EXHIBIT 1
$100,000,000 of 7.25% Convertible Subordinated Notes Due 2003
RAC FINANCIAL GROUP, INC.
PURCHASE AGREEMENT
August 14, 1996
BEAR, XXXXXXX & CO. INC.
as Representative of the
several Initial Purchasers named in
Schedule I hereto
c/o Bear, Xxxxxxx & Co. Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Dear Sirs:
RAC Financial Group, Inc., a corporation organized and existing
under the laws of Nevada (the "Company"), proposes, subject to the terms and
conditions stated herein, to issue and sell to Bear, Xxxxxxx & Co. Inc.,
("Bear Xxxxxxx" or the "Representative"), Prudential Securities Incorporated
and Xxxxx Xxxxxxxx & Xxxxx, Inc. (collectively, the "Initial Purchasers") an
aggregate of $100,000,000 of its 7.25% Convertible Subordinated Notes Due
2003 (the "Firm Notes"). In addition, the Company proposes to grant to the
Initial Purchasers an option, for the sole purpose of covering
over-allotments in connection with the sale of the Firm Notes, to purchase up
to an additional $15,000,000 of Notes (the "Optional Notes") as provided in
Section 2 below. The Firm Notes and any Optional Notes purchased by the
Initial Purchasers are referred to herein as the "Notes".
The Notes are to be issued pursuant to an indenture to be dated as
of August 20, 1996 (the "Indenture") between the Company and Bank One, Texas,
N.A., as trustee (the "Trustee"), and will be convertible into shares of the
Company's common
-1-
stock, par value $0.01 per share (the "Common Stock"), on the terms set forth
therein. The holders of the Notes will be entitled to certain registration
rights provided under a Note Resale Registration Rights Agreement to be dated
as of August 20, 1996 (the "Registration Rights Agreement") between the
Company and the Initial Purchasers.
The Company has prepared a preliminary offering circular dated
August 5, 1996 (the "Preliminary Offering Circular") and a final offering
circular dated August 14, 1996 (as supplemented from time to time with the
written consent of the Company and Bear Xxxxxxx, the "Offering Circular")
with respect to the offering of the Notes contemplated by this Agreement (the
"Offering").
The Notes have not been registered under the Securities Act of
1933, as amended (the "Securities Act"), and are being sold in reliance on
exemptions from or in transactions not subject to the registration
requirements of the Securities Act, including sales (i) made in the United
States to (a) "qualified institutional buyers" as defined in, and in reliance
on, Rule 144A under the Securities Act ("Rule 144A") and (b) to institutional
"accredited investors" as defined in Rule 501(a)(1), (2), (3) and (7) of
Regulation D under the Securities Act ("Regulation D")and (ii) made outside
the United States in reliance on Regulation S under the Securities Act
("Regulation S").
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to, and agrees with, the Representative and each of
the Initial Purchasers that:
(a) The Offering Circular, as of the date hereof, and as of the
Closing Date (as hereinafter defined) and as of any Additional Closing Date
(as hereinafter defined), if any, is and will be accurate in all material
respects, does not and will not contain an untrue statement of a material
fact and does not and will not omit to state any 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
Preliminary Offering Circular, as of the date thereof, was accurate in all
material respects, did not contain an untrue statement of a material fact and
did not omit to state any 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. No representation
and warranty is made in this Section 1(a), however, with respect to any
information contained in or omitted
-2-
from the Preliminary Offering Circular or the Offering Circular or any
amendment thereof or supplement thereto in reliance upon and in conformity
with information furnished in writing to the Company by Bear Xxxxxxx
expressly for use in connection with the preparation thereof.
(b) Ernst & Young LLP ("E&Y"), who have certified (i) the
consolidated balance sheets of the Company as of September 30, 1994 and 1995
and June 30, 1996, the related consolidated statements of income and cash
flows for each of the three years in the period ended September 30, 1995 and
each of the nine month periods ended June 30, 1995 and 1996, and the related
consolidated statements of stockholders' equity for each of the three years
in the period ended September 30, 1995 and the nine month period ended June
30, 1996, and (ii) the balance sheet of FirstPlus Financial, Inc., formerly
Remodelers National Funding Corp., a corporation organized and existing under
the laws of Texas ("FPF"), as of September 30, 1994, and the related
statements of operations, stockholders' equity and cash flows for the
nine-month period then ended, in each case included in the Offering Circular,
are independent public accountants as required by the Securities Act of 1933,
as amended (the "Act") and the Rules and Regulations of the Securities and
Exchange Commission (the "Commission") promulgated under the Act (the
"Regulations"). Xxxxx & Xxxxxxxx, LLP ("S&H"), who have certified the
balance sheet of First Security Mortgage Corporation, a corporation organized
and existing under the laws of South Carolina ("FSMC"), as of December 31,
1994 and the related statements of operations, changes in shareholders'
equity and cash flows of FSMC for the year then ended, included in the
Offering Circular, are independent public accountants as required by the Act
and the Regulations.
(c) Subsequent to the respective dates as of which information is
given in the Offering Circular, except as set forth in the Offering Circular,
there has been no material adverse change, nor any development involving a
prospective material adverse change, in the business, prospects, properties,
operations, condition (financial or otherwise) or results of operations of
the Company and its subsidiaries taken as a whole, whether or not arising
from transactions in the ordinary course of business, and since the date of
the latest balance sheet presented in the Offering Circular, neither the
Company nor any of its subsidiaries has incurred or undertaken any
liabilities or obligations, direct or contingent, that are material to the
Company and its subsidiaries taken as a whole, except for liabilities or
obligations that are disclosed in the Offering Circular.
-3-
(d) This Agreement and the transactions contemplated herein have
been duly and validly authorized by the Company. This Agreement has been
duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except, in the case of enforceability,
as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws now or hereafter in effect relating to or affecting creditors'
rights generally or by general principles of equity relating to the
availability of remedies and except as rights to indemnity and contribution
may be limited by federal or state securities laws or the public policy
underlying such laws. This Agreement conforms in all material respects to the
description hereof contained in the Offering Circular.
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Indenture, the Notes and the Registration Rights Agreement (collectively, the
"Transaction Agreements"), and to consummate the transactions contemplated
hereby and thereby, including (without limitation) (i) the issuance, sale and
delivery of the Notes hereunder and (ii) the filing of the Registration
Statement and consummation of the Exchange Offer under and as defined in the
Registration Rights Agreement.
(f) The execution, delivery, and performance of this Agreement and
the other Transaction Agreements and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
of its subsidiaries pursuant to, any agreement, instrument, franchise,
license or permit to which the Company or any of its subsidiaries is a party
or by which any of such corporations or their respective properties or assets
may be bound, (ii) violate or conflict with any provision of the certificate
of incorporation or bylaws of the Company or any of its subsidiaries or any
judgment, decree, order, statute, rule or regulation of any court or any
public, governmental or regulatory agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their respective properties
or assets or (iii) require any consent, approval, authorization, order,
registration, filing, qualification, license or permit of or with any court
or any public, governmental or regulatory agency or body having jurisdiction
over the Company or any of its subsidiaries or any of their respective
properties or assets
-4-
(collectively, "Licenses"), except, in the case of clause (iii), for any such
consents, approvals, authorizations, orders, registrations, filings,
qualifications, licenses and permits as have been obtained or as may be
required under state securities or Blue Sky laws or the securities laws of
any jurisdiction outside the United States in connection with the purchase
and distribution of the Notes by the Initial Purchasers.
(g) All of the outstanding shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
nonassessable and were not issued and are not now in violation of or subject
to any preemptive rights. The Company had, at June 30, 1996, an authorized
and outstanding capitalization as set forth in the Offering Circular. The
capital stock of the Company conforms in all material respects to the
descriptions thereof contained in the Offering Circular.
(h) Each of the Company and its subsidiaries (i) has been duly
organized and is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the character
or location of its properties (owned, leased or licensed) or the nature or
conduct of its business makes such qualification necessary, except for those
failures to be so qualified or in good standing that will not have a material
adverse effect, singly or in the aggregate, on the business, prospects,
properties, operations, condition (financial or other), or results of
operations of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect") and (iii) has all requisite power and authority, and all
necessary Licenses, to own, lease and operate its properties and conduct its
business as now being conducted and as described in the Offering Circular,
except in such case where the failure to have such Licenses will not have a
Material Adverse Effect, and no such License contains a materially burdensome
restriction not adequately disclosed in the Offering Circular. Neither the
Company nor any of its subsidiaries has received any written notice of
proceedings relating to the revocation or modification of any such License
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have resulted in a Material Adverse Effect, except
as described in or contemplated by the Prospectus.
(i) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable, were not issued and are not now in violation of or subject to
any preemptive rights
-5-
and are owned of record and beneficially, directly or indirectly, by the
Company free and clear of any security interest (other than the security
interest in such capital stock held by BOCP II, Limited Liability Company
("BOCP II"), Banc One Capital Partners V, Ltd. ("BOCP V") and Farm Bureau
Life Insurance Company ("FBLIC") pursuant to the Security Agreement-Pledge of
Common Stock dated as of Xxxxx 00, 0000), xxxx, xxxxx, encumbrance, security
interest, restriction on transfer, shareholders' agreement, voting trust or
other preferential arrangement or defect of title whatsoever.
(j) Except as described in the Offering Circular, there is no
litigation or governmental proceeding to which the Company or any of its
subsidiaries is a party or to which any property of the Company or any of its
subsidiaries is subject or which is pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries that (i)
would have a Material Adverse Effect or would result in any development
involving a Material Adverse Effect or (ii) is required to be disclosed in
the Offering Circular.
(k) Neither the Company nor any of its subsidiaries, nor any of
their respective officers or directors has taken and none of them will take,
directly or indirectly, any action designed to cause or result in, or which
constitutes or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the Notes or the Common Stock
to facilitate the sale or resale of the Notes or the Common Stock.
(l) The financial statements, including the notes thereto,
included in the Offering Circular, present fairly the financial position of
the Company, FPF and FSMC, respectively, as of the dates indicated and the
results of their respective operations for the periods specified, all in
conformity with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the entire periods presented, except as
otherwise disclosed therein. The selected financial data for the Company set
forth under the captions "Summary--Summary Financial Information" and
Selected Financial Data" in the Offering Circular have been prepared on a
basis consistent with the financial statements of the Company. No other
financial statements of the Company or any other entity are required by the
Act or the Rules and Regulations to be included in the Offering Circular.
The pro forma financial information included in the Offering Circular has
been prepared in accordance with the applicable requirements of Rule 3-05 and
Article 11 of Regulation S-X, and the assumptions used in the preparation
thereof are, in the opinion of the Company, reasonable.
-6-
(m) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
(n) No labor dispute with the employees of the Company or any of
its subsidiaries exists or, to the Company's knowledge, is threatened or
imminent that would have a Material Adverse Effect, except as described in or
contemplated by the Offering Circular.
(o) The Company and its subsidiaries own or possess, or can
acquire on reasonable terms, all material trademarks, service marks, trade
names, licenses, copyrights and proprietary or other confidential
information, including, but not limited to, "FIRSTPLUS FINANCIAL", "Buster
Plus", "Debt Buster", and "You don't need equity, you just need a phone",
currently employed by them in connection with their respective businesses,
and neither the Company nor any such subsidiary has received any written
notice of infringement of or conflict with asserted rights of any third party
with respect to any of the foregoing which, singly or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would have a
Material Adverse Effect, except as described in or contemplated by the
Offering Circular.
(p) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are customary in the businesses in which they are
engaged; and neither the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would
not have a Material Adverse Effect, except as described in or contemplated by
the Offering Circular.
(q) No subsidiary of the Company is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any
other distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary's property or assets to the Company or
any other subsidiary of the Company, except as described in or contemplated
by the Offering Circular.
(r) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has
-7-
requested extensions thereof (except in any case in which the failure so to
file would not have a Material Adverse Effect) and has paid all taxes
required to be paid by it and any other assessment, fine or penalty levied
against it, to the extent that any of the foregoing is due and payable,
except for any such assessment, fine or penalty that is currently being
contested in good faith or as described in or contemplated by the Offering
Circular.
(s) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to their
respective lending activities, including, without limitation, rules and
regulations of the Federal Housing Authority and applicable banking laws,
rules and regulations, except for any such violation of law or regulation
which would not have a Material Adverse Effect or which is described in or
contemplated by the Offering Circular.
(t) Except for the shares of capital stock of each of the
subsidiaries owned by the Company and its other subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other equity
securities of any corporation or has any equity interest in any firm,
partnership, association or other entity, except as described in or
contemplated by the Offering Circular.
(u) No event has occurred that will (i) conflict with or result in
a breach of any of the terms and provisions of, or constitute a default (or
an event which with notice or lapse of time, or both, would constitute a
default) under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any agreement, instrument, franchise, License or
permit to which the Company or any of its subsidiaries is a party or by which
any of such corporations or their respective properties or assets may be
bound, except for such conflicts, breaches or defaults which would not have a
Material Adverse Effect, or (ii) violate or conflict with any provision of
the certificate of incorporation or bylaws of the Company or any of its
subsidiaries or any judgment, decree, order, statute, rule or regulation of
any court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
respective properties or assets.
(v) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and
-8-
warranty by the Company, and not by such officer in an individual capacity,
to each Initial Purchasers as to the matters covered thereby.
(w) The Indenture has been duly and validly authorized by the
Company and, when executed and delivered by the Company and the Trustee, will
have been duly and validly executed and delivered and will constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except, in the case of enforceability,
as limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws now or hereafter in effect relating to or affecting creditors'
rights generally or by general principles of equity relating to the
availability of remedies. The Indenture conforms in all material respects to
the description thereof contained in the Offering Circular.
(x) The Notes have been duly and validly authorized by the Company
and, when authenticated by the Trustee and issued, sold and delivered in
accordance with this Agreement and the Indenture, will have been duly and
validly executed, authenticated, issued and delivered and will constitute the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with their terms, except, in the case of
enforceability, as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws now or hereafter in effect relating
to or affecting creditors' rights generally or by general principles of
equity relating to the availability of remedies. The Notes conform in all
material respects to the description thereof contained in the Offering
Circular.
(y) The Registration Rights Agreement and the transactions
contemplated therein have been duly and validly authorized by the Company.
The Registration Rights Agreement, when executed and delivered by the Company
and the Initial Purchaser, will have been duly and validly executed and
delivered by the Company and will constitute the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except, in the case of enforceability, as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to or affecting creditors' rights generally or
by general principles of equity relating to the availability of remedies and
except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws. The
Registration Rights Agreement conforms in all material
-9-
respects to the description thereof contained in the Offering Circular.
(z) The Company and its subsidiaries are in compliance, and have
complied at all times during the past five (5) years, and all transactions
involving the issuance, offer, placement and sale, pursuant to the terms of
the Transaction Agreements, of the Notes comply, in all material respects,
with all applicable federal, state and local statutes, codes, ordinances,
rules and regulations of the United States (the "Laws") to the extent
applicable. Neither the Company nor any of its subsidiaries has received
notice within the past five (5) years of any violations of any Laws that
would have a Material Adverse Effect or would result in any development
involving a Material Adverse Effect.
(aa) The Notes, when issued, delivered and sold in accordance with
this Agreement, will be fully paid and nonassessable, will not have been
issued in violation of or be subject to any preemptive or similar rights and,
except as otherwise set forth in the Offering Circular and Article XV
(Subordination) of the Indenture, will rank PARI PASSU in right of payment
with all of the Company's other unsecured and unsubordinated indebtedness for
borrowed money. No event has occurred nor has any circumstance arisen which,
had the Notes already been issued, would constitute a default or Event of
Default (as such terms are defined in the Indenture).
(bb) (i) None of the Company, any of its affiliates (as defined in
Rule 501(b) under the Securities Act) nor any person acting on behalf of any
such person (excluding the Initial Purchasers and their respective
affiliates, as to which no representation is made) has engaged in any
directed selling efforts (as such term is defined in Regulation S) in the
United States with respect to the Notes and (ii) each of the Company, its
affiliates and each person acting on behalf of any of them (other than the
Initial Purchasers and their respective affiliates, as to which no
representation made) has complied with the offering restrictions requirement
of Regulation S.
(cc) None of the Company, any of its affiliates, nor any person
acting on behalf of any of them (excluding the Initial Purchasers and their
respective affiliates, as to which no representation is made) has sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect
of any security (as such term is defined in the Securities Act) that is or
may be integrated with the sale of the Notes in a manner that would require
registration under the Securities Act.
-10-
(dd) The Notes are eligible for resale pursuant to Rule 144A and,
when issued, will not be of the same class as any securities listed on a
national securities exchange registered under section 6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or quoted in a U.S.
automated inter-dealer quotation system.
(ee) The Company is subject to Section 13 or 15(d) of the Exchange
Act and is in compliance with the provisions of such Section.
(ff) Subject to compliance by the Initial Purchasers with the
procedures set forth in Section 3 hereof, it is not necessary, in connection
with the offer, sale and delivery of the Notes to the Initial Purchasers in
the manner contemplated by this Agreement and the Offering Circular, to
register the Notes under the Securities Act or to qualify the Indenture under
the Trust Indenture Act of 1939, as amended.
(gg) The shares of Common Stock issuable upon conversion of the
Notes have been duly authorized and, when issued in accordance with the terms
of the Notes and the Indenture, will be validly issued, fully paid and
nonassessable, will conform in all material respects to the description
thereof contained in the Offering Circular and will not have been issued in
violation of or be subject to any preemptive rights. The shares of Common
Stock issuable on conversion of the Notes at the initial conversion price set
forth in the Indenture have been reserved for issuance and no further
approval or authority of the stockholders or the Board of Directors of the
Company will be required for such issuance of Common Stock.
2. PURCHASE, SALE AND DELIVERY OF THE NOTES.
(a) On the basis of the representations, warranties, covenants and
agreements herein contained, but subject to the terms and conditions herein
set forth, the Company agrees to sell to the Initial Purchasers, and the
Initial Purchasers, severally and not jointly, agree to purchase from the
Company, the principal amount of the Notes set forth opposite their
respective names in Schedule I hereto at a purchase price equal to 97% of
such principal amount. Payment of the purchase price for, and delivery of,
the Notes will be made at the offices of Bear Xxxxxxx, 000 Xxxx Xxxxxx, Xxx
Xxxx, XX 00000 at 9:30 a.m. (New York City time) on August 20, 1996, unless
postponed in accordance with Section 9 hereof, or such other time and date as
may be mutually agreed in writing between you and the Company
-11-
(the time and date of such payment and delivery being herein called the
"Closing Date").
(b) In addition, on the basis of the representations, warranties,
covenants and agreements herein contained, but subject to the terms and
conditions herein set forth, the Company hereby grants to the Initial
Purchasers the option to purchase, severally and not jointly, up to U.S.
$15,000,000 in principal amount of Optional Notes, for the sole purpose of
covering over-allotments in the sale of Firm Notes by the Initial Purchaser,
at the same purchase price to be paid by the Initial Purchasers to the
Company for the Firm Notes as set forth in Section 2(a). This option may be
exercised at any time, in whole or in part, on or before the 30th day
following the date of the Offering Circular, by written notice by Bear
Xxxxxxx on behalf of the Initial Purchasers to the Company. Such notice
shall set forth the aggregate principal amount of Optional Notes to be
purchased pursuant to the option and the date and time, as reasonably
determined by Bear Xxxxxxx, when the Optional Notes are to be delivered (such
date and time being herein sometimes referred to as the "Additional Closing
Date"); PROVIDED that the Additional Closing Date shall not be earlier than
(x) the Closing Date or (y) the second full business day after the date on
which the option shall have been exercised, nor later than the eighth full
business day after the date on which the option shall have been exercised
(unless such date and time are postponed in accordance with Section 9
hereof). The principal amount of the Optional Notes to be sold to each
Initial Purchasers shall be that principal amount which bears the same ratio
to the aggregate principal amount of Optional Notes being purchased as the
principal amount of Firm Notes set forth opposite the name of such Initial
Purchasers in Schedule I hereto (or such number increased as set forth in
Section 9 hereof) bears to the aggregate principal amount of Firm Notes,
subject to such adjustments to eliminate fractional amounts as Bear Xxxxxxx
in its sole discretion may make.
(c) At or prior to the Closing Date and any Additional Closing
Date hereunder, the Company shall execute and deliver to the Trustee for
authentication (i) the Notes to be purchased and sold on such date and shall
deposit such Notes with the Trustee as custodian for the Depositary Trust
Company ("DTC") for the account or accounts of participants in DTC (including
Euroclear and CEDEL, as the case may be) purchasing beneficial interests
therein and/or (ii) one or more certificates in global or definitive form in
such denominations and registered in such names as the Initial Purchasers
request upon notice to the Company at least two business days prior to such
date. Against
-12-
delivery of the Notes to DTC and Bear Xxxxxxx for the respective accounts of
the Initial Purchasers, the Initial Purchasers shall pay or cause to be paid
to the Company the purchase price for such Notes by certified or official
bank check or checks, in New York Clearing House or similar same day funds,
payable to the order of the Company. Certificates evidencing the Notes shall
be registered in such name or names and in such authorized denominations as
Bear Xxxxxxx may request in writing at least two full business days prior to
the Closing Date or applicable Additional Closing Date, as the case may be,
the name of Cede & Co. as nominee for DTC. The Company will permit you to
inspect such certificates at the offices of Bear Xxxxxxx, 000 Xxxx Xxxxxx,
Xxx Xxxx, XX 00000 at least one full business day prior to the Closing Date
and each Additional Closing Date.
3. SUBSEQUENT OFFERS AND RESALES OF THE NOTES. The Initial Purchasers
and the Company hereby establish and agree to observe the following
procedures in connection with the offer and sale of the Notes:
(a) Each Initial Purchaser has advised the Company and Bear
Xxxxxxx that it proposes to offer the Notes for resale upon the terms and
conditions set forth in this Agreement and the Offering Circular. The Notes
have not been and will not be registered under the Securities Act. Each
Initial Purchaser agrees that it will not take, and acknowledges that the
Company has not taken, any action that would permit a public offering of the
Notes in any jurisdiction and further agrees that, with respect to the offer
or sale of any Notes or the delivery or distribution of any Offering
Circular, it will comply with applicable laws and regulations in such
jurisdictions or to which it is otherwise subject.
(b) Each Initial Purchaser represents and warrants that (i) it is
a "qualified institutional buyer" within the meaning of Rule 144A or an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act and (ii) that neither it nor any of its affiliates
nor any person acting on behalf of any such person has engaged in any general
solicitation or general advertising, as such terms are defined in Rule 502(c)
under the Securities Act, in connection with the offer or sale of the Notes.
(c) In connection with sales outside the United States, each
Initial Purchaser agrees that it will not offer, sell or deliver Notes (i) as
part of the distribution thereof at any time or (ii) otherwise until 40 days
after completion of the distribution, as determined by Bear Xxxxxxx, to or
for the
-13-
account or benefit of U.S. persons (as defined in Regulation S). Each Initial
Purchaser confirms that neither it nor its affiliates nor any person acting
on behalf of any such person has engaged in any "directed selling efforts"
(as such term is defined in Regulation S) with respect to the Notes and that
it and each such other person has complied with the offering restrictions
requirement of Regulation S with respect to the Notes.
(d) Each of the Initial Purchasers acknowledges and agrees that it
has not and will not offer, sell or deliver the Notes in the United States or
to or for the account of any U.S. Person other than (i) distributors (as
defined in Regulation S), (ii) institutional buyers that are reasonably
believed to be "qualified institutional buyers" (as defined in Rule 144A) and
(iii) investors that are reasonably believed to be "accredited investors" (as
defined in Rule 501(a) (1), (2), (3) or (7) under the Securities Act.
(e) Each of the Initial Purchasers has advised the Company and
Bear Xxxxxxx that, prior to the confirmation of sale of any Notes, it will
have sent to each dealer, distributor or person receiving a selling
concession fee or other remuneration that purchases any Notes from it during
the restricted period a confirmation or notice substantially to the following
effect:
"The Notes have not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and may not be offered and sold
within the United States or to, or for the account or benefit of U.S.
persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the completion of the
distribution of the Notes, as determined by Bear Xxxxxxx & Co. Inc.,
except in accordance with Regulation S or Rule 144A or Regulation D
under the Securities Act."
(f) Each Initial Purchaser represents, warrants and agrees that
(i) it has not offered or sold and prior to the expiration of six months from
the Closing Date will not offer or sell Notes to persons in the United
Kingdom, other than to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (whether as
principal or agent) for the purposes of their business or otherwise in
circumstances which will not result in an offer to the public within the
meaning of the Public Offers of Securities Regulations 1995; (ii) it has
complied and will comply with all applicable provisions of the Public Offers
of Securities
-14-
Regulations and the Financial Services Act of 1986 with respect to anything
done by it in relation to the Notes in, from, or otherwise involving the
United Kingdom, and (iii) it has only issued or passed on and will only issue
or pass on, to any person in the United Kingdom any documents received by it
in connection with the issue of the Notes if the person is of a kind
described in Article 11(c) of the Financial Services Act of 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the documents
may otherwise lawfully be issued or passed on.
(g) Each Initial Purchaser represents, warrants and agrees that
it has not offered or sold and will not offer or sell any Notes directly or
indirectly (i) in Japan or to any resident of Japan except (A) pursuant to an
exemption from the registration requirements of the Securities and Exchange
Law of Japan and (B) in compliance with any applicable requirements of
Japanese law or (ii) in any province of Canada except in compliance with all
requirements of applicable Canadian securities laws.
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with
the Representative and each of the Initial Purchasers that:
(a) If at any time prior to the Closing Date or any Additional
Closing Date any event shall have occurred as a result of which the Offering
Circular as then amended or supplemented would in the judgment of any of the
Initial Purchasers or the Company include an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, the Company will notify the
Representative promptly and prepare and deliver to the Representative on
behalf of the Initial Purchasers an amendment or supplement (in form and
substance satisfactory to you) which will correct such statement or omission.
(b) The Company will promptly deliver to the Representative on
behalf of the Initial Purchasers such number of copies of the Offering
Circular and all amendments of and supplements thereto as the Representative
on behalf of the Initial Purchasers may reasonably request.
(c) The Company will endeavor in good faith, in cooperation with
the Representative to qualify the Notes for offering and sale under the
securities and legal investment laws relating to the offering or sale of the
Notes of such jurisdictions as you may designate and to maintain such
qualification in effect for so
-15-
long as required for the distribution thereof; except that in no event shall
the Company be obligated in connection therewith to qualify as a foreign
corporation or to execute a general consent to service of process.
(d) During the period of 90 days from the date of the Agreement,
the Company will not, without the prior written consent of the
Representative, issue, sell, offer or agree to sell, grant any option for the
sale of, or otherwise dispose of, directly or indirectly, any capital stock
of the Company (or any securities convertible into, exercisable for or
exchangeable for capital stock of the Company) or any rights to acquire
capital stock of the Company, other than (i) the Company's sale of Notes
hereunder, (ii) the Company's issuance of capital stock upon the (a) exercise
of presently outstanding stock options or warrants or (b) conversion of Notes
and (iii) in respect of investments in, acquisitions of, or mergers or
combinations with other companies, up to a maximum of 1,000,000 shares of
Common Stock. The Company will cause each of its executive officers and
directors and such of its shareholders as have been heretofore designated by
you and listed on Schedule II attached hereto to agree with you that, during
the period from 90 days from the date of the Agreement (and one year with
respect 1.2 million shares of Common Stock owned by Farm Bureau Life
Insurance Company), they will not engage in any of the aforementioned
transactions on their own behalf other than exercises of outstanding stock
options.
(e) During the period from the Closing Date until three years
after the Closing Date, the Company and its subsidiaries will not, and will
not permit any of their "affiliates" (as defined in Rule 144 under the
Securities Act) to, resell any of the Notes that have been reacquired by
them, except for Notes purchased by the Company and its subsidiaries or any
of their affiliates and resold in a transaction registered under the
Securities Act.
(f) The Company will apply the proceeds from the sale of the Notes
as set forth under "Use of Proceeds" in the Offering Circular.
(g) The Company will use its best efforts to cause (i) the Notes
to be approved for quotation in the Private Offerings, Resales and Trading
through Automated Linkage ("PORTAL") market in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. relating
to trading in the PORTAL market, and (ii) within 60 days from the latest date
of original issuance of the Notes, the Common Stock issuable upon
-16-
conversion thereof to be listed for quotation on the Nasdaq National Market.
(h) None of the Company, its subsidiaries or affiliates or any
person acting on their behalf (other than the Initial Purchasers and their
respective affiliates, as to which no representation is made) will solicit
any offer to buy or offer or sell the Notes by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.
(i) None of the Company, its subsidiaries or affiliates or any
person acting on their behalf (other than the Initial Purchasers and their
respective affiliates, as to which no representation is made) will offer,
sell or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which will be integrated with the
sale of the Notes in a manner that would require the registration of the
Notes under the Securities Act.
(j) None of the Company, its subsidiaries or affiliates or any
person acting on their behalf (other than the Initial Purchasers and their
respective affiliates, as to which no representation is made) will engage in
any directed selling efforts (as that term is defined in Regulation S) with
respect to the Notes sold pursuant to Regulation S, and the Company and their
affiliates and each person acting on their behalf (other than the Initial
Purchasers and their respective affiliates, as to which no representation is
made) will comply with the offering restrictions of Regulation S with respect
to those Notes sold pursuant thereto.
(k) The Company will cooperate with the Initial Purchasers in
arranging for the Notes to be accepted for clearance and settlement through
Euroclear, CEDEL and DTC.
(l) Each of the Notes will bear the legend contained in "Transfer
Restrictions" in the Offering Circular for the time period and upon the other
terms stated therein, except after the Notes are resold pursuant to a
registration statement effective under the Securities Act.
(m) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute,
-17-
stabilization of the price of the Notes or the shares of Common Stock to
facilitate the sale or resale of any of the Notes.
5. PAYMENT OF EXPENSES. Whether or not the transactions
contemplated in this Agreement are consummated or this Agreement is
terminated, the Company hereby agrees to pay all costs and expenses incident
to the performance of the obligations of the Company hereunder, including
those in connection with (i) preparing, printing, duplicating, filing and
distributing the Preliminary Offering Circular, the Offering Circular and any
amendments or supplements thereto (including, without limitation, fees and
expenses of the Company's accountants and counsel), the underwriting
documents (including this Agreement and the other Transaction Agreements and
any related agreement among underwriters, intersyndicate agreement and the
selling agreement) and all other documents related to the offering of the
Notes (including those supplied to the Initial Purchasers in quantities
provided for herein), (ii) the issuance, transfer and delivery of the Notes
to the Initial Purchasers, including any transfer or other taxes payable
thereon, (iii) the qualification of the Notes under state or foreign legal
investment, securities or Blue Sky laws, including the costs of printing and
mailing a preliminary and final "Blue Sky Survey" and the fees of Stroock &
Stroock & Xxxxx ("Counsel for the Initial Purchasers") and such counsel's
disbursements in relation thereto, (iv) the cost of printing the Notes, (v)
the cost and charges of any transfer agent, registrar, trustee or fiscal
paying agent and (vii) the costs and charges of DTC, Euroclear and CEDEL.
6. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The obligations
of the Initial Purchasers to purchase and pay for the Firm Notes and the
Optional Notes, as provided herein, shall be subject to the accuracy of the
representations and warranties of the Company herein contained, as of the
date hereof and as of the Closing Date (for purposes of this Section 6
"Closing Date" shall refer to the Closing Date and any Additional Closing
Date, if different), to the absence from any certificates, opinions, written
statements or letters furnished to you or to Counsel for the Initial
Purchasers pursuant to this Section 6 of any misstatement or omission, to the
performance by the Company of its obligations hereunder, and to the following
additional conditions:
(a) At the Closing Date you shall have received the opinion of
Jenkens & Xxxxxxxxx, a professional corporation, counsel for the Company,
dated the Closing Date addressed to the Initial Purchasers and in form and
substance satisfactory to Counsel for the Initial Purchasers, to the effect
that:
-18-
(i) Each of the Company and its subsidiaries (A) has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; (B) is
duly qualified and in good standing as a foreign corporation in each
jurisdiction where the Company has certified to such counsel that it
owns, leases or licenses properties, maintains employees or conducts
business, except for those failures to be so qualified or in good
standing which will not in the aggregate have a material adverse effect
on the Company and its subsidiaries taken as a whole; and (C) has all
requisite power and authority to own, lease, license and operate its
properties and conduct its business as now being conducted and as
described in the Offering Circular. All of the issued and outstanding
capital stock of each subsidiary of the Company has been duly and
validly issued and is fully paid and nonassessable and was not issued in
violation of any statutory preemptive rights or, to such counsel's
knowledge, contractual preemptive rights and is owned directly or
indirectly by the Company, free and clear of any lien, encumbrance,
security interest (other than the security interest in such capital
stock held by BOCP II, BOCP V and FBLIC pursuant to the Security
Agreement-Pledge of Common Stock dated as of March 31, 1995), or, to
such counsel's knowledge, any claim, restriction on transfer,
shareholders' agreement, voting trust agreement or other defect of title
whatsoever.
(ii) The authorized capital stock of the Company is as set
forth in the Offering Circular. All of the outstanding shares of Common
Stock are duly and validly authorized and issued, are fully paid and
nonassessable and were not issued in violation of or subject to any
statutory preemptive rights or, to such counsel's knowledge, contractual
preemptive rights. The shares of Common Stock issuable upon conversion
of the Notes have been duly authorized by the Company and, when issued
and delivered upon such conversion in accordance with the terms and
provisions of the Notes and the Indenture (assuming payment for and
delivery of the Notes in accordance with the Purchase Agreement), will
be validly issued, fully paid and nonassessable and will not have been
issued in violation of or subject to any statutory preemptive rights or,
to such counsel's knowledge, contractual preemptive rights. The shares
of Common Stock issuable on conversion of the Notes at the initial
conversion price set forth therein and in the Indenture have been
reserved for issuance and no further approval or authority of the
stockholders or the Board of
-19-
Directors of the Company will be required for such issuance of
Common Stock.
(iii) To such counsel's knowledge, there is no legal or
governmental suit or proceeding or investigation before any court or
before or by any public, regulatory or governmental agency or body
pending or threatened against the Company or any of its subsidiaries or
their business or properties, which is of a character required to be
disclosed in the Offering Circular that has not been properly disclosed
therein.
(iv) The Company has all requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement, the Indenture, the Notes and the Registration Rights
Agreement, and to consummate the transactions contemplated hereby and
thereby, including (without limitation) (A) the issuance, sale and
delivery of the Notes hereunder and (B) the filing of the Registration
Statement and Consummation of the Exchange Offer under and as defined in
the Registration Rights Agreement.
(v) This Agreement and each of the other Transaction
Agreements, and the transactions contemplated herein and therein, have
been duly and validly authorized by the Company. This Agreement and each
of the other Transaction Agreements have been duly and validly executed
and delivered by the Company.
(vi) The execution, delivery, and performance of this
Agreement and the other Transaction Agreements and the consummation of
the transactions contemplated hereby and thereby do not and will not (A)
conflict with or result in a breach of any of the terms and provisions
of, or constitute a default (or an event which with notice or lapse of
time, or both, would constitute a default) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any material agreement, instrument, franchise, license or permit
certified to such counsel by an officer of the Company to which the
Company or any of its subsidiaries is a party or by which any of such
corporations or their respective properties or assets may be bound, (B)
violate or conflict with any provision of the certificate of
incorporation or bylaws of the Company or any of its subsidiaries or any
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or any of
its subsidiaries or any of their respective properties or assets or, to
the knowledge of such counsel, any judgment, decree or order of any
court or any public, governmental or regulatory agency or body having
jurisdiction over the Company or any of its
-20-
subsidiaries or any of their respective properties or assets, or (C) to
such counsel's knowledge, require any consent, approval, authorization,
order, registration, filing, qualification, license or permit of or with
any court or any public, governmental or regulatory agency or body
having jurisdiction over the Company or any of its subsidiaries or any
of their respective properties or assets, except (in the case of clause
(C) above) for any such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits as have
been made or obtained in as may be required under state securities or
Blue Sky laws or the securities laws of any jurisdiction outside the
United States in connection with the purchase and distribution of the
Notes by the Initial Purchasers (as to which such counsel need express
no opinion).
(vii) The Notes have been duly and validly authorized and,
when delivered by the Company in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable and will not have
been issued in violation of or subject to any statutory preemptive
rights and, to such counsel's knowledge, contractual preemptive rights,
except as otherwise set forth in the Offering Circular and Article XV
(Subordination) of the Indenture, will rank PARI PASSU in right of
payment with all of the Company's other unsecured and unsubordinated
indebtedness for borrowed money.
(viii) The information in the Offering Circular under the
headings "Description of the Notes" and "Description of Capital Stock",
to the extent that it constitutes matters of law, summaries of legal
matters, documents or proceedings, or legal conclusions, has been
reviewed by such counsel and is a correct summary in all material
respects.
(ix) The information in the Offering Circular under the
heading "Certain Tax Considerations" to the extent that it constitutes
matters of law, summaries of legal matters, documents or proceedings, or
legal conclusions, has been reviewed by such counsel and is a correct
summary in all material respects.
-21-
(x) The information in the Offering Circular under the
heading "Transfer Restrictions", insofar as it purports to summarize
matters of United States federal law, is a correct summary in all
material respects.
(xi) Based, in part, upon the representations, warranties
and covenants of the Initial Purchasers contained herein and upon the
letters delivered by accredited investors in the form of Annex A to the
Offering Circular, it is not necessary in connection with (a) the offer,
sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by the Purchase Agreement and the Offering Circular or (b)
the initial resale of the Notes by the Initial Purchasers in the manner
contemplated in the Purchase Agreement and the Offering Circular to (i)
register the Notes under the Securities Act, it being understood that no
opinion need be expressed as to any subsequent resale of any Note, or
(ii) qualify the Indenture under the Trust Indenture Act of 1939, as
amended.
(xii) To such counsel's knowledge, other than as disclosed in
the Offering Circular, no holders of securities of the Company have
rights which have not been satisfied or waived to the registration of
shares of capital stock or other securities of the Company because of
the filing of the Shelf Registration Statement or the New Notes
Registration Statement (as such terms are defined in the Offering
Circular) by the Company or the respective offerings contemplated
thereby.
In addition, such counsel shall also state that such counsel
has participated in conferences with officers and representatives of the
Company, representatives of the independent public accountants for the
Company and the Initial Purchasers at which the contents of the Offering
Circular and related matters were discussed and, although such counsel
is not passing upon and does not assume any responsibility for and has
not verified the accuracy, completeness or fairness of the statements
contained in the Offering Circular, and has not made any independent
check or verification thereof, on the basis of the foregoing (relying as
to materiality to a large extent upon facts provided by officers and
other representatives of the Company), no facts have come to the
attention of such counsel that lead such counsel to believe that the
Offering Circular contained an untrue statement of a material fact or
omitted to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
-22-
misleading (it being understood that such counsel need express no belief
or opinion with respect to the financial statements and other financial
and statistical data included therein).
In rendering such opinion, such counsel may rely (x) as to matters involving
the application of laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (in form and substance reasonably satisfactory to Counsel
for the Initial Purchasers) of other counsel reasonably acceptable to Counsel
for the Initial Purchasers, familiar with the applicable laws; (y) as to
matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and certificates or other written
statements of officers of departments of various jurisdictions having custody
of documents respecting the corporate existence or good standing of the
Company and its subsidiaries, provided that copies of any such statements or
certificates shall be delivered to Counsel for the Initial Purchasers. The
opinion of such counsel for the Company shall state that the opinion of any
such other counsel is in form satisfactory to such counsel and, in their
opinion, you and they are justified in relying thereon.
(b) All proceedings taken in connection with the sale of the Notes
as herein contemplated shall be reasonably satisfactory in form and substance
to you and to Counsel for the Initial Purchasers, and the Initial Purchasers
shall have received from said Counsel for the Initial Purchasers a favorable
opinion, dated as of the Closing Date with respect to the issuance and sale
of the Notes, the Offering Circular and such other related matters as you may
reasonably require, and the Company shall have furnished to Counsel for the
Initial Purchasers such documents as they request for the purpose of enabling
them to pass upon such matters.
(c) At the Closing Date you shall have received the opinion of
Xxxxxx X. Xxxxxxx, General Counsel to the Company, dated the Closing date
addressed to the Initial Purchasers and in form and substance satisfactory to
Counsel for the Initial Purchasers, to the effect that each of the Company
and its subsidiaries has obtained all Licenses as are necessary or required
for the ownership, leasing and operation of its properties and the conduct of
its business as now being conducted.
-23-
(d) At the Closing Date you shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company, dated
the Closing Date to the effect that (i) as of the date hereof and as of the
Closing Date, the representations and warranties of the Company set forth in
Section 1 hereof are accurate, (ii) as of the Closing Date, the obligations
of the Company to be performed hereunder on or prior thereto have been duly
performed and (iii) subsequent to the respective dates as of which
information is given in the Offering Circular, the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding, and there has not been any
material adverse change, or any development involving a material adverse
change, in the business, prospects, properties, operations, condition
(financial or other), or results of operations of the Company and its
subsidiaries taken as a whole, except in each case as disclosed in the
Offering Circular.
(e) At the time this Agreement is executed, you shall have
received a letter from E&Y, independent public accountants for the Company
and RNFC, dated as of the date of this Agreement (the "Original Letter")
addressed to the Initial Purchasers and in form and substance satisfactory to
you, to the effect that: (i) they are independent auditors with respect to
the Company and RNFC under Rule 101 of the American Independent Certified
Public Accountants Code of Professional Conduct (the "AICPA CPR"), and its
interpretations and rulings; (ii) on the basis of procedures, not
constituting an examination in accordance with generally accepted auditing
standards, set forth in detail in the Original Letter, a reading of the
minutes of meetings and consents of the shareholders and boards of directors
of the Company and the committees of such board subsequent to June 30, 1996,
inquiries of officers and other employees of the Company who have
responsibility for financial and accounting matters of the Company with
respect to transactions and events subsequent to June 30, 1996 and other
procedures and inquiries as may be specified in the Original Letter to a date
not more than five days prior to the date of the Original Letter, nothing has
come to their attention that would cause them to believe that: (A) the
unaudited pro forma financial statements included in the Prospectus do not
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements; (B) there have been any changes in the
capital
-24-
stock, warehouse financing facilities, term line, notes payable, subordinated
notes payable to affiliates or other debt or indebtedness of the Company or
decreases in total assets, excess servicing receivable or stockholders'
equity of the Company, in each case as compared with the amounts shown in the
most recent balance sheet presented in the Offering Circular, except for
changes or decreases which the Offering Circular disclose have occurred or
may occur or which are set forth in the Original Letter; and (C) for the
periods from the date of the latest financial statements included in the
Prospectus to a date not more than five days prior to the date of the
Original Letter, there were any decreases, as compared with the corresponding
period in the prior fiscal year, in gain on sale of loans, net, total
revenues, or total or per share net income, except for decreases which the
Offering Circular disclose have occurred or may occur or which are set forth
in the Original Letter; and (iii) stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings, and
other financial information pertaining to the Company and its subsidiaries
set forth in the Offering Circular, which have been specified by you prior to
the date of this Agreement, to the extent that such amounts, numbers,
percentages, and information may be derived from the general accounting,
financial or other records of the Company and its subsidiaries or from
schedules furnished by the Company, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate
procedures specified by you set forth in such letter, and found them to be in
agreement. At the Closing Date and, as to the Optional Notes, the Additional
Closing Date, E&Y shall have furnished to you a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with
the procedures set forth in the Original Letter, that nothing has come to
their attention during the period from the date of the Original Letter
referred to in the prior sentence to a date (specified in the letter) not
more than five days prior to the Closing Date or the Additional Closing Date,
as the case may be, which would require any change in the Original Letter if
it were required to be dated and delivered at the Closing Date or the
Additional Closing Date, as the case may be.
(f) At the time this Agreement is executed, you shall have
received a letter from S&H, independent public accountants for FSMC, dated as
of the date of this Agreement (the "Original S&H Letter") addressed to the
Initial Purchasers and in form and substance satisfactory to you, to the
effect that: (i) they are independent certified public accountants with
respect to under Rule 101 of the AICPA CPR, and its interpretations and
rulings;
-25-
(ii) stating that, in their opinion, the financial statements of FSMC,
included in the Offering Circular and covered by their opinion therein,
comply as to form in all material respects with the applicable accounting
requirements of the Act and the applicable published rules and regulations of
the Commission thereunder; (iii) on the basis of procedures, not constituting
an examination in accordance with generally accepted auditing standards, set
forth in detail in the Original S&H Letter, including the procedures
specified by the American Institute of Certified Public Accounts as described
in SAS 71, INTERIM FINANCIAL INFORMATION, and other procedures and inquiries
as may be specified in the Original S&H Letter, nothing has come to their
attention that would cause them to believe that the unaudited financial
statements included in the Offering Circular do not comply as to form in all
material respects with the applicable accounting requirements of the Act and
the Rules or are not fairly presented in conformity with GAAP applied on a
basis substantially consistent with that of the audited financial statements
included in the Offering Circular; and (iv) stating that they have compared
specific dollar amounts, numbers of shares, percentages of revenues and
earnings, and other financial information pertaining to FSMC and its
subsidiary set forth in the Offering Circular, which have been specified by
you prior to the date of this Agreement, to the extent that such amounts,
numbers, percentages, and information may be derived from the general
accounting, financial or other records of FSMC and its subsidiary or from
schedules furnished by FSMC, and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate
procedures specified by you set forth in such letter, and found them to be in
agreement. At the Closing Date and, as to the Optional Notes, the Additional
Closing Date, S&H shall have furnished to you a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with
the procedures set forth in the Original S&H Letter, that nothing has come to
their attention during the period from the date of the Original S&H Letter
referred to in the prior sentence to a date (specified in the letter) not
more than five days prior to the Closing Date or the Additional Closing Date,
as the case may be, which would require any change in the Original Letter if
it were required to be dated and delivered at the Closing Date or the Option
Closing Date, as the case may be.
(g) At the time this Agreement is executed, you shall have
received a letter from McGladrey & Xxxxxx ("M&P"), independent public
accountants for FPF, dated as of the date of this Agreement (the "Original
M&P Letter") addressed to the
-26-
Initial Purchasers and in form and substance satisfactory to you, to the
effect that: (i) they are independent certified public accountants with
respect to FPF, within the meaning of the Act and the Regulations; and (ii)
stating that they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, and other financial information
pertaining to FPF set forth in the Offering Circular, which have been
specified by you prior to the date of this Agreement, to the extent that such
amounts, numbers, percentages, and information may be derived from the
general accounting, financial or other records of FPF or from schedules
furnished by FPF, and excluding any questions requiring an interpretation by
legal counsel, with the results obtained from the application of specified
readings, inquiries, and other appropriate procedures specified by you set
forth in such letter, and found them to be in agreement.
(h) Prior to the Closing Date the Company shall have furnished
to the Initial Purchasers such further information, certificates and
documents as the Initial Purchasers may reasonably request.
(i) You shall have received from each person who is a director
or executive officer of the Company or the shareholders of the Company listed
on Schedule II hereto an agreement to the effect that such person will not,
directly or indirectly, without your prior written consent, offer, sell,
offer or agree to sell, grant any option to purchase or otherwise dispose (or
announce any offer, sale, grant of an option to purchase or other
disposition) of any shares of capital stock of the Company (or any securities
convertible into, exercisable for or exchangeable or exercisable for shares
of capital stock of the Company) for a period of 90 days (and one year with
respect 1.2 million shares of Common Stock owned by Farm Bureau Life
Insurance Company) after the date of the Agreement, except for the exercise
of outstanding options or warrants.
(j) At the Closing Date, the Notes shall have been approved for
quotation in the PORTAL market.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to
Counsel for the Initial Purchasers pursuant to this Section 6 shall not be in
all material respects reasonably satisfactory in form and substance to Bear
Xxxxxxx and to Counsel for the Initial Purchasers, all obligations of the
Initial Purchasers hereunder may be canceled by you at, or at any time prior
to, the Closing Date and the
-27-
obligations of the Initial Purchasers to purchase the Optional Notes may be
canceled by you at, or at any time prior to, the Additional Closing Date.
Notice of such cancellation shall be given to the Company in writing, or by
telephone, telex or telegraph, confirmed in writing.
7. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all losses, liabilities, claims, damages and expenses
whatsoever as incurred (including but not limited to attorneys' fees and any
and all expenses whatsoever incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or any claim whatsoever, and
any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims,
damages or expenses (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Offering Circular or any related preliminary Offering
Circular or any amendment or supplement thereto or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; PROVIDED, HOWEVER, that the Company will not be liable in any
such case to the extent but only to the extent that any such loss, liability,
claim, damage or expense arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Initial Purchaser through Bear Xxxxxxx
expressly for use therein; PROVIDED, FURTHER, that such indemnity with
respect to any preliminary Offering Circular shall not inure to the benefit
of any Initial Purchaser (or any person controlling such Initial Purchaser)
from whom the person asserting any such loss, claim, damage, liability or
action purchased the Notes which are the subject thereof to the extent that
any such loss, liability, claim, damage or expense (i) results from the fact
that such Initial Purchaser failed to send or give a copy of the Offering
Circular (as amended or supplemented) to such person at or prior to the
confirmation of the sale of such Notes to such person and (ii) arises out of
or is based upon an untrue statement or omission of a material fact contained
in such preliminary Offering Circular that was corrected in the Offering
Circular (or any amendment or
-28-
supplement thereto), unless such failure to deliver the Offering Circular (as
amended or supplemented) was the result of noncompliance by the Company with
Section 4(a) or 4(b) hereof. This indemnity agreement will be in addition to
any liability which the Company may otherwise have including under this
Agreement.
(b) Each Initial Purchaser severally, and not jointly, agrees to
indemnify and hold harmless the Company, each of the directors of the
Company, each of the officers of the Company, and each other person, if any,
who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any losses, liabilities, claims,
damages and expenses whatsoever as incurred (including but not limited to
attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever, and any and all amounts paid in
settlement of any claim or litigation), jointly or severally, to which they
or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Circular, or any related preliminary Offering Circular, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
made therein in reliance upon and in conformity with written information
furnished to the Company by or on behalf of any Initial Purchaser through
Bear Xxxxxxx expressly for use therein; PROVIDED, HOWEVER, that in no case
shall any Initial Purchaser be liable or responsible for any amount in excess
of the discount or commission applicable to the Notes purchased by such
Initial Purchaser hereunder. This indemnity will be in addition to any
liability which any Initial Purchaser may otherwise have including under this
Agreement. The Company acknowledges that the statements set forth in the
last paragraph of the cover page, in the last paragraph of page iii and in
the second and seventh paragraphs under the caption "Plan of Distribution" in
the Offering Circular constitute the only information furnished in writing by
or on behalf of any Initial Purchaser through Bear Xxxxxxx expressly for use
in the Offering Circular, any
-29-
Preliminary Offering Circular or in any amendment thereof or supplement
thereto, as the case may be.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but
the failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 7). In case any such action
is brought against any indemnified party, and it notifies an indemnifying
party of the commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with
counsel satisfactory to such indemnified party. Notwithstanding the
foregoing, the indemnified party or parties shall have the right to employ
its or their own counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of such indemnified party or parties unless
(i) the employment of such counsel shall have been authorized in writing by
one of the indemnifying parties in connection with the defense of such
action, (ii) the indemnifying parties shall not have employed counsel to have
charge of the defense of such action within a reasonable time after notice of
commencement of the action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all of
the indemnifying parties (in which case the indemnifying parties shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying parties. Anything in this subsection to
the contrary notwithstanding, an indemnifying party shall not be liable for
any settlement of any claim or action effected without its written consent;
PROVIDED, HOWEVER, that such consent was not unreasonably withheld.
8. CONTRIBUTION. In order to provide for contribution in
circumstances in which the indemnification provided for in Section 7 hereof
is for any reason held to be unavailable from any indemnifying party or is
insufficient to hold harmless a party indemnified thereunder, the Company and
the Initial Purchasers shall contribute to the aggregate losses, claims,
damages, liabilities and expenses of the nature contemplated by such
indemnification provision (including any investigation,
-30-
legal and other expenses incurred in connection with, and any amount paid in
settlement of, any action, suit or proceeding or any claims asserted, but
after deducting in the case of losses, claims, damages, liabilities and
expenses suffered by the Company any contribution received by the Company
from persons, other than the Initial Purchaser, who may also be liable for
contribution, including persons who control the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, and officers and
directors of the Company) as incurred to which the Company and one or more of
the Initial Purchasers may be subject, in such proportions as is appropriate
to reflect the relative benefits received by the Company and the Initial
Purchasers from the offering of the Notes or, if such allocation is not
permitted by applicable law or indemnification is not available as a result
of the indemnifying party not having received notice as provided in Section 7
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company and the
Initial Purchasers in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative benefits received
by the Company and the Initial Purchasers shall be deemed to be in the same
proportion as (x) the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) received by the Company and (y)
the discounts and commissions received by the Initial Purchasers
respectively. The relative fault of the Company and of the Initial
Purchasers shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company or the Initial Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 8
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this Section 8, (i) in no case
shall any Initial Purchaser be liable or responsible for any amount in excess
of the discount or commission applicable to the Notes purchased by such
Initial Purchaser hereunder, (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation and (iii) no Initial Purchaser shall be required
to contribute any amount in excess of the amount by which the total price at
which the Notes
-31-
purchased by it and sold in the Offering were offered to subsequent
purchasers exceeds the amount of any damages that such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. For purposes of this Section 8,
each person, if any, who controls an Initial Purchaser within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act shall have the
same rights to contribution as such Initial Purchaser, and each person, if
any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, each officer and each director of the
Company shall have the same rights to contribution as the Company, subject in
each case to clauses (i) and (ii) of this Section 8. Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties, notify each party
or parties from whom contribution may be sought, but the omission to so
notify such party or parties shall not relieve the party or parties from whom
contribution may be sought from any obligation it or they may have under this
Section 8 or otherwise. No party shall be liable for contribution with
respect to any action or claim settled without its consent; PROVIDED,
HOWEVER, that such consent was not unreasonably withheld.
9. DEFAULT BY AN INITIAL PURCHASER. If one or more of the Initial
Purchasers shall fail at the Closing Date to purchase the Notes which it is
obligated to purchase under this Agreement (the "Defaulted Notes"), the
non-defaulting Initial Purchaser(s) shall have the right, within 24 hours
thereafter, to make arrangements for it or any other Initial Purchaser(s) to
purchase all, but not less than all, of the Defaulted Notes in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
non-defaulting Initial Purchaser(s) shall not have completed such
arrangements within such 24-hour period, then this Agreement shall terminate
without liability on the part of the non-defaulting Initial Purchaser(s).
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchasers from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the non-defaulting Initial Purchasers or the
Company shall have the right to postpone the Closing Date for a period not
exceeding seven days in order to effect any required changes in the Offering
Memorandum or in any other documents or arrangements.
-32-
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All
representations and warranties, covenants and agreements of the Initial
Purchasers and the Company contained in this Agreement, including the
agreements contained in Section 5, the indemnity agreements contained in
Section 7 and the contribution agreements contained in Section 8, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Initial Purchasers or any agent, representative
or controlling person thereof or by or on behalf of the Company, any of its
officers and directors or any controlling person thereof, and shall survive
delivery of and payment for the Notes to and by the Initial Purchasers. The
representations contained in Section 1 and the agreements contained in
Sections 5, 7, 8 and 11(d) hereof shall survive the termination of this
Agreement, including termination pursuant to Section 9 or 11 hereof.
11. TERMINATION.
(a) Bear Xxxxxxx shall have the right to terminate this
Agreement at any time prior to the Closing Date or the obligations of the
Initial Purchasers to purchase the Optional Notes at any time prior to the
Additional Closing Date, as the case may be, if (A) any domestic or
international event or act or occurrence has materially disrupted, or in Bear
Xxxxxxx' opinion will in the immediate future materially disrupt, the United
States or international securities markets; or (B) if trading on the New York
Stock Exchange or Nasdaq National Market shall have been suspended, or
materially limited; or (C) if a banking moratorium has been declared by any
United States federal or New York State authority or if any new restriction
materially adversely affecting the distribution of the Notes or the Optional
Notes, as the case may be, shall have become effective; or (D) if any
downgrading in the rating of the Company's debt securities by any "nationally
recognized statistical rating organization" (as defined for purposes of Rule
436(g) under the Act); (E)(i) if the United States becomes engaged in
hostilities or there is an escalation of hostilities involving the United
States or there is a declaration of a national emergency or war by the United
States or (ii) if there shall have been such change in political, financial
or economic conditions if the effect of any such event in (i) or (ii) in Bear
Xxxxxxx' judgment makes it impracticable or inadvisable to proceed with the
offering, sale and delivery of the Notes or the Optional Notes, as the case
may be, on the terms contemplated by the Offering Circular; or (F) if trading
in the Common Stock shall have been suspended by the Commission or the Nasdaq
National Market.
-33-
(b) Any notice of termination pursuant to this Section 11
shall be by telephone, telex, or telegraph, confirmed in writing by letter.
(c) If this Agreement shall be terminated pursuant to any
of the provisions hereof (otherwise than pursuant to Section 9 or 11(a)
hereof), or if the sale of the Notes provided for herein is not consummated
because any condition to the obligations of the Initial Purchasers set forth
herein is not satisfied or because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or comply with any
provision hereof, the Company will, subject to demand by you, reimburse the
Initial Purchasers for all out-of-pocket expenses (including the fees and
expenses of Counsel for the Initial Purchasers), incurred by the Initial
Purchasers in connection herewith.
12. NOTICE. All communications hereunder, except as may be
otherwise specifically provided herein, shall be in writing and, if sent to
any Initial Purchaser, shall be mailed, delivered, or telexed or telegraphed
and confirmed in writing, to it c/o Bear, Xxxxxxx & Co. Inc., 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxxxxxx; if sent to
the Company, shall be mailed, delivered, or telegraphed and confirmed in
writing to the Company, RAC Financial Group, Inc., 0000 Xxxx Xxxxxxxxxxx
Xxxx, Xxxxxx, Xxxxx 00000, Attention: General Counsel.
13. PARTIES. This Agreement shall inure solely to the benefit of,
and shall be binding upon, the Initial Purchasers and the Company and the
controlling persons, directors, officers, employees and agents referred to in
Section 7 and 8, and their respective successors and assigns, and no other
person shall have or be construed to have any legal or equitable right,
remedy or claim under or in respect of or by virtue of this Agreement or any
provision herein contained. The term "successors and assigns" shall not
include a purchaser, in its capacity as such, of Notes from any of the
Initial Purchasers.
14. GOVERNING LAW.
(a) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
(b) THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
FEDERAL COURTS OF THE UNITED STATES OF AMERICA SITTING IN THE CITY OF NEW
YORK IN ANY ACTION PROCEEDING ARISING OUT OF OR
-34-
RELATING TO THIS AGREEMENT AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD IN ANY SUCH NEW YORK STATE OR
FEDERAL COURT. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING AND APPOINTS CT CORPORATION TRUST SYSTEM WITH AN OFFICE AT 0000
XXXXXXXX, XXX XXXX, XXX XXXX 00000 AS ITS AUTHORIZED AGENT UPON WHOM PROCESS
MAY BE SERVED IN ANY ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT WHICH
MAY BE INSTITUTED IN ANY SUCH COURT. THE COMPANY REPRESENTS AND WARRANTS
THAT SUCH AGENT HAS AGREED TO ACT AS ITS AGENT FOR SERVICE OF PROCESS AND
AGREES TO TAKE ANY AND ALL ACTIONS INCLUDING THE FILING OF ANY AND ALL
DOCUMENTS OR INSTRUMENTS (INCLUDING THE APPOINTMENT OF ANY SUCCESSOR AGENT,
AS NECESSARY) THAT MAY BE NECESSARY TO CONTINUE SUCH APPOINTMENT IN EFFECT.
NOTHING HEREIN SHALL BE CONSTRUED TO PREVENT OR IMPAIR THE RIGHT OF ANY
INITIAL PURCHASER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER JURISDICTION.
-35-
If the foregoing correctly sets forth the understanding between you and the
Company, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among us.
Very truly yours,
RAC FINANCIAL GROUP, INC.
By ________________________
Name:
Title:
Accepted as of the date first above written
BEAR, XXXXXXX & CO. INC.
By ____________________________
Name:
Title:
On behalf of itself and the other
Initial Purchasers named in Schedule I hereto.
-36-
SCHEDULE I
Number of Firm
Name of Initial Purchaser Notes to be Purchased
------------------------- ---------------------
Bear, Xxxxxxx & Co. Inc. .............................. $45,000,000
Prudential Securities Incorporated..................... 45,000,000
Xxxxx Xxxxxxxx & Xxxxx................................. 10,000,000
Total.................... $100,000,000
-37-
SCHEDULE II
LOCK-UP AGREEMENTS
Xxxxxx X. Xxxxxxx
Xxxxxxx Generation Trust
RJM Properties, Ltd.
Xxxxxxx Irrevocable Trust
SFA Mortgage Company
Xxxxxx X. Xxxxxxxx
Xxxxxxxx Partnership
Lenox Investment Corporation
Xxxx X. Xxxxx
G.B. Xxxxx Residuary Trust
Xxxx X'Xxxxx
Xxxx Xxxxxxxxxx
Xxxxxx X. Xxxxxx
Xxxx Xxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxx Xxxxx Children's Trust
Banc One Capital Holdings Corporation
Farm Bureau Life Insurance Company
-38-
