INVESTMENT AGREEMENT
Exhibit
10.1
EXECUTION COPY
This INVESTMENT AGREEMENT (this “Agreement”) dated as of May 26, 2008, is by and between
Guaranty Financial Group Inc., a Delaware corporation (the “Company”) and TRT Financial Holdings,
LLC, a Delaware limited liability company (the “Investor”).
W I T N E S S E T H:
WHEREAS, the Company intends to sell to the Investor, and the Investor intends to purchase
from the Company, (i) 7,423,333 shares of its common stock, par value $1.00 per share (the “Common
Stock”), and (ii) a number of shares equal to the Preferred Purchase Number (as defined below) of a
series of convertible preferred stock to be designated with the terms and attributes set forth in
Exhibit A hereto (the “Convertible Preferred Stock”), all on the terms and subject to the
conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
the parties hereto hereby agree as follows:
Section 1. Certain Other Definitions. The following terms used herein shall have the
meanings set forth below:
“Affiliate” shall have the meaning set forth in Rule 12b-2 under the Exchange Act.
“Agreement” shall have the meaning set forth in the preamble hereof.
"Benefit Plan” means all employee welfare benefit plans within the meaning of Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA”), all employee pension
benefit plans within the meaning of Section 3(2) of ERISA, including, but not limited to, plans
that provide retirement income or result in a deferral of income by employees for periods extending
to termination of employment or beyond, and plans that provide medical, surgical, or hospital care
benefits or benefits in the event of sickness, accident, disability, death or unemployment, and all
other employee benefit agreements or arrangements, including, but not limited to, all bonus,
incentive, deferred compensation, vacation, stock purchase, stock option, stock award, severance,
employment, change of control, golden-parachute, consulting, dependent care, cafeteria, employee
assistance, scholarship, or fringe benefit or similar plans, programs, agreements or policies, in
all cases whether written, unwritten or otherwise, funded or unfunded, and whether or not ERISA is
applicable to such plan, program, agreement or policy.
“Board of Directors” means the Board of Directors of the Company.
“Board Representative” shall have the meaning set forth in Section 9(c) hereof.
“Business Day” shall mean any day that is not a Saturday, a Sunday or a day on which banks are
required or permitted to be closed in the State of New York.
“Code” means Internal Revenue Code of 1986, as amended as of the date hereof.
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“Commission” shall mean the United States Securities and Exchange Commission, or any successor
agency thereto.
“Common Purchase Price” shall have the meaning set forth in Section 2(a)(i) hereof.
“Common Shares” shall have the meaning set forth in Section 2(a)(i) hereof.
“Common Stock” shall have the meaning set forth in the recitals hereof.
“Company” shall have the meaning set forth in the preamble hereof.
“Company SEC Documents” shall have the meaning set forth in Section 3(e) hereof.
“Company Significant Agreement” means any contract or agreement that is a “material contract”
within the meaning of Item 601(b)(10) of Regulation S-K to be performed in whole or in part after
the date of this Agreement.
“Conversion Shares” shall mean the shares of Common Stock issuable or to be issued upon
conversion of the Preferred Shares.
“Convertible Preferred Stock” shall have the meaning set forth in the recitals hereof.
“Determination Date” shall mean the date that is the 120th day following the First Closing, or
if such day is not a Business Day, the first Business Day thereafter.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated by the Commission thereunder.
“First Closing” shall have the meaning set forth in Section 2(b) hereof.
“First Closing Date” shall have the meaning set forth in Section 2(b) hereof.
“GAAP” shall have the meaning set forth in Section 3(f) hereof.
“Governmental Entity” means any court, administrative agency or commission or other
governmental authority or instrumentality, whether federal, state, local or foreign, and any
applicable industry self-regulatory organization, including, without limitation, the OTS.
“Indemnified Party” shall have the meaning set forth in Section 9(e)(ii) hereof.
“Indemnifying Party” shall have the meaning set forth in Section 9(e)(ii) hereof.
“Investor” shall have the meaning set forth in the preamble hereof.
“Issuer Sale Transaction” shall have the meaning set forth in Section 9(a) hereof.
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“Material Adverse Effect” or “Material Adverse Change” means any circumstance, event, change,
development or effect that, individually or in the aggregate, (1) is material and adverse to the
business, assets, results of operations or financial condition of the Company and its subsidiaries
taken as a whole or (2) would materially impair the ability of the Company to perform its
obligations under this Agreement or to consummate the First Closing or the Second Closing;
provided, however, that in determining whether a Material Adverse Effect or Material Adverse Change
has occurred, there shall be excluded any effect to the extent resulting from the following: (A)
changes, after the date hereof, in generally accepted accounting principles or regulatory
accounting principles generally applicable to banks, savings associations or their holding
companies, (B) changes, after the date hereof, in laws, rules and regulations of general
applicability or interpretations thereof by Governmental Entities, (C) actions or omissions of the
Company expressly required by the terms of this Agreement or taken with the prior written consent
of each Investor, (D) changes in general economic, monetary or financial conditions, including
changes in prevailing interest rates, credit markets, secondary mortgage market conditions or
housing price appreciation/depreciation trends, (E) changes in the market price or trading volumes
of the Common Stock or the Company’s other securities (but not the underlying causes of such
changes), (F) the failure of the Company to meet any internal or public projections, forecasts,
estimates or guidance (including guidance as to “earnings drivers”) for any period ending on or
after December 31, 2007 (but not the underlying causes of such failure), (G) changes in global or
national political conditions, including the outbreak or escalation of war or acts of terrorism,
and (H) the public disclosure of this Agreement or the transactions contemplated hereby; except,
with respect to clauses (A), (B), (D) and (G), to the extent that the effects of such changes have
a disproportionate effect on the Company and its subsidiaries, taken as a whole, relative to other
banks, savings associations and their holding companies generally.
“OTS” means the United States Office of Thrift Supervision.
“OTS Approval” means a determination by OTS that the Investor has rebutted the presumption of
control under 12 CFR § 574.
“Per Share Price” means, with respect to any issuance of any class or series of convertible
preferred stock, (A) (1) the aggregate purchase price (net of any brokerage, transaction,
acquisition, advisory, due diligence, origination or similar fees, but excluding expense
reimbursements and underwriting discounts, fees or commissions) paid for all such shares of
convertible preferred stock in such issuance, divided by (2) the number of shares of Common
Stock into which all such shares of convertible preferred stock would be converted if they
were so converted immediately following such issuance, multiplied by (B) the number of
shares of Common Stock into which one such share of convertible preferred stock would be
converted if it were so converted immediately following such issuance.
“Person” shall mean an individual, corporation, partnership, association, joint stock company,
limited liability company, joint venture, trust, Governmental Entity, unincorporated organization
or other legal entity.
“Preferred Purchase Number” means the number of shares of Convertible Preferred Stock that, if
such shares were issued to the Investor on the Determination Date, immediately converted into
Common Stock, and then added to the number of shares of
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Common Stock already beneficially owned by the Investor on the Determination Date (which
number of shares a senior executive officer of the Investor shall, on behalf of the Investor,
certify to the Company in writing on the Business Day following the Determination Date), would
result in the Investor owning 19.9% of the issued and outstanding shares of Common Stock on the
Determination Date immediately following such issuance.
“Preferred Purchase Price” shall have the meaning set forth in Section 2(a)(ii)
hereof.
“Preferred Shares” shall have the meaning set forth in Section 2(a)(ii) hereof.
“Registrable Securities” means all shares of Common Stock (whether such shares are now owned
or acquired after the date hereof but on or before the date of the Second Closing) owned by the
Investor and all shares of Common Stock issued or issuable directly or indirectly with respect to
the Common Stock by way of conversion or exchange thereof or share dividend or share split or in
connection with a combination of shares, recapitalization, reclassification, merger, amalgamation,
arrangement, consolidation, or other reorganization. As to any securities constituting Registrable
Securities, such securities will cease to be Registrable Securities when (i) a registration
statement with respect to the sale by the holder thereof is declared effective under the Securities
Act and such securities have been disposed of in accordance with such registration statement, (ii)
they have been acquired by the Company, (iii) they have been sold to the public pursuant to Rule
144 or Rule 145 or other exemption from registration under the Securities Act, or (iv) they are
able to be sold in their entirety by the Investor or transferee holding such securities pursuant to
Rule 144 under the Securities Act within any single three-month period.
“Registration Notice” shall have the meaning set forth in Section 10(a) hereof.
“Regulatory Approvals” means the Shareholder Approval, the OTS Approval, the filing of a
Biographical Form and Certificate of License Qualification with the Texas Department of Insurance,
and the filing of a certificate of rights, designations and preferences by the Company relating to
the Convertible Preferred Stock.
“Required Registration” shall have the meaning set forth in Section 10(a) hereof.
“Rights Agreement” shall have the meaning set forth in Section 6(f) hereof.
“Rights Offering” means the distribution by the Company to holders of its Common Stock of
record rights to subscribe for and purchase shares of Common Stock, all as described in that
certain registration statement on Form S-1, file No. 333-150558, as the same may be amended or
supplemented from time-to-time.
“Rights Offering Prospectus” means the final prospectus used with regard to the Rights
Offering.
“Second Closing” shall have the meaning set forth in Section 2(c) hereof.
“Second Closing Date” shall have the meaning set forth in Section 2(c) hereof.
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“Securities” shall have the meaning set forth in Section 2(a)(ii) hereof.
“Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated by the Commission thereunder.
“Shareholder Approval” means approval by stockholders of the Company as required by Rule
312.03 of the New York Stock Exchange Listed Company Manual.
“Spin-Off” means the transaction by which shares of Common Stock were distributed to
stockholders of Temple-Inland, which transaction was completed on December 28, 2007.
“Standstill” shall have the meaning set forth in Section 9(a) hereof.
“Subject Securities” shall mean any security issued by the Company or any of its subsidiaries
that would, initially or upon exercise, qualify as “Tier 1 capital” or “Tier 2 capital” under the
regulations of the OTS but excludes shares of Common Stock that are issued or are issuable pursuant
to a stock option plan, restricted stock plan, agreements or other incentive stock arrangements
approved by the stockholders and a majority of the Board of Directors or an authorized committee
thereof; or shares of Common Stock issued in a split or subdivision of the outstanding shares of
Common Stock, a dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, exchangeable for, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (the “Common Stock Equivalents”)
without payment of any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof).
“Taxes” means all taxes, charges, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including any income, excise, property,
sales, transfer, franchise, payroll, withholding, social security or other taxes, together with any
interest or penalties attributable thereto, and any payments made or owing to any other Person
measured by such taxes, charges, levies, penalties or other assessment, whether pursuant to a tax
indemnity agreement, tax sharing payment or otherwise (other than pursuant to commercial agreements
or Benefit Plans).
“Tax Return” shall mean any return, report, information return or other document (including
any related or supporting information) required to be filed with any taxing authority with respect
to Taxes, any claims for refunds of Taxes and any amendments or supplements to any of the
foregoing.
“Temple-Inland” means Temple-Inland Inc., the former parent of the Company.
“Third-Party Tender Offer” shall have the meaning set forth in Section 9(a) hereof.
“Voting Securities” means securities of the Company with the power to vote with respect to the
election of directors generally, including, without limitation, the Common Stock.
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Section 2. Purchase; Closings.
(a) On the terms and subject to the conditions set forth herein:
(i) the Investor hereby agrees, at the First Closing, to purchase from the Company, and
the Company hereby agrees to sell to the Investor, for an aggregate purchase price of
$38,378,630.68 (the “Common Purchase Price”), 7,423,333 shares of Common Stock (the “Common
Shares”), which Common Shares are equal in number to 19.9% of the number shares of Common
Stock of the Company issued and outstanding as of the date hereof; and
(ii) the Investor hereby agrees, at the Second Closing, to purchase from the Company,
and the Company hereby agrees to sell to the Investor, for a purchase price per share of the
lower of (A) $51.70 per share (assuming a 10:1 initial conversion ratio), or (B) the Per
Share Price at which any class or series of convertible preferred stock is issued by the
Company to any third party on or prior to the Second Closing Date, in each case subject to
adjustment for any stock split, reverse stock split, stock dividend or other combination or
division affecting shares of Common Stock (the “Preferred Purchase Price”), a number of
shares of Convertible Preferred Stock equal to the Preferred Purchase Number (the “Preferred
Shares” and, together with the Common Shares, the “Securities”).
(b) First Closing. Subject to the satisfaction or waiver of the conditions set forth
in Section 7 hereof, the closing of the purchase of the Common Shares hereunder (the “First
Closing”) shall occur at the Dallas, Texas offices of Fulbright & Xxxxxxxx L.L.P. at 10:30 a.m.,
Dallas, Texas time, on June 2, 2008, or such earlier time as the conditions to Closing set forth in
Section 7(a) hereof (other than delivery of the items to be delivered on or at the Closing
as set forth in Section 5(a) hereof) shall be satisfied (the “First Closing Date”).
(c) Second Closing. The closing of the purchase of the Preferred Shares hereunder
(the “Second Closing”) shall occur at the Dallas, Texas offices of Fulbright & Xxxxxxxx L.L.P. at
10:30 a.m., Dallas, Texas time, on the date that is three Business Days following the Determination
Date (the “Second Closing Date”). The obligation of the Company to issue and sell, and the
Investor to purchase and pay for, the Preferred Shares shall be irrevocable and absolute, subject
only to the conditions that (i) the First Closing shall have occurred; (ii) in the case of the
Company, that the Investor shall have tendered the Preferred Purchase Price; and (iii) in the case
of the Investor, that the Company shall have tendered for delivery the Preferred Shares on the
terms provided herein and shall, as of the Second Closing Date, have made all filings required to
be made under the Exchange Act and with the OTS.
Section 3. Representations and Warranties of the Company. The Company represents and
warrants to the Investor as follows:
(a) Organization and Authority. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and each of the Company’s
material subsidiaries is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization or incorporation, as applicable, and each of the
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Company and the Company’s material subsidiaries is duly qualified to do business and is in
good standing in all jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified, and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted.
(b) Authorization. This Agreement has been duly and validly authorized, executed and
delivered by the Company and constitutes a binding obligation of the Company enforceable against it
in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity). All of the Securities to be issued to the Investor hereunder, or
the Conversion Shares to be issued to the Investor upon conversion of the Preferred Shares, will
have been duly authorized for issuance prior to the First Closing Date (with respect to the Common
Shares); the Second Closing Date (with respect to the Preferred Shares); and Conversion thereof (in
the case of the Conversion Shares) as applicable, and, when issued, paid for and delivered as set
forth herein, or in the certificate of designations, rights and preferences of the Convertible
Preferred Shares, as applicable, the Securities and the Conversion Shares will be validly issued,
fully paid and non-assessable.
(c) Capitalization. The authorized capital stock of the Company consists of
200,000,000 shares of Common Stock, of which, (i) 37,303,180 shares are issued and outstanding, as
of May 18, 2008, and (ii) 2,100,570 shares are reserved for issuance upon exercise of options and
other awards granted under the Company’s stock option and incentive plans, as of May 18, 2008; and
25,000,000 shares of preferred stock, $0.01 par per share, none of which is issued and outstanding
as of May 18, 2008. All of the outstanding shares of Common Stock have been duly authorized, are
validly issued, fully paid and nonassessable and were offered, sold and issued in compliance with
all applicable federal and state securities laws and without violating any contractual obligation
or any other preemptive or similar rights.
(d) No Conflicts. Except as disclosed to you in writing, the issuance and sale of
the Securities and the Conversion Shares, the execution, delivery and performance by the Company of
this Agreement, the compliance by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not (i) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the property or assets of
the Company is subject, (ii) result in any violation of the provisions of any of the organizational
or governing documents of the Company or any statute, order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any of its properties, or (iii)
require any consent, approval, authorization, order, registration or qualification of or with any
court or governmental agency or body having jurisdiction over the Company or any of its properties
(other than the Regulatory Approvals).
(e) Reports. Since December 28, 2007, the Company has filed with the Commission all
forms, reports, schedules, statements and other documents required to be filed by it through the
date hereof under the Exchange Act, or the Securities Act (all such documents, as supplemented
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and amended since the time of filing, collectively, the “Company SEC Documents”). The Company
SEC Documents, including without limitation all financial statements and schedules included in the
Company SEC Documents, at the time filed or, in the case of any Company SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on the date of such amending or
superseding filing, and, in the case of registration statements and proxy statements, on the dates
of effectiveness and the dates of mailing, respectively, (i) 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, and (ii) complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as applicable.
(f) Financial Statements. The Company’s financial statements, including the notes
thereto, included in the Company SEC Documents (the “Company Financial Statements”) have been
prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) consistently
applied (except as may be indicated in the notes and schedules thereto) during the periods involved
and present fairly the Company’s consolidated financial position at the dates thereof and of its
operations and cash flows for the periods then ended (subject, in the case of unaudited statements,
to normal audit adjustments and the provisions of Regulation S-X as adopted by the Commission).
Since the date of the most recent balance sheet included in the Company Financial Statements, (i)
the Company has not effected any change in any method of accounting or accounting practice, except
for any such change required because of a concurrent change in GAAP, nor has it been advised by its
independent registered accounting firm or any Governmental Entity that any such change in method of
accounting or accounting practice is appropriate and (ii) there has been no Material Adverse
Change.
(g) No Undisclosed Liabilities. Neither the Company nor any of its material
subsidiaries has any liabilities or obligations of any nature (absolute, accrued, contingent or
otherwise) that are not properly reflected or reserved against in the Company Financial Statements
to the extent required to be so reflected or reserved against in accordance with GAAP, except for
(1) liabilities that have arisen since March 31, 2008 in the ordinary and usual course of business
and consistent with past practice, (2) contractual liabilities under agreements entered into in the
ordinary course of business or that are disclosed in the Company SEC Documents, and (3) liabilities
that have not had and would not reasonably be expected to have a Material Adverse Effect.
(h) Company Significant Agreements. Each of the Company Significant Agreements is
valid and binding on the Company and its subsidiaries, as applicable, and in full force and effect;
the Company and each of its subsidiaries, as applicable, are in all material respects in compliance
with and have in all material respects performed all obligations required to be performed by them
to date under each Company Significant Agreement; and as of the date hereof, neither the Company
nor any of its subsidiaries has received notice of any material violation or default (or any
condition which with the passage of time or the giving of notice would cause such a violation of or
a default) by any party under any Company Significant Agreement.
(i) Governmental Consents. Other than the Regulatory Approvals, and the securities or
blue sky laws of the various states, no material notice to, registration, declaration or filing
with, exemption or review by, or authorization, order, consent or approval of, any Governmental
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Entity, nor expiration or termination of any statutory waiting periods, is necessary for the
consummation by the Company of the transactions contemplated by this Agreement.
(j) Controls and Procedures. The Company (A) has implemented and maintains disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to ensure that material
information relating to the Company, including its subsidiaries, is made known to the chief
executive officer and the chief financial officer of the Company by others within those entities,
and (B) has disclosed, based on its most recent evaluation prior to the date hereof, to the
Company’s outside auditors and the audit committee of the Board of Directors (x) any significant
deficiencies and material weaknesses in the design or operation of internal controls over financial
reporting (as defined in Rule 13a-15(f) of the Exchange Act) that are reasonably likely to
adversely affect the Company’s ability to record, process, summarize and report financial
information and (y) any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company’s internal controls over financial reporting.
(k) Properties and Leases. The Company and its subsidiaries have good and marketable
title to all real properties and all other material properties and assets owned by them, in each
case free from liens, encumbrances, claims and defects that would affect the value thereof or
interfere with the use made or to be made thereof by them. The Company and its subsidiaries hold
all leased real or personal property under valid and enforceable leases with no exceptions that
would interfere with the use made or to be made thereof by them.
(l) Taxes. (i) Each of the Company and its material subsidiaries has (x) duly and
timely filed (including pursuant to applicable extensions granted without penalty) all material Tax
Returns required to be filed by it and (y) paid in full all Taxes due or made adequate provision
in the financial statements of the Company (in accordance with GAAP) for any such Taxes, whether or
not shown as due on such Tax Returns; (ii) no material deficiencies for any Taxes have been
proposed, asserted or assessed in writing against or with respect to any Taxes due by or Tax
Returns of the Company or any of its material subsidiaries, which deficiencies have not since been
resolved, except for Taxes proposed, asserted or assessed that are being contested in good faith by
appropriate proceedings and for which reserves adequate in accordance with GAAP have been provided;
and (iii) there are no material liens for Taxes upon the assets of either the Company or its
material subsidiaries except for statutory liens for current Taxes not yet due or liens for Taxes
that are being contested in good faith by appropriate proceedings and for which reserves adequate
in accordance with GAAP have been provided.
(m) Litigation and Other Proceedings. There is no pending or, to the knowledge of the
Company, threatened, claim, action, suit, investigation or proceeding, against the Company or any
of its subsidiaries or to which any of their assets are subject, nor is the Company or any of its
subsidiaries subject to any order, judgment or decree, in each case except as would not reasonably
be expected to have a Material Adverse Effect.
(n) Compliance with Laws. The Company and each of its subsidiaries have all material
permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings,
applications and registrations with, Governmental Entities that are required in order to permit
them to own or lease their properties and assets and to carry on their business as presently
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conducted and that are material to the business of the Company or such subsidiary. The Company
and each of its subsidiaries has complied in all material respects and is not in default or
violation in any respect of, and none of them is, to the knowledge of the Company, under
investigation with respect to or, to the knowledge of the Company, has been threatened to be
charged with or given notice of any material violation of, any applicable material domestic
(federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or
guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity.
(o) Insurance. The Company and each of its material subsidiaries are presently
insured, and since December 27, 2007 have been insured, for reasonable amounts with financially
sound and reputable insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be insured.
(p) Anti-takeover Provisions Not Applicable. The Board of Directors has taken all
necessary action to ensure that the transactions contemplated by this Agreement will be deemed
approved by the Board of Directors for the purposes of Section 203 of the Delaware General
Corporation Law.
(q) Mortgage Banking Business. Except as has not had and would not reasonably be
expected to have a Material Adverse Effect:
(i) The Company and each of its subsidiaries has complied with, and all documentation
in connection with the origination, processing, underwriting and credit approval of any
mortgage loan originated, purchased or serviced by the Company or any of its subsidiaries
satisfied, (A) all applicable federal, state and local laws, rules and regulations with
respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing, or
filing of claims in connection with mortgage loans, including all laws relating to real
estate settlement procedures, consumer credit protection, truth in lending laws, usury
limitations, fair housing, transfers of servicing, collection practices, equal credit
opportunity and adjustable rate mortgages, (B) the responsibilities and obligations relating
to mortgage loans set forth in any agreement between the Company or any of its subsidiaries
and any Agency, Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines,
handbooks and other requirements of any Agency, Loan Investor or Insurer and (D) the terms
and provisions of any mortgage or other collateral documents and other loan documents with
respect to each mortgage loan; and
(ii) No Agency, Loan Investor or Insurer has (A) claimed in writing that the Company or
any of its subsidiaries has violated or has not complied with the applicable underwriting
standards with respect to mortgage loans sold by the Company or any of its subsidiaries to a
Loan Investor or Agency, or with respect to any sale of mortgage servicing rights to a Loan
Investor, (B) imposed in writing restrictions on the activities (including commitment
authority) of the Company or any of its subsidiaries or (C) indicated in writing to the
Company or any of its subsidiaries that it has terminated or intends to terminate its
relationship with the Company or any of its subsidiaries for poor performance, poor loan
quality or concern with respect to the Company’s or any of its subsidiaries’ compliance with
laws.
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(iii) For purposes of this Section 3(q): (A) “Agency” shall mean the Federal
Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home
Administration (now known as Rural Housing and Community Development Services), the Federal
National Mortgage Association, the Federal National Mortgage Association, the United States
Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of
Agriculture or any other federal or state agency with authority to (i) determine any
investment, origination, lending or servicing requirements with regard to mortgage loans
originated, purchased or serviced by the Company or any of its Subsidiaries or (ii)
originate, purchase, or service mortgage loans, or otherwise promote mortgage lending,
including without limitation state and local housing finance authorities; (B) “Loan
Investor” shall mean any person (including an Agency) having a beneficial interest in any
mortgage loan originated, purchased or serviced by the Company or any of its subsidiaries or
a security backed by or representing an interest in any such mortgage loan; and (C)
“Insurer” means a person who insures or guarantees for the benefit of the mortgagee all or
any portion of the risk of loss upon borrower default on any of the mortgage loans
originated, purchased or serviced by the Company or any of its subsidiaries, including, the
Federal Housing Administration, the United States Department of Veterans’ Affairs, the Rural
Housing Service of the U.S. Department of Agriculture and any private mortgage insurer, and
providers of hazard, title or other insurance with respect to such mortgage loans or the
related collateral
(r) Agreements with Regulatory Agencies. As of the date hereof, neither the Company
nor any of its subsidiaries is subject to any cease-and-desist or other similar order or
enforcement action issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or similar undertaking to,
or is subject to any capital directive of, any Governmental Entity that in a material manner
relates to its capital adequacy, its liquidity and funding policies and practices, its ability to
pay dividends, its credit, risk management or compliance policies, its internal controls, its
management or its operations or business.
(s) Off-Balance Sheet Arrangements. There is no transaction, arrangement or other
relationship between the Company and an unconsolidated or other off-balance sheet entity that is
required to be disclosed by the Company in its Company SEC Documents and is not so disclosed or
that otherwise would be reasonably likely to have a material adverse effect on the Company and its
subsidiaries, taken as a whole. There are no such transactions, arrangements or other
relationships with the Company that may create contingencies or liabilities that are not otherwise
disclosed by the Company in its Company SEC Documents.
(t) Other Capital Commitments. Except as previously disclosed by the Company to the
Investor in writing prior to its execution and delivery of this Agreement (including as set forth
in Section 3(c) above), as of the date hereof, the Company does not have and is not bound
by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issue of, or securities or rights convertible into or
exchangeable for, any shares of Common Stock, preferred stock, subordinated debt, trust preferred
securities, or any other equity or debt securities of the Company or any securities representing
the right to purchase or otherwise receive any shares of capital stock or debt securities of the
Company.
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Section 4. Representations and Warranties of Investors. The Investor represents and
warrants to the Company as follows:
(a) Organization and Authority. Such Investor is a limited liability company duly
organized, validly existing and in good standing under the laws of its state of organization, and
has all requisite limited liability company power and authority to enter into and perform its
obligations under this Agreement.
(b) Authorization. This Agreement has been duly and validly authorized, executed and
delivered by the Investor and constitutes a binding obligation of the Investor enforceable against
it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles of equity, including principles
of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity).
(c) No Affiliates. The Investor is not an Affiliate of any other stockholder of the
Company or, to the knowledge of the Investor, any other Person investing in the Company, is not
acting in concert with any other Person and is not a member of a “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) with respect to the Company’s securities, and has no current
intention to act in the future in a manner that would make it a member of such a group.
(d) Purchase for Investment. The Investor acknowledges that neither the Securities nor
the Conversion shares have been registered under the Securities Act or under any state securities
laws. Such Investor (i) is acquiring the Securities, and will acquire the Conversion Shares, if
any, pursuant to an exemption from registration under the Securities Act solely for investment with
no present intention to distribute any of the Securities or the Conversion Shares to any Person,
(ii) will not sell or otherwise dispose of any of the Securities or the Conversion Shares, except
in compliance with the registration requirements or exemption provisions of the Securities Act and
any other applicable securities laws, (iii) has such knowledge and experience in financial and
business matters and in investments of this type that it is capable of evaluating the merits and
risks of its investment in the Securities and the Conversion Shares and of making an informed
investment decision, (iv) is an “accredited investor” (as that term is defined by Rule 501 of the
Securities Act), and is either a “qualified institutional investor” within the meaning of Rule 144A
promulgated under the Act, or a large institutional “accredited investor” within the meaning of the
Commission’s response to the “No-Action Letter” submitted to the Commission on behalf of Black Box
Inc. on June 25, 1990 (publicly available June 26, 1990).
(e) Knowledge as to Conditions. As of the date of this Agreement, the Investor knows
of no reason why any regulatory approvals and, to the extent necessary, any other approvals,
authorizations, filings, registrations, and notices required or otherwise a condition to the
consummation of the transactions contemplated by this Agreement will not be obtained.
(f) Sufficient Funds. The Investor has and will have prior to the First Closing Date,
sufficient cash, available lines of credit or other sources of immediately available funds to
enable it to timely deliver to the Company the Common Purchase Price payable hereunder by the
Investor. The Investor has and will have prior to the Second Closing Date, sufficient cash,
- 12 -
available lines of credit or other sources of immediately available funds to enable it to
timely deliver to the Company the aggregate Preferred Purchase Price payable hereunder by the
Investor.
(g) No Prior Understandings. Prior to the Spin-Off, neither the Investor nor any
Person acting on behalf of the Investor, with the Investor’s explicit or implicit permission, had
an agreement, understanding, arrangement, or substantial negotiations with any Person acting on
behalf of Temple-Inland or the Company regarding the Rights Offering or any other acquisition of
shares of Common Stock, Convertible Preferred Stock or other equity interests in the Company.
(h) Ownership. As of the close of business on the Business Day immediately preceding
the date hereto, the Investor beneficially owns (as determined in accordance with Rule 13d-3 under
the Exchange Act) the number of shares of Common Stock set forth next to the Investor’s name on
Schedule 1 hereof and, other than as set forth on Schedule 1 hereof, does not
beneficially own (as determined in accordance with Rule 13d-3 under the Exchange Act) or have the
right to vote with respect to any equity securities of the Company.
(i) No Conflict. The execution, delivery and performance by the Investor of this
Agreement and the consummation by it of the transactions contemplated hereby and thereby will not
violate any statute, order, rule or regulation of any Governmental Entity having jurisdiction over
the Investor or any of its properties.
(j) No Broker. The Investor has not employed any broker or finder in connection with
the transactions contemplated by this Agreement.
(k) Non-Reliance. The Investor is not relying upon, and has not relied upon, any
statement, representation or warranty made by any Person, including, without limitation, Xxxxx,
Xxxxxxxx & Xxxxx, Inc, except for the statements, representations and warranties by the Company
contained in this Agreement.
(l) Company Reliance. The Investor acknowledges that the Company and others will rely
upon the truth and accuracy of the acknowledgements, representations and agreements in this
Agreement and that its commitments hereunder will be described in the Rights Offering Prospectus.
Section 5. Deliveries at Closings.
(a) First Closing.
(i) Company Deliverables. At the First Closing, the Company shall deliver to
the Investor the following:
(A) A certificate or certificates representing Common Shares, or evidence of
book-entry record ownership of such Common Shares; and
(B) A certificate of a senior officer of the Company on its behalf to the
effect that (1) the representations and warranties of the Company in Section
3 are
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true and correct on and as of the First Closing Date as if made on such date,
except for representations and warranties made as of a specified date, which shall
be true and correct as of such specified date, and except, in all cases, as would
not result in a Material Adverse Change, (2) the Company has complied in all
material respects with its obligations hereunder that are required to be complied
with by it at or prior to the First Closing, and (3) the Investor will be the record
holder of the Common Stock so delivered on the record date for the Rights Offering
or for any other dividend or distribution made to holders of the Company’s Common
Stock after the date hereof.
(ii) Investor Deliverables. At the First Closing, the Investor shall deliver
to the Company the following:
(A) Payment of the Common Purchase Price in United States dollars by means of
wire transfers of immediately available funds to an account specified in writing by
the Company; and
(B) A certificate of a senior officer of the Investor on its behalf to the
effect that (1) the representations and warranties of the Investor contained in
Section 4 are true and correct on and as of the First Closing Date as if
made on such date, except for representations and warranties made as of a specified
date, which shall be true and correct as of such specified date, and except, in all
cases, as would not, individually or in the aggregate, materially impair the ability
of the Investor to perform its obligations hereunder or to consummate the First
Closing, and (2) the Investor has complied in all material respects with its
obligations hereunder that are required to be complied with by it at or prior to the
First Closing.
(b) Second Closing.
(i) Company Deliverables. At the Second Closing, the Company shall deliver to
the Investor a certificate or certificates representing the Preferred Shares, or evidence of
book-entry record ownership of such Preferred Shares; and
(ii) Investor Deliverables. At the Second Closing, the Investor shall deliver
to the Company Payment of the Preferred Purchase Price in United States dollars by means of
wire transfers of immediately available funds to an account specified in writing by the
Company.
Section 6. Covenants.
(a) Public Statements. Attached to this Agreement as Exhibit B is a form of
press release that will be jointly issued by the Company and the Investor on the date hereof.
(b) Certain Acquisitions and Sales. Between the date hereof and through and including
the First Closing Date, neither the Investor nor any of its Affiliates shall sell, transfer,
convey, assign, acquire or purchase ownership of (including beneficial ownership as determined
under Rule 13d-3 under the Exchange Act) any shares of Common Stock; provided, however, that the
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foregoing shall not restrict the acquisition of shares of Common Stock by the Investor from
the Company pursuant to Section 2 of this Agreement.
(c) Regulatory Approvals. The Investor shall use its commercially reasonable best
efforts to obtain, as promptly as practicable, all governmental, quasi-governmental, court or
regulatory approvals, consents or statements of non-objection necessary to allow the Investor to
acquire the Securities and Conversion Shares it will or may acquire or to own or control the
Securities and Conversion Shares it will or may own or control following the date hereof, including
any approvals, consents or statements of non-objection required by any state or federal banking
regulatory authority, including the Regulatory Approvals. In performing its obligations under this
Section 6(c), the Investor will cooperate with the Company, provide the Company with
advance notice of and an opportunity to comment to all regulatory filings, applications and support
materials, and will provide the Company with advance notice of and an opportunity to participate in
any meetings (including telephonic conferences) with any regulatory authorities regarding any such
approvals. Without limiting the foregoing, the Investor agrees that it will promptly, and in any
event on the Business Day following the date hereof, make to the OTS a submission rebutting the
presumption of control of the Company as provided in 12 CFR §574.4(e) and offer to enter into the
Rebuttal of Control Agreement required by 12 CFR §574.100.
(d) Cooperation. The Investor will, and will cause its Affiliates to, cooperate with
the Company and use commercially reasonable efforts to take, or cause to be taken, all commercially
reasonable actions in order to facilitate the successful consummation of the transactions
contemplated hereby. From and after the date hereof and continuing after the closing of the
transactions contemplated hereby, the Company will, and will cause its Affiliates to (i) cooperate
with the Investor and use commercially reasonable efforts to take, or cause to be taken, all
commercially reasonable actions in order to facilitate the successful consummation of the
transactions contemplated hereby, and (ii) assist the Investor in any appearances and proceedings
before and consents, approvals, or waivers sought from any Governmental Entity.
(e) Legends. (i) The Investor agrees that all certificates or other instruments
representing the Securities and the Conversion Shares subject to this Agreement will bear a legend
substantially to the following effect:
(A) THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES
LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS IN EFFECT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.
(B) THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
TRANSFER AND OTHER RESTRICTIONS SET FORTH IN AN INVESTMENT
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AGREEMENT, DATED AS OF MAY 26, 2008, COPIES OF WHICH ARE ON FILE
WITH THE SECRETARY OF THE ISSUER.
(ii) Upon request of the Investor, upon receipt by the Company of an opinion of
counsel reasonably satisfactory to the Company to the effect that such legend is no longer
required under the Securities Act and applicable state laws, the Company shall promptly
cause clause (1) of the legend to be removed from any certificate for any Securities or
Conversion Shares to be transferred in accordance with the terms of this Agreement and
clause (2) of the legend shall be removed upon the expiration of such transfer and other
restrictions set forth in this Agreement. The Investor acknowledges that the Securities have
not been registered under the Securities Act or under any state securities laws and agrees
that it will not sell or otherwise dispose of any of the Securities, except in compliance
with the registration requirements or exemption provisions of the Securities Act and any
other applicable securities laws.
(f) Preemptive Right. From the First Closing Date until the earlier to occur of (a)
the first anniversary of the First Closing Date and (b) the first date on which the Investor ceases
to beneficially own 5% of the issued and outstanding Common Stock, the Company and its subsidiaries
shall not issue or sell any Subject Securities without first complying with this Section
6(f). The Company hereby grants to the Investor the preemptive right to purchase, pro rata,
all or any part of the Subject Securities that the Company or any of its subsidiaries may, from
time to time, propose to sell or issue. In the event that Subject Securities are offered or sold
as part of a unit with other securities, the Investor must, if the Investor elects to exercise its
preemptive right to purchase the Subject Securities, exercise its preemptive right with respect to
all of the securities comprising part of the units on the same terms that the Company proposes to
offer such units to other parties. The Investor’s pro rata share for purposes of this Section
6(f) is the ratio that the number of shares of Common Stock beneficially owned by the Investor
immediately before giving effect to the proposed issuance of the Subject Securities bears to the
total number of shares of Common Stock then issued and outstanding. In the event the Company
proposes to issue or sell Subject Securities, it shall give the Investor written notice of its
intention, describing the type of Subject Securities and the price and terms upon which the Company
proposes to issue or sell the Subject Securities. In the event that the Subject Securities include
securities the acquisition of which by the Investor would result in the Investor becoming an
“Acquiring Person” or similar status within the meaning of the Rights Agreement of the Company
dated December 11, 2007 (as amended, the “Rights Agreement”), the Company shall take such action as
is necessary, including amending the Rights Agreement or structuring the proposed issuance of
Subject Securities, so that the Investor will not become such an Acquiring Person or similar
status. The Investor shall have five Business Days from the date of such notice to irrevocably
agree to purchase up to its pro rata share of the Subject Securities for the price and upon the
terms (including brokerage, transaction, acquisition, advisory, due diligence, origination or
similar fees, but excluding expense reimbursements and underwriting discounts, fees or commissions)
specified in the notice by giving written notice to the Company stating the quantity of Subject
Securities agreed to be purchased. The Investor acknowledges that the acquisition of the Subject
Securities may be subject to stockholder approval under the rules of the New York Stock Exchange
and subject to any required approval from any Governmental Entity. In the event the Investor fails
to exercise such preemptive right within such five Business Day period, the Company shall have 90
days to sell the Subject Securities not agreed to be
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purchased by the Investor at the same price and upon the same terms specified in the Company’s
notice described above. In the event the Company has not sold the Subject Securities within such
ninety-day period, the Company shall not thereafter issue or sell any Subject Securities without
first offering such securities in the manner provided above.
(g) Information. The Company covenants and agrees that, from and after the date
hereof and through and including the date of the Second Closing, it will promptly inform the
Investor if the Company becomes bound by any subscriptions, options, warrants, calls, commitments
or agreements of any character calling for the purchase or issue of, or securities or rights
convertible into or exchangeable for, any shares of Common Stock, preferred stock, subordinated
debt, trust preferred securities, or any other equity or debt securities of the Company or any
securities representing the right to purchase or otherwise receive any shares of capital stock or
debt securities of the Company, provided, however, that this covenant shall not apply to shares of
Common Stock that are issued or are issuable pursuant to a stock option plan, restricted stock
plan, agreement or other incentive stock arrangements; or shares of Common Stock issued in a split
or subdivision of the outstanding shares of Common Stock, a dividend or other distribution payable
in additional shares of Common Stock or other securities or rights convertible into, exchangeable
for, or entitling the holder thereof to receive directly or indirectly, additional shares of Common
Stock.
Section 7. Conditions to First Closing.
(a) The obligations of the Investor to consummate the purchase of the Common Shares at the
First Closing as contemplated hereunder are subject to the fulfillment, prior to or on the First
Closing Date, of the following conditions:
(i) The representations and warranties of the Company in Section 3 shall be
true and correct as of the date hereof and at and as of the First Closing Date as if made on
such date, except for representations and warranties made as of a specified date, which
shall be true and correct as of such specified date, and except, in all cases, as would not
result in a Material Adverse Change;
(ii) The Company shall have complied in all material respects with its obligations
hereunder that are required to be complied with at or prior to the First Closing;
(iii) No judgment, injunction, decree or other legal restraint shall prohibit, or have
the effect of rendering unachievable, the consummation of the transactions contemplated by
this Agreement, and the Investor shall have obtained the Regulatory Approvals applicable to
it;
(iv) the record date for the Rights Offering shall not have occurred; and
(v) The Company shall have received from Fulbright & Xxxxxxxx L.L.P. an opinion that
the issuance of the Common Shares and the Convertible Preferred Shares, as provided herein,
will not result in Distribution Taxes (as such term is defined in that certain Tax Matters
Agreement by and among Temple-Inland, Forestar Real Estate Group Inc., and the Company,
dated as of December 11, 2007) imposed under the Code with respect to the Spin-Off.
- 17 -
(b) The obligations of the Company to consummate the sale of the Common Shares at the First
Closing as contemplated hereunder are subject to the fulfillment, prior to or on the First Closing
Date, of the following conditions:
(i) The representations and warranties of the Investor in Section 4 shall be
true and correct as of the date hereof and at and as of the First Closing Date as if made as
of such date, except for representations and warranties made as of a specified date, which
shall be true and correct as of such specified date, and except, in all cases, as would not,
individually or in the aggregate, materially impair the ability of the Investor to perform
its obligations hereunder or consummate the transactions contemplated hereby;
(ii) The Investor shall have complied in all material respects with its obligations
hereunder that are required to be complied with at or prior to the First Closing; and
(iii) No judgment, injunction, decree or other legal restraint shall prohibit, or have
the effect of rendering unachievable, the consummation of the transactions contemplated by
this Agreement, and the Investor shall have obtained the Regulatory Approvals applicable to
it.
Section 8. Termination.
(a) This Agreement may be terminated at any time prior to the First Closing Date by the
Company on one hand or the Investor on the other hand, by written notice to the other if there is a
material breach of this Agreement by the other party that is not cured within five (5) days after
such material breach.
(b) This Agreement may be terminated by either party by written notice thereof to the other
at any time following June 30, 2008 if the First Closing shall not have occurred on that date.
Section 9. Additional Covenants.
(a) Standstill. The parties hereto agree that the one (1) year period specified in
the first sentence of Section 6 (Standstill) (the “Standstill”) of that certain Confidentiality
Agreement by and between the Company and the Investor shall expire on December 31, 2008, and, the
Standstill will not apply to purchases of Common Stock by Investor to the extent such purchases
result in the Investor having beneficial ownership (as determined in accordance with Rule 13d-3
under the Exchange Act) of less than 19.9% of the issued and outstanding shares of Common Stock.
In addition, the Standstill shall automatically become inoperative and of no force or effect if (a)
any Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) shall have
acquired or entered into a definitive agreement to acquire more than 20% of the equity securities
of the Company or assets of the Company or its subsidiaries representing more than 20% of the
consolidated earning power of the Company and its subsidiaries (an “Issuer Sale Transaction”), (b)
a third party makes a tender offer for more than 20% of the equity securities of the Company (a
“Third-Party Tender Offer”) and the Company files a Schedule 14D-9 with respect to such offer that
does not recommend that the Company’s stockholders reject such offer, (c) the Company effects a
transaction, or series of related transactions, involving the issuance of securities representing
15% or more (assuming the conversion of all convertible securities issued
- 18 -
in such transaction or series of related transactions) of the pro-forma outstanding equity
securities of the Company, unless the Investor is offered the opportunity to participate in, or
does in fact participate in, such transaction and, such opportunity if accepted by the Investor
would result in the Investor beneficially owning equity securities of the Company representing at
least the same percentage of the outstanding equity securities of the Company that it beneficially
owned immediately prior to such transaction, (d) any Person or “group” (within the meaning of
Section 13(d)(3) of the Exchange Act) commences a solicitation of proxies or written consents to
elect to the Board of Directors any individuals or slate of individuals in a contest with any
individuals or slate of individuals whose nomination has been approved by the Nominating and
Corporate Governance Committee (or its equivalent) of the Company, or (e) termination of the Rights
Agreement or an increase in the triggering threshold thereunder to a percentage in excess of 20%,
in which case the percentage limitation in the first sentence of this Section 9(a) shall be
increased to one-tenth of one percent less than such revised triggering threshold. Notwithstanding
the foregoing or any other provision of this Agreement, the Investor shall not be required to (A)
vote any shares or other voting equity securities of the Company that it beneficially owns in favor
of, or provide a consent or proxy approving, any Issuer Sale Transaction, or (B) tender any equity
securities of the Company in response to a Third-Party Tender Offer.
(b) Lock-Up. The Investor hereby agrees that, without the prior written consent of
the Company, it will not, during the period commencing on the date hereof and ending on the first
to occur of (i) the closing of the Rights Offering, or (ii) June 30, 2008, (1) offer, pledge in
margin transactions, sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the voting rights or
economic consequences of ownership of the Common Stock, whether any such transaction described in
clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise. In addition, the undersigned agrees that, without the prior written consent of
the Company, it will not, during the period commencing on the date hereof and ending on the first
to occur of (i) the closing of the Rights Offering, and (ii) June 30, 2008, make any demand for or
exercise any right with respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock.
(c) Governance Matters.
(i) The Company will, concurrently with the First Closing, cause one person nominated
by the Investor (the “Board Representative”) to be elected or appointed to the Board of
Directors, subject to satisfaction of all legal and governance requirements regarding
service as a director of the Company and to the reasonable approval of the Governance
Committee of the Board of Directors (such approval not to be unreasonably withheld or
delayed). After such appointment, so long as the Investor beneficially owns (as determined
in accordance with Rule 13d-3 under the Exchange Act) at least 10% of the outstanding shares
of Common Stock (including for this purpose shares of Common Stock issuable upon conversion
of the Convertible Preferred Stock), the Company will be required to recommend to its
stockholders the election of the Board Representative at the
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Company’s annual meeting, subject to satisfaction of all legal and governance
requirements regarding service as a director of the Company and to the reasonable approval
of the Governance Committee of the Board of Directors (such approval not to be unreasonably
withheld or delayed), to the Board of Directors. If the Investor no longer beneficially own
(as determined in accordance with Rule 13d-3 under the Exchange Act) the minimum number of
Securities specified in the prior sentence, the Investor will have no further rights under
Section 9(c), and, at the written request of the Board of Directors, shall use all
reasonable best efforts to cause its Board Representative to resign from the Board of
Directors as promptly as possible thereafter.
(ii) The Board Representative (including any successor nominee) duly selected in
accordance with Section 9(a)(i) shall, subject to applicable law, be the Company’s
and the Company’s Governance Committee’s nominee to serve on the Board of Directors. The
Company shall use all reasonable best efforts to have the Board Representative elected as a
director of the Company and the Company shall solicit proxies for each such person to the
same extent as it does for any of its other nominees to the Board of Directors.
(iii) Investor shall have the power to designate the Board Representative’s replacement
upon the death, resignation, retirement, disqualification or removal from office of such
director. The Board of Directors will use its reasonable best efforts to take all action
required to fill the vacancy resulting therefrom with such person (including such person,
subject to applicable law, being the Company’s and the Company’s Governance Committee’s
nominee to serve on the Board of Directors, using all reasonable best efforts to have such
person elected as director of the Company and the Company soliciting proxies for such person
to the same extent as it does for any of its other nominees to the Board of Directors).
(iv) The Board Representative shall be entitled to the same compensation and same
indemnification in connection with his or her role as a director as the other members of the
Board of Directors, and each Board Representative shall be entitled to reimbursement for
documented, reasonable out-of-pocket expenses incurred in attending meetings of the Board of
Directors or any committees thereof, to the same extent as the other members of the Board of
Directors. The Company shall notify the Board Representative of all regular and special
meetings of the Board of Directors and shall notify the Board Representative of all regular
and special meetings of any committee of the Board of Directors of which the Board
Representative is a member. The Company shall provide the Board Representative with copies
of all notices, minutes, consents and other materials provided to all other members of the
Board of Directors concurrently as such materials are provided to the other members.
(v) For so long as the Board Representative is entitled to serve on the Board of
Directors, upon the Investor’s request, the Company will promptly take such actions as may
be necessary to appoint the Board Representative to the board of directors of Guaranty Bank
and the governing board of any bank or savings institution subsequently acquired by the
Company.
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(d) Reservation for Issuance. The Company shall at all times reserve and keep
available, out of its authorized but unissued Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, the full number of shares of Common Stock issuable upon the
conversion of all the Preferred Shares from time to time outstanding. Additionally, the Company
shall at all times from and after the First Closing Date and until the Second Closing Date (or
until three Business Days following the Determination Date if no shares of Convertible Preferred
Stock are required to be issued at the Second Closing) reserve and keep available, out of its
authorized but unissued shares of preferred stock, solely for the purpose of issuing the Preferred
Shares at the Second Closing, a sufficient number of shares of preferred stock to allow the
issuance of all shares of Preferred Stock necessary to be issued to the Investor at such Second
Closing Date.
(e) Indemnification.
(i) The Company agrees to indemnify, defend and hold harmless the Investor and its
Affiliates and each of their respective officers, directors, partners, members and
employees, and each person who controls the Investor within the meaning of the Exchange Act
and the regulations thereunder, to the fullest extent lawful, from and against any and all
actions, suits, claims, proceedings, costs, losses, liabilities, damages, expenses
(including reasonable attorneys’ fees and disbursements), amounts paid in settlement and
other costs (collectively, “Losses”) arising out of or resulting from any action, suit,
claim, proceeding or investigation by any Governmental Entity, stockholder of the Company or
any other Person (other than the Company) relating to this Agreement or the transactions
contemplated hereby (other than any Losses attributable to the acts, errors or omissions on
the part of such Investor, but not including the transactions contemplated hereby).
(ii) A party entitled to indemnification hereunder (each, an “Indemnified Party”)
shall give written notice to the party indemnifying it (the “Indemnifying Party”) of any
claim with respect to which it seeks indemnification promptly after the discovery by such
Indemnified Party of any matters giving rise to a claim for indemnification; provided,
however, that the failure of any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 9(e) unless
and to the extent that the Indemnifying Party shall have been actually prejudiced by the
failure of such Indemnified Party to so notify such party. Such notice shall describe in
reasonable detail such claim. In case any such action, suit, claim or proceeding is brought
against an Indemnified Party, the Indemnified Party shall be entitled to hire, at its own
expense, separate counsel and participate in the defense thereof; provided, however, that
the Indemnifying Party shall be entitled to assume and conduct the defense thereof, unless
the counsel to the Indemnified Party advises such Indemnifying Party in writing that such
claim involves a conflict of interest (other than one of a monetary nature) that would
reasonably be expected to make it inappropriate for the same counsel to represent both the
Indemnifying Party and the Indemnified Party, in which case the Indemnified Party shall be
entitled to retain its own counsel at the cost and expense of the Indemnifying Party (except
that the Indemnifying Party shall only be liable for the legal fees and expenses of one law
firm for all Indemnified Parties, taken together with respect to any single action or group
of related actions). If the Indemnifying Party assumes the
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defense of any claim, all Indemnified Parties shall thereafter deliver to the
Indemnifying Party copies of all notices and documents (including court papers) received by
the Indemnified Party relating to the claim, and each Indemnified Party shall cooperate in
the defense or prosecution of such claim. Such cooperation shall include the retention and
(upon the Indemnifying Party’s request) the provision to the Indemnifying Party of records
and information that are reasonably relevant to such claim, and making employees available
on a mutually convenient basis to provide additional information and explanation of any
material provided hereunder. The Indemnifying Party shall not be liable for any settlement
of any action, suit, claim or proceeding effected without its written consent; provided,
however, that the Indemnifying Party shall not unreasonably withhold or delay its consent.
The Indemnifying Party further agrees that it will not, without the Indemnified Party’s
prior written consent (which shall not be unreasonably withheld or delayed), settle or
compromise any claim or consent to entry of any judgment in respect thereof in any pending
or threatened action, suit, claim or proceeding in respect of which indemnification has been
sought hereunder unless such settlement or compromise includes an unconditional release of
such Indemnified Party from all liability arising out of such action, suit, claim or
proceeding.
(iii) No party to this Agreement (or any of its Affiliates) shall, in any event, be
liable or otherwise responsible to any other party (or any of its Affiliates) for any
consequential or punitive damages of such other party (or any of its Affiliates) arising out
of or relating to this Agreement or the performance or breach hereof.
(f) Exchange Listing. The Company shall promptly use its reasonable best efforts to
cause the shares of Common Stock to be issued pursuant to this Agreement and the shares of Common
Stock reserved for issuance pursuant to the conversion of the Preferred Shares to be approved for
listing on the New York Stock Exchange, subject to official notice of issuance (and, in the case of
the shares of Common Stock issuable upon conversion of the Preferred Shares, upon receipt of
stockholder approval of such conversion), as promptly as practicable, and in any event before the
Second Closing if permitted by the rules of the New York Stock Exchange.
(g) Stockholder Meeting. The Company shall call a special meeting of its
stockholders, as promptly as practicable following the Second Closing Date to approve the
conversion of the Preferred Shares into Common Stock for purposes of complying with the
requirements of the New York Stock Exchange, and (B) use commercially reasonable efforts to take
any other action necessary to effect such conversion. The Board of Directors, to the extent it is
consistent with their fiduciary duties, shall recommend to the Company’s stockholders that such
stockholders vote in favor of the proposals required by this Section 9(g). In connection
with such meeting, the Company shall promptly prepare and file with the Commission a preliminary
proxy statement, shall use its reasonable best efforts to respond to any comments of the Commission
or its staff and to cause a definitive proxy statement related to such stockholders’ meeting to be
mailed to the Company’s stockholders not more than five Business Days after clearance thereof by
the Commission staff, and shall use its reasonable best efforts to solicit proxies for such
stockholder approval. In the event that the approvals necessary to permit the Preferred Shares to
be converted into Common Stock are not obtained at such special stockholders meeting, the Company
shall include a proposal to approve (and the Board of Directors, to the extent it is consistent
with their fiduciary duties, shall recommend approval of) such issuance at a meeting
- 22 -
of its stockholders no less than once in each subsequent six-month period beginning on January
1, 2009 and ending on the earlier of (1) the date such approval is obtained or made, or (2) May 31,
2012.
Section 10. Registration Rights.
(a) Required Registration. At any time following the expiration of the transfer
restrictions set forth herein, Investor will have the right, by written notice (the “Registration
Notice”) to the Company, to require the Company to use reasonable efforts to register (the
“Required Registration”) under the Securities Act all or any portion of the Registrable Securities
owned by Investor at the time the Registration Notice is delivered to the Company; provided that
the Company shall be obligated to register such Registrable Securities pursuant to this Section
10(a) on only two occasions. The Company shall be entitled to sell shares of Voting Securities
(to be newly issued or from shares held in treasury) pursuant to such Required Registration. Upon
receipt of such Registration Notice, the Company will, as promptly as practicable, prepare and file
with the SEC and use its reasonable efforts to cause to become effective promptly, a registration
statement under the Securities Act registering the Registrable Securities specified in the
Registration Notice; provided, however, that the Company shall be entitled to defer any such filing
(i) which would result in an effective registration statement within six months of an underwritten
offering by the Company of its equity securities for its own account or (ii) for a period of up to
180 days upon a determination by the Company’s Board that the filing of a registration statement at
such time would be detrimental to the Company due to the pendency of a material acquisition or
financing or for other reasonable cause.
(b) Incidental Registration Rights. In addition to the provisions contained in
Section 10(a), if the Company shall at any time after the expiration of restrictions
transfer restrictions set forth herein seek to register under the Securities Act for sale to the
public in an underwritten offering any of its equity securities (other than a registration on Form
S-4 or Form S-8, or any successor or other forms promulgated for similar purposes) and if the form
of registration statement proposed to be used may be used for the registration of Registrable
Securities, on each such occasion it shall promptly furnish Investor with prior written notice
thereof. At the written request of Investor, given (i) at a time when Investor beneficially owns
5% or more of the outstanding Voting Securities and (ii) within five days after the receipt of such
notice, to register any of Investor’s Registrable Securities, the Company will cause such
Registrable Securities, for which registration shall have been requested, to be included in such
registration statement in an amount so as to permit the sale or other disposition by Investor as
part of such underwritten public offering of such Registrable Securities as are registered,
provided, that if the managing underwriter shall advise the Company in writing that, in its
opinion, the number of securities requested and otherwise proposed to be included in such offering
exceeds the number that can be sold without adversely affecting the marketability of the offering,
the Company will include in such registration to the extent of the number which the Company is so
advised can be sold in such offering, first, the securities the Company proposes to sell in such
registration and second, the Registrable Securities of Investor that Investor requested to be
included in such registration, which, in the opinion of such managing underwriter, can be sold
without having the adverse effect referred to above.
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(c) Expenses. All expenses incurred by the Company in complying with this
Section 10, including all registration and filing fees, printing expenses, fees, and
disbursements of counsel (including one counsel for the Investor) and independent public
accountants for the Company and the Investor, fees of the Financial Industry Regulatory Authority,
listing or quotation fees, and fees of transfer agents and registrars, shall be borne in full by
the Company. Investor shall be responsible for all underwriting commissions, transfer taxes,
discounts and fees with respect to Registrable Securities.
(d) Listing. The Company shall cause all Securities registered as provided in this
Section 10 to be listed on each securities exchange on which similar securities issued by
the Company are then listed or, if no similar securities issued by the Company are then listed on
any securities exchange, use its reasonable best efforts to cause all such Registrable Securities
to be listed on the New York Stock Exchange or the NASDAQ stock market, as determined by the
Company.
Section 11. Survival. The representations and warranties of the Company contained in this
Agreement or in any certificate delivered hereunder shall terminate on and as of the First Closing.
Section 12. Notices. All notices, communications and deliveries required or permitted by
this Agreement shall be made in writing signed by the party making the same, shall specify the
Section of this Agreement pursuant to which it is given or being made and shall be deemed given or
made (i) on the date delivered if delivered by telecopy or in person, (ii) on the third
(3rd) Business Day after it is mailed if mailed by registered or certified mail (return
receipt requested) (with postage and other fees prepaid) or (iii) on the day after it is delivered,
prepaid, to an overnight express delivery service that confirms to the sender delivery on such day,
as follows:
(a) if to the Company, at:
Guaranty Financial Group Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy No.: (000) 000-0000
0000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Fulbright & Xxxxxxxx L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
(b) if to the Investor, at:
c/o TRT Holdings, Inc.
000 Xxxx Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
000 Xxxx Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
- 24 -
Attention: Xxxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx Xxxxxxxxx LLP
One Wachovia Center
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: X.X. Xxxxxxxx
Telecopy No.: (000) 000-0000
One Wachovia Center
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: X.X. Xxxxxxxx
Telecopy No.: (000) 000-0000
or to such other representative or at such other address of a party as such party hereto may
furnish to the other parties in writing in accordance with this Section 12. If notice is
given pursuant to this Section 12 of any assignment to a permitted successor or assign of a
party hereto, the notice shall be given as set forth above to such successor or permitted assign of
such party.
Section 13. Assignment. This Agreement will be binding upon, and will inure to the benefit
of and be enforceable by, the parties hereto and their respective successors and assigns.
Section 14. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior written and prior or contemporaneous oral agreements and
understandings between the parties with respect to the subject matter of this Agreement.
Section 15. Governing Law. This Agreement shall be governed by, construed and enforced in
accordance with the laws of the State of Texas, without giving effect to conflicts or law
principles or other principles that would require the application of any other law.
Section 16. Severability. If any provision of this Agreement or the application thereof to
any Person or circumstances is determined by a court of competent jurisdiction to be invalid, void
or unenforceable, the remaining provisions hereof, or the application of such provision to Persons
or circumstances other than those as to which it has been held invalid or unenforceable, shall
remain in full force and effect and shall in no way be affected, impaired or invalidated thereby,
so long as the economic or legal substance of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such determination, the parties shall negotiate in good
faith in an effort to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.
Section 17. Expenses. Except as set forth herein, each of the Company and the Investor
shall pay its respective fees and expenses related to the transactions contemplated by this
Agreement; provided, however, that the Company shall pay the Investor a one-time fee of $350,000,
which the parties agree is a reasonable amount to reimburse the Investor for its expenses incurred
in connection with the transactions contemplated by this Agreement.
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Section 18. Miscellaneous.
(a) Construction.
(i) the word “or” will not be exclusive;
(ii) inclusion of items in a list will not be deemed to exclude other terms of similar
import;
(iii) all parties will be considered to have drafted this Agreement together, with the
benefit of counsel, and no provision will be strictly construed against any Person by reason
of having drafted such provision;
(iv) the word “include” and its correlatives means to include without limitation;
(v) terms that imply gender will include all genders;
(vi) defined terms will have their meanings in the plural and singular case;
(vii) references to Sections, Articles, Annexes and Exhibits are to the Sections,
Articles, Annexes and Exhibits to this Agreement;
(viii) financial terms that are not otherwise defined have the meanings ascribed to
them under United States generally accepted accounting principles as of the date of this
Agreement;
(ix) the use of “will” as an auxiliary will not be deemed to be a mere prediction of
future occurrences; and
(x) the headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning of this Agreement.
(b) This Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which, when taken together, shall constitute one and the same
instrument.
[Remainder of this page intentionally left blank.]
- 26 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.
| TRT Financial Holdings, LLC | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||||
| Name: | Xxxxxx X. Xxxxxxx | |||||
| Title: | Manager | |||||
| Guaranty Financial Group Inc. | ||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||
| Name: | Xxxxxx X. Xxxxx | |||||
| Title: | Chief Financial Officer | |||||
Signature Page to Investment Agreement
Exhibit A
Terms of the Convertible Preferred Stock
Terms of the Convertible Preferred Stock
Stockholder Approval:
|
The Company must hold a meeting of stockholders to seek approval of the convertibility of the Convertible Preferred Stock for the purposes of 312.03(b) of the New York Stock Exchange Listed Company Manual (the “Stockholder Meeting”) before the 120th day after the Determination Date. | |
Conversion:
|
The Convertible Preferred Stock will be mandatorily convertible into Common Stock of the Company promptly upon stockholder approval of the issuance of the Common Stock underlying the Convertible Preferred Stock. To the extent the conversion is not approved by stockholders at the initial meeting therefor and the increase in the conversion ratio would cause TRT to exceed the then current threshold for GFG’s stockholder rights plan, the Board of Directors will take any actions necessary to exempt the change in the conversion ratio or the issuance of Common Stock pursuant thereto to not trigger GFG’s stockholder rights plan. | |
Conversion Ratio:
|
Initially 10:1 (i.e. 10 shares of Common Stock for each share of Convertible Preferred). | |
| Reduced to effectively reduce the conversion price $0.50 each six month period beginning after the Stockholder Meeting until such time as the Company obtains stockholder approval of the issuance of the Common Stock underlying the Convertible Preferred Stock. | ||
| Conversion price floor of $3.00 | ||
| Conversion right limited so that, after conversion, the holder will not beneficially own more than 19.9% of the issued and outstanding Common Stock of the Company to comply with the stockholder rights plan of the Company. | ||
Dividend Rate:
|
Initially 14% per year. Dividends will be cumulative. | |
| Increases 2.0% every 6 months following Stockholder Meeting. | ||
| Maximum rate of 18% per year. | ||
Payment Dates:
|
Initial dividend payment due three months after the Stockholder Meeting (but accrues from the date of issuance of the Convertible Preferred Stock), and semi-annually after that unless the stockholders have approved the issuance of the Common Stock underlying the Convertible Preferred Stock. |
Exhibit A to Investment Agreement
