correct as of the Closing and that the
Company has complied with all agreements, obligations and conditions that are
required to be performed or complied with by the Company on or before the
Closing Date.
4.6 Secretary's Certificate. The Company shall deliver to the
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Investor at the Closing a certificate executed by the Secretary of the Company
certifying as to the valid adoption of resolutions of the Board of Directors of
the Company and its stockholders, as necessary, approving this Agreement and the
consummation of the transactions contemplated hereby.
4.7 Qualifications. All authorizations, approvals or permits, if any,
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of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
4.8 Proceedings and Documents. All corporate and other proceedings in
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connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investor.
4.9 Board of Directors. As of immediately following the Closing (a)
------------------
the Company Board of Directors shall have been reconstituted, (b) the Company
Board of Directors will consist of Xxxxx Xxxxx, Xxxxxx XxXxxx and Xxxxxx X.
Xxxxxxx, with two vacanies and (c) the Company, the Investor and Pacific Life
Insurance Company shall have entered into a voting agreement in a form mutually
agreeable to the Company, the Investor and Pacific Life Insurance Company.
4.10 Stock Certificate. The Company shall have delivered to the
-----------------
Investor a certificate representing the Stock.
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4.11 Investor's Rights Agreement. The Company and the Investor shall
---------------------------
have entered into the Investor's Rights Agreement in the form attached hereto as
Exhibit A.
---------
4.12 Legal Opinion. The Investor shall have received from Xxxxxxx,
-------------
Xxxxx & Xxxx, LLP, counsel for the Company, an opinion, dated as of the Closing,
in substantially the form attached hereto as Exhibit B.
---------
5. Conditions to the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to the Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by the Investor,
any one or more of which may be waived by written agreement of the parties:
5.1 No Restriction.
---------------
5.2 No injunction or restraining order shall be in effect to forbid
or enjoin, and no suit, action or proceeding shall be pending or threatened to
prohibit, nullify or otherwise materially adversely affect the consummation of
the transactions contemplated by this Agreement or the consideration to be
received hereunder.
5.3 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
5.4 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.1.
5.5 Qualifications. All authorizations, approvals or permits, if any,
--------------
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Stock pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
5.6 Investor's Rights Agreement. The Company and the Investor shall
---------------------------
have entered into the Investor's Rights Agreement.
5.7 Legal Opinion. The Company shall have received from Pillsbury,
-------------
Madison & Sutro LLP, counsel for the Investor, an opinion, dated as of the
Closing, in substantially the form attached hereto as Exhibit C.
---------
5.8 Compliance Certificate. If the Closing occurs later than the date
----------------------
hereof, the General Partner or President of the Investor shall deliver to the
Company at the Closing a certificate certifying that the representations and
warranties of the Investor contained herein are true and correct as of the
Closing and that the Investor has complied with all agreements, obligations and
conditions that are required to be performed or complied with by the Investor on
or before the Closing Date.
5.9 General Partner's Certificate. The Investor shall deliver to the
-----------------------------
Company at the Closing a certificate executed by the General Partner of the
Investor certifying as to the approval of this Agreement and the consummation of
the transactions contemplated hereby.
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6. Indemnification and Other Agreements.
------------------------------------
6.1 Survival of Representations and Warranties. Notwithstanding any
------------------------------------------
investigation or inquiries made by the Investor prior to Closing, the Company
acknowledges and agrees that the Investor has entered into this Agreement and
has purchased the Stock in reliance upon the representations and warranties by
the Company contained in this Agreement. The representations and warranties in
this Agreement shall survive the Closing as follows:
(a) The representations and warranties in Section 2.1
(Organization; Good Standing; Qualification), Section 2.2 (Authorization),
Section 2.4 (Capitalization and Voting Rights), Section 2.5 (Valid Issuance of
Preferred and Common Stock), Section 2.10 (Registration Rights) and Section 2.12
(Compliance) shall not terminate;
(b) All other representations and warranties in this Agreement
shall terminate three (3) years after the Closing; provided, however, that any
-------- -------
representation or warranty in respect of which indemnity may be sought under
this Section 6, and the indemnity with respect thereto, shall survive the time
at which it would otherwise terminate pursuant to this Section 6 if notice of
the inaccuracy or breach or potential inaccuracy or breach thereof giving rise
to such right or potential right of indemnity shall have been given to the party
against whom such indemnity may be sought prior to such time. The
representations and warranties in this Agreement shall survive for the periods
set forth in this Section 6 and shall in no event be affected by any
investigation, inquiry or examination made for or on behalf of any party, or the
knowledge of any party's officers, directors, stockholders, employees or agents
or the acceptance by any party of any certificate or opinion hereunder; and
(c) The Company and the Investor agree that (i) their sole
respective rights for any recourse of any kind with respect to any breaches of
any representations, warranties or covenants under this Agreement shall be the
Investor's and the Company's respective rights to indemnification as expressly
set forth in this Section 6.
6.2 General Indemnification.
-----------------------
(a) The Company shall indemnify the Investor and its,
stockholders, partners, officers, directors, employees, agents, representatives,
successors and permitted assigns (collectively, the "Investor Parties"), and
save and hold each of them harmless against and pay on behalf of or reimburse
the Investor Parties as and when incurred for any loss, liability, demand,
claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or
expense, whether or not arising out of third party claims (including interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid in
investigation, defense or settlement of any of the foregoing) (collectively,
"Losses"), which any the Investor Party may suffer, sustain or become subject
to, as a result of, in connection with, relating or incidental to or by virtue
of: (i) any material breach of any representation or warranty of the Company in
this Agreement; or (ii) any material nonfulfillment or material breach of any
covenant or agreement by the Company under this Agreement or the Investor's
Rights Agreement.
(b) The Investor shall indemnify the Company and its affiliates,
stockholders, officers, directors, employees, agents, representatives,
successors and permitted
-12-
assigns (collectively, the "Company Parties"), and save and hold each of them
harmless against and pay on behalf of or reimburse such Company Parties as and
when incurred for any Losses which any such Company Party may suffer, sustain or
become subject to, as a result of, in connection with, relating or incidental to
or by virtue of: (a) any material breach of any representation or warranty of
the Investor in this Agreement; or (b) any material nonfulfillment or material
breach of any covenant or agreement by the Investor under this Agreement or the
Investor's Rights Agreement.
6.3 Procedure For Indemnification--Indemnified Party Claims.
-------------------------------------------------------
(a) If an indemnified party (the "Indemnified Party") becomes
aware of facts or circumstances establishing a claim ("Claim") that the
Indemnified Party has experienced or incurred any Loss or may experience or
incur any Losses which will give rise to indemnification under this Section 6,
then the Indemnified Party shall give written notice to the indemnifying party
(the "Indemnifying Party") of such Claim ("Indemnification Notice"). The
Indemnification Notice shall be provided as soon as reasonably practicable but
in no event more than thirty (30) days after the Indemnified Party has received
written notice or actual knowledge of such facts or circumstances (provided that
failure to give an Indemnification Notice shall not limit the Indemnifying
Party's indemnification obligation hereunder except to the extent that the delay
in giving, or failure to give, the Indemnification Notice adversely affects the
Indemnifying Party's ability to defend against a Claim). To the extent
reasonably practicable, the Indemnification Notice will describe the nature,
basis and amount of the Claim and include any relevant supporting documentation.
Any Claim described in the Indemnification Notice shall be deemed final and
binding (hereinafter, a "Permitted Indemnification Claim") if the Indemnifying
Party does not object in writing to the propriety of the Claim or the amount of
the Loss by delivering a notice of objection to the Indemnified Party (an
"Indemnification Objection Notice") within thirty (30) days after receipt of the
Indemnification Notice. The Indemnification Objection Notice shall detail all
specific objections to the Claim.
(b) The Indemnified Party against whom a third party claim
("Third Party Claim") is made or brought shall give the Indemnifying Party an
opportunity to defend such Third Party Claim with counsel selected by the
Indemnifying Party and reasonably satisfactory to the Indemnified Party.
Notwithstanding the above, the Indemnified Party at all times shall have the
right to participate fully in the defense at its own expense. Failure of an
Indemnifying Party to give the Indemnified Party written notice of its election
to defend such Third Party Claim within thirty (30) days after receipt of notice
shall be deemed a waiver of its right to defend such Third Party Claim. In that
event, the Indemnified Party against whom such Third Party Claim is made shall
have the right, but not the obligation, to undertake, defend and compromise or
settle the Third Party Claim. The party that undertakes the defense shall defend
the Third Parry Claim in good faith and shall periodically apprise the other
party of the progress of such defense. If the Indemnifying Party undertakes the
defense of a Third Party Claim, it shall not consent to the entry of any
judgment or enter into any settlement (except with the written consent of the
Indemnified Party) which does not include as an unconditional term thereof the
giving by the claimant to the Indemnified Party against whom such Third Party
Claim is made a release from all liability in respect of such Third Party Claim
(which release shall exclude only any obligations incurred in connection with
any such settlement). The Indemnified
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Party shall make available, at the Indemnifying Party's expense, all information
and assistance that the Indemnifying Party reasonably may request.
6.4 CPS Acquisition. The proceeds received by the Company from the
---------------
sale of the Stock shall be used to (i) acquire the stock and/or assets of Orange
County Professional Services, Inc., a California corporation, and its affiliated
entities (collectively, the "CPS Acquisition") and (ii) to pay certain expenses
incurred by the Company and the Investor in the negotiation and preparation of
documents with respect to the CPS Acquisition.
6.5 Exclusivity; No Issuance of Equity Securities. The Company agrees
---------------------------------------------
that until the closing of the CPS Acquisition, the Company will not, and will
not permit any of its officers, directors, employees or representatives to,
without the prior written consent of the Investor and the Board of Directors of
the Company:
(a) solicit, enter into any negotiations with or respond to any
proposals from other third parties indicating an interest in making an
investment in the Company; or
(b) issue or grant any shares, options, warrants, convertible
notes or other equity securities ("Equity Securities") of the Company (except
for the issuance of shares upon the exercise of options granted under the Plan
prior to the Closing Date in accordance with the terms thereof) or enter into
any contract, commitment or agreement for the issuance by the Company, or
purchase or acquisition by the Company from any individual or entity of any
Equity Securities;
(c) create a mortgage, pledge, lien or encumbrance on any of the
properties or assets of the Company;
(d) make any expenditures in excess of $10,000 (individually or
in the aggregate), except in the ordinary course of business; or
(e) incur any indebtedness for money borrowed by the Company or
obligations assumed or guaranteed by the Company.
6.6 Advance for Payment of Certain Legal Fees; Monitoring Fee.
---------------------------------------------------------
Subsequent to the Closing Date and for so long as the Investor holds any Stock,
the Company shall pay to the Investor a quarterly monitoring fee of $15,000,
payable on July 1, 2000 and on the first day of each quarter thereafter. The
first monitoring fee will be pro rated from the Closing Date. Initial monitoring
fees in an aggregate amount of $17,442.49 will be offset against amounts owed by
the Investor to the Company for amounts borrowed to by the Investor at the
Closing to pay certain transaction expenses.
6.7 Name Change. Within ninety (90) days of the Closing Date, the
-----------
Company shall change the Company's name to "RevCare, Inc."
7. Miscellaneous.
-------------
7.1 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any
-14-
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any shares of Stock sold hereunder).
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, and if not, then on the next business
day, or upon personal delivery to the party to be notified by hand or
professional courier service or five (5) days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
7.7 Public Announcements. The parties shall jointly cooperate in the
--------------------
preparation of any press releases or public statements to be made with respect
to this Agreement and the transactions contemplated hereby.
7.8 Finders' Fees. Each party represents that it neither is nor will
-------------
be obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless the Investor from any liability for any commission or compensation in
the nature of a finder's fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.9 Expenses. Irrespective of whether the Closing is effected, the
--------
Company and the Investor shall each bear their respective costs and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement. provided, however, that concurrent with and contingent upon the
-------- -------
Closing, the Company shall pay the reasonable fees and
-15-
costs of special counsel for the Investor in connection with the negotiation,
execution and delivery of this Agreement.
7.10 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any securities purchased under this Agreement at the time outstanding,
each future holder of all such securities and the Company.
7.11 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CYPRESS FINANCIAL SERVICES, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
Address: 0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
FBR FINANCIAL FUND II, L.P.
By: FBR Financial Fund Management, L.L.C.,
Title: General Partner
By: Friedman, Billings, Xxxxxx
Investment Management, Inc.
Title: Managing Member
By: _____________________________
Name: ___________________________
Title: __________________________
Address: 0000 00/xx/ Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
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