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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
CAPITAL TITLE GROUP, INC.
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(Name of Small Business Issuer in its charter)
DELAWARE 87-0399785
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
4808 N. 22nd Street, Phoenix, Arizona 85016
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, (602) 954-0022
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.001 par value
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(Title of class)
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(Title of class)
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ITEM 1. DESCRIPTION OF BUSINESS
COMPANY HISTORY AND OVERVIEW
Capital Title Group, Inc., a Delaware corporation (the "Company" or
"Capital Title Group"), through its wholly owned subsidiary, Capital Title
Agency, Inc., an Arizona corporation ("Capital Title"), operates an independent
title agency and escrow business headquartered in Phoenix, Arizona. Capital
Title Group was formed under the laws of Utah in 1983 and redomiciled in
Delaware in 1989. Capital Title was formed as an Arizona corporation in 1981 and
has engaged in business as an independent title agency and escrow company since
that time.
Since its formation, Capital Title Group has had no significant
business operations. On May 23, 1996, Capital Title Group issued 6,744,628
shares of its common stock, $.001 par value ("Common Stock"), to the existing
shareholders of Capital Title in exchange for 100% of the outstanding stock of
Capital Title. As a result of this transaction (the "Acquisition Transaction"),
Capital Title Group now operates Capital Title as a wholly owned subsidiary.
Since 1981, Capital Title has provided continuous title insurance and
escrow services to the real estate industry in Yavapai County, Arizona.
Recently, Capital title expanded its operations into Phoenix, Arizona and
relocated its corporate headquarters from Prescott, Arizona to Phoenix, Arizona.
The Company has nine branch offices, five of which are located in Yavapai
County, Arizona and four of which were recently opened by the Company in the
Phoenix metropolitan area. The Company plans to expand its operations into
Southern California and Texas by the end of 1997. This planned expansion will be
accomplished through acquisition or recruitment of escrow officers with
significant existing revenue production based upon their relationships with real
estate brokers, mortgage lenders and other industry participants. The Company
will attempt to attract these significant producers through employment packages
that include stock options and stock purchase programs as substantial
motivational incentives.
The principal executive offices of the Company are located at 4808 N.
22nd Street, Phoenix, Arizona 85016 and the Company's telephone number is: (602)
954-0022.
COMPANY OPERATIONS
Capital Title is an independent title agency providing escrow services
and, as an agent for First American Title Insurance Company ("First American")
and Old Republic Insurance Company ("Old Republic"), issuing title insurance
policies to service the real estate industry in Yavapai County and Maricopa
County, Arizona. Capital Title's operations commenced in 1981 in Prescott,
Arizona. By 1987, Capital Title was the largest title company in Yavapai County
based on market share, and by 1994, its market share had reached 24%. In early
1994, Money magazine listed Prescott, Arizona as the number one place in the
United States to retire. During the next ten months, the real estate market in
Yavapai County increased by 38%, but Capital
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Title's staffing levels were not increased quickly enough to capitalize on this
increase. As a result, by the end of 1994, Capital Title found that its market
share in Yavapai County had fallen to approximately 16%.
During 1995 and 1996, Capital Title began an expansion program, opening
additional offices in the Yavapai County population centers of Prescott Valley,
Cottonwood and Sedona. Capital Title estimates its current market share is
approximately 21%, second to First American Title which has a market share of
approximately 35%. During 1996 and 1997, Capital Title intends to open ten to
twelve branch offices in Maricopa County, Arizona starting in the Phoenix
metropolitan area. To date, four of such offices have been opened. Phoenix is
currently the 7th largest city in the United States with an estimated population
of 1.08 million, and its projected growth is expected to boost Phoenix to the
6th largest city in the nation by the year 2000. The Company believes the
surrounding metropolitan areas in Maricopa County have the potential to grow at
an even more accelerated pace. Capital Title's expansion plans also call for the
opening of offices in Southern California and Texas before the end of 1997. The
Company believes that the Southern California real estate market is at its
lowest recent historical level, and most predictions are that a recovery will
commence during 1996, although there can be no assurance in that regard.
INDUSTRY OVERVIEW
Title Insurance has become accepted as the most efficient means of
determining title to, and the priority of interests in, real estate in nearly
all parts of the United States. Virtually all real property lenders require
their borrowers to obtain title insurance policies at the time mortgage loans
are made.
TITLE POLICIES. Title insurance policies state the terms and conditions
upon which a title underwriter will insure title to real estate. The
beneficiaries of title insurance policies are generally buyers of real property
or secured lenders.
Title insurance is different from other types of insurance because it
relates to past events that affect title to property at the time of closing and
not unforeseen future events. Prior to issuing policies, underwriters can
eliminate future losses by accurately performing searches and examinations. The
major expense of a title company is the search and examination function in
preparing preliminary reports, commitments and policies and is not from claim
losses. The premium for title insurance is due in full on the closing date of
the real estate transaction and is based upon the purchase price of the property
insured or the amount of the secured loan. Coverage under the policy generally
terminates upon resale or refinance of the property. The terms of coverage have
become standardized in accordance with forms approved by trade associations such
as American Land Title Association and Land Title Association of Arizona.
Title insurance policies are issued on the basis of a preliminary
report or commitment. These reports are prepared after a search of public
records, maps and other relevant documents to ascertain title ownership and the
existence of easements, restrictions, rights of way,
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conditions, encumbrances or other matters affecting the title to, or use of real
property. A visual inspection of the property may also be made prior to the
issuance of certain title insurance policies.
To facilitate the preparation of preliminary reports without the
necessity of manually searching public records, copies of public records, maps
and other relevant historical documents are compiled and indexed in a "title
plant." Each title plant relates to a particular county and is kept current on a
daily or other frequent basis by the addition of copies of recorded documents
that affect rights in real property in the particular county. Title companies
often subscribe to independent title information services to assist in the
updating of their title plants and the maintenance of title records.
DIRECT VS. AGENCY SALES. Preliminary reports and commitments to issue a
policy are prepared by title underwriters (direct sales) or by independent
agents on behalf of the underwriters (agency sales). The terms and conditions
upon which the real property will be insured are determined in accordance with
the standard policies and procedures of the title underwriter. In direct sales,
the title underwriter issues the preliminary report and commitment and retains
the entire title premium paid in connection with the transaction. In agency
sales, the search and examination function is performed by the independent agent
and the majority of the premium collected is retained by the agent, with the
balance remitted to the title underwriter. Independent agents may select among
several title underwriters based upon the amount of the premium "split" offered,
the overall terms and conditions of the agency agreement, including
indemnification obligations of the agent, and the scope of services offered to
the agent by the title underwriter. Agent commissions vary by geographic region.
THE TITLE POLICY PROCESS. A brief description of the process of issuing
a title insurance policy is as follows:
(i) The customer, typically a real estate salesperson or broker,
escrow agent or lender, places an order for a title policy.
(ii) Sales personnel note the specifics of the order and place a
request with the title department for a preliminary report.
(iii) After the relevant historical data on the property is
compiled, the title officer prepares a preliminary report that
documents (a) the current status of title to the property, (b)
any exemptions, exceptions and/or limitations that might be
attached to the policy and (c) specific issues that need to be
addressed and resolved by the parties to the transaction
before the title policy will be issued (such as removal of
prior tax liens and payment of prior loans on the property).
The preliminary report is circulated to all the parties for
satisfaction of any specific issues.
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(iv) After all specific issues identified in the preliminary report
are satisfied, the escrow agent closes the transaction in
accordance with the instructions of the parties and the policy
conditions.
(v) Once the transaction is closed and all monies have been
released, the policy is issued (a) to the owner and the lender
on a resale transaction or (b) to the lender only on a
refinancing transaction.
LOSSES AND RESERVES. The maximum amount of liability under a title
insurance policy is usually the face amount of the policy plus the cost of
defending the insured's title against an adverse claim. The reserve for claim
losses is based upon known claims as well as losses the insurer expects to incur
based on historical experience and other factors, including industry averages,
claims loss history, current legal environment, geographic considerations and
type of policy written.
ECONOMIC FACTORS AFFECTING INDUSTRY. Title insurance revenue is closely
related to the level of activity in the real estate market and the average price
of real estate sales. Real estate sales are directly affected by the
availability of money to finance purchases. Other factors affecting real estate
activity include demand, mortgage interest rates, family income levels and
general economic conditions.
It is estimated that title industry revenue for 1995 was approximately
$6 billion, which reflected no significant change in comparison to 1994.
Although recovery from a weak year in 1994 appeared to commence in the second
half of 1995, continued weakness in the California market, which accounts for
25% or more of all mortgage originations nationwide, precluded substantial
growth. The long-term growth rate for the industry approximates nominal gross
domestic product growth, or about 5%.
COMPANY STRATEGY
The Company's strategy is to pursue aggressive growth in the title
insurance industry in the Southwestern United States. Essential elements of the
Company's strategy are as follows:
COMMITMENT TO SERVICE. The Company is built on three basic
entrepreneurial premises: (1) every employee is a salesperson for the Company;
(2) the Company's services are a one-stop, computer-based contact point for
complete real estate transactions; and (3) success is achieved through focus on
an unequaled quality of customer service. Because title insurance policies and
escrow functions are generally standardized, the level of service provided is
the key differentiating factor among competitors in the title industry. One of
the Company's foremost objectives is to issue written title reports in
substantially all its transactions within two working days from the opening of
escrow. Through its commitment to customer service, the Company seeks to build
lasting relationships with its real estate industry clients.
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MARKET FOCUS. The Company's market focus is on real estate brokers and
mortgage lenders, which the Company believes generate approximately 70% of the
transactions involving title and escrow fees. To set itself apart as a service
company, Capital Title has developed industry specific information technology
that it provides to its clients. The Company trains real estate agents and their
administrative assistants in the use of a customized computer program which
enhances their client presentations. The Company has also developed "Plain
Language Escrow Instructions" in an effort to simplify the escrow process and
minimize the numerous questions that can arise in the preparation of escrow
documents. These simplified instructions have been well received in the Yavapai
County real estate community and have provided the Company with an opportunity
to conduct educational seminars directed at its real estate agent clients.
MANAGEMENT STRENGTH. The Company recognizes that its aggressive growth
plan calls for executive management with extensive industry operational and
expansion experience. Capital Title appointed Mr. Andrew Johns as President
effective April 16, 1996, and Mr. Johns also serves as President of the
Company. Mr. Johns, the former President of Stewart Title for the State of
California, has over 28 years of industry experience, including the expansion
of United Title's Orange County operations throughout the Southern California
market. The Company believes that Mr. Johns has the leadership, experience and
industry contacts required to effect Capital Title's planned expansion into the
Southern California and Texas markets. Capital Title also has an experienced
and dedicated group of executive officers to support Mr. Johns in this effort.
See "Directors, Executive Officers, Promoters and Control Persons."
EQUITY PARTICIPATION BY ESCROW OFFICERS. Escrow officers are the major
revenue producers for title insurance companies. It is their relationships with
real estate brokers, lenders and other industry participants that are primarily
responsible for the direction of escrow and title business. Capital Title will
seek to attract the most successful escrow officers (and the related revenue)
through employment packages that include stock options and stock purchase
programs in the Company as added motivational incentives. The Company believes
such programs will also promote Company loyalty, which will help to insulate the
Company's escrow officers from competitive recruiting efforts. The Company's
philosophy of equity participation by its escrow officers is unique in the title
industry.
EXPANSION. The Company intends to accomplish its planned expansion
through acquisitions of existing title agencies, the opening of new branch
offices and the development of "Home-Based Relationship" ("HBR") arrangements
with escrow officers. The HBR program will allow escrow officers to work in
their own homes doing escrow processing functions through the Company's computer
network, thereby reducing the Company's administrative and office expense.
CAPITAL TITLE OPERATIONS
MARKETING. The Company believes that the primary source of its business
is from referrals from participants in the real estate industry, such as real
estate brokers, mortgage
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lenders, developers and attorneys. In addition to the referral market, Capital
Title markets its services directly to larger brokerages and real property
lenders. Marketing activities are performed by the escrow officers of Capital
Title and a marketing representative whose sole function is the solicitation of
business from major real estate brokers and lenders. Escrow officers, in
addition to their escrow service duties, maintain and further develop
relationships established with current clients for on-going business. The
marketing representative holds educational seminars for real estate brokers,
offers the use of "Dataquick" as a service that provides ease in placing
valuations on surrounding property and trains brokers or their assistants in the
use of Capital Title's proprietary industry specific information technology.
ESCROW SERVICE. Capital Title's escrow department has the fiduciary
responsibility of handling the consummation of real estate sales, exchanges and
a variety of other transactions involving the sale or encumbrance of real
property, refinance of real property, sales of assets of businesses and sales of
promissory notes secured by deeds of trust.
The escrow officer and assistant typically prepare their escrow
documents pursuant to the real estate contract. The escrow instructions provide
guidance to all concerned parties as to the conditions required for the real
estate transaction. Furthermore, the instructions provide authorization for the
escrow agent to request information concerning matters appearing of record, the
receipt of all earnest monies and closing funds, the disbursement of seller
proceeds, payoff of underlying liens, judgments, real property taxes, insurance
and any other disbursement as set forth in the instructions or parties to the
transaction. The instructions also include authorization to prepare and obtain
documents necessary to complete the real estate transaction.
The escrow agent is held accountable by state governmental agencies for
strict compliance with its fiduciary responsibilities outlined by the escrow
instructions. The officer must possess a high degree of skill, professionalism
and confidentiality in the handling, preparation, collecting and recordation of
all escrow matters between the buyer, seller, real estate brokers and their
agents, developers, lenders and investors.
TITLE DEPARTMENT. The primary function of the title department is the
accumulation and analysis of various documents from the many sources that make
up the public record. From this analysis, a preliminary report is written
showing the present condition of title. This report is given to the escrow
officer who, in turn, distributes it to the parties involved in the purchase
agreement. After the preliminary report has been read and approved by all the
parties and the requirements of the report have been fulfilled, the escrow will
proceed to closing and a final title insurance policy will be issued.
Capital Title owns a "title plant," a listing and history of each
parcel of ground in a particular county, for Yavapai County, Arizona. The
Company can use the services of a third party title plant provider or acquire
additional title plants for purposes of conducting its title research as it
expands into additional geographic areas.
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CLAIMS AND UNDERWRITING. Capital Title provides title insurance as an
agent of First American and Old Republic, both of which have a Best's Insurance
rating of A+. These services are provided pursuant to Underwriting Agreements
with First American and Old Republic, which state the conditions on which
Capital Title is authorized to issue a title insurance policy on behalf of First
American or Old Republic and prescribe the circumstances under which Capital
Title may be liable to First American or Old Republic if a policy loss is
attributable to errors made by Capital Title.
Claims against the policy of title insurance normally arise out of
human error. During the process of accumulation and analysis of the public
record, certain inaccuracies and inconsistencies are often encountered that
sometimes result in a situation in which interpretation of these documents could
lead to a claim. Such claims are reviewed by Capital Title's staff and, if
warranted, sent to the insurance carrier for final disposition.
Underwriting is the process of analyzing risk assumption. As each
individual situation arises, the local staff makes a risk analysis. If the local
underwriting staff decides that the risk assumption is outside its underwriting
authority, the insurance carrier is contacted for its underwriting approval.
ACCOUNT SERVICING. The account servicing department handles the receipt
and disbursement of monies for accounts with respect to which Capital Title acts
as servicing agent for a transaction. Its responsibility as trustee includes the
maintenance of all records reflecting receipts and disbursements, calculation of
total interest, principal and any other sums due as required under the
agreement/note between the buyer and the seller. This information is summarized
and reported to the Internal Revenue Service with the appropriate Form 1098
and/or 1099 supplied to the buyer and the seller. Following the payoff of
accounts, the servicing agent prepares and records the appropriate documents
necessary to substantiate accounts as paid in full in the applicable county
records. Typically, transactions serviced by Capital Title include promissory
notes secured by deeds of trust and agreements of sale.
FORECLOSURES. Both promissory notes secured by deeds of trust and
agreements of sale can be foreclosed nonjudicially by the servicing agent. As
trustee of the documents being serviced by Capital Title, the seller and/or
beneficiary can direct the servicing agent, at the time of default, to proceed
with foreclosure of the lien.
The maintenance of accurate up-to-date accounting and control of all
original documents enable the trustee/servicing agent to expedite the
nonjudicial trustee sale or foreclosure.
ADMINISTRATION. Capital Title's administrative staff handles general
accounting and finance, human resources, purchasing, management information
systems and regulatory compliance.
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EXPANSION PLANS
The Company has initiated its expansion plans in Maricopa County.
Recently, the Company relocated its headquarters to Phoenix, and has opened four
branch office locations in Maricopa County. In addition, the Company has
retained the services of escrow officers with significant production capacity in
the Phoenix metropolitan area. The Company plans to open offices in Southern
California and Texas by the end of 1997.
COMPETITION
The title insurance business is highly competitive. The number and size
of competing companies varies in different geographic areas. In those areas
where the Company operates and intends to operate, the Company will face
competition from major national insurance underwriters and other independent
agencies, many of which have greater financial and other resources than the
Company. The Company believes that quality and timeliness of service are the key
competitive factors in the industry, because parties to a real estate
transaction are usually concerned with time schedules and costs associated with
delays in the closing of transactions. In those states where prices are not
established by regulation, the price of title insurance is also an important
competitive factor.
REGULATION
Capital Title conducts its business under licenses granted by the State
Banking and Insurance Departments of the State of Arizona. The title insurance
and escrow businesses generally are subject to extensive regulation under
applicable state laws. These laws establish supervisory agencies with broad
administrative powers relating to issuing and revoking licenses, regulating
trade practices, licensing agents, approving policy forms and approving rate
schedules. Failure to comply with these regulations or an inability to secure or
maintain any required licenses could materially adversely affect the Company's
business. The Company believes that it is in material compliance with applicable
laws and regulations, and that it will maintain and obtain all licenses required
for the conduct of its business.
EMPLOYEES
As of July 31, 1996, the Company had a total of 82 employees, of which
44 (including officers of the Company) were in the marketing/escrow department,
25 were in the title department, five were in account services and eight were in
administration. Capital Title believes that its relations with its employees are
good.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
BUSINESS AND ORGANIZATION
Capital Title Group (formerly Norvex) is the parent holding company of
Capital Title. Capital Title entered into the Acquisition Transaction with
Norvex effective May 23, 1996. Prior to the Acquisition Transaction, Norvex was
an inactive corporation which was formed under the laws of the State of Utah in
1983 and redomiciled in the State of Delaware in 1989.
Prior to the Acquisition Transaction, Norvex had 1,686,158 shares of
common stock issued and outstanding after a one for ten reverse stock split
effected immediately prior to the Acquisition Transaction. The stockholders of
Capital Title received 6,744,628 shares of common stock of Norvex, Inc.,
equaling 80% of the then total outstanding common stock. On the date of the
Acquisition Transaction, Norvex changed its name to Capital Title Group, Inc.
Capital Title was formed as an Arizona corporation in 1981, and has
been engaged, primarily in Yavapai County, Arizona, as an independent title
agency and escrow company since that time. Capital Title's operations commenced
in 1981 in Prescott, Arizona. By 1987, Capital Title was the largest title
company in Yavapai County based on market share, and by 1994, its market share
had reached 24%. In early 1994, Money magazine listed Prescott, Arizona as the
number one place in the United States to retire. During the next ten months, the
real estate market in Yavapai County increased by 38%, but Capital Title's
staffing levels were not increased quickly enough to capitalize on this
increase. As a result, by the end of 1994, Capital Title found that its market
share in Yavapai County had fallen to approximately 16%.
During 1995 and 1996, Capital Title began an expansion program, opening
additional offices in the Yavapai County population centers of Prescott Valley,
Cottonwood, Chino Valley and Sedona. Capital Title estimates its current market
share at 21%, second to First American Title with a market share of
approximately 35%. Since October, 1995, Capital Title has opened four new
offices in the Phoenix metropolitan area, and plans to have ten to twelve
offices open in the Phoenix metropolitan area by the end of 1997. Phoenix is
currently the 7th largest city in the United States with an estimated population
of 1.08 million, and its projected growth is expected to boost Phoenix to the
6th largest city in the nation by the year 2000. The Company believes the
surrounding metropolitan areas in Maricopa County have the potential to grow at
an even more accelerated pace. Capital Title's expansion plans also call for the
opening of offices in Southern California and Texas before the end of 1997. The
Southern California real estate market is at its lowest level, and most
predictions are that a recovery will commence during 1996, although there can be
no assurance in that regard.
Capital Title is an independent agent for Old Republic and First
American. Title insurance has become accepted as the most efficient means of
determining title to, and the priority of interests in, real estate in nearly
all parts of the United States. Virtually all real property lenders require
their borrowers to obtain title insurance policies at the time mortgage
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loans are made. Capital Title also provides collection and escrow services to
the general public.
The following discussion of the results of the operations and financial
condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere in this
statement. Historical results and percentage relationships among accounts are
not necessarily an indication of trends in operating results for any future
period. The discussion of the results of operations and financial condition is
based solely upon the activity of Capital Title and excludes the activity of
Norvex which was inactive until the Acquisition Transaction.
RESULTS OF OPERATIONS
The following table sets forth the condensed operations of Capital
Title for the periods presented. This table excludes the activity of Capital
Title Group (formerly Norvex) as it was an inactive corporation.
<TABLE>
<CAPTION>
NINE MONTH PERIODS ENDED YEARS ENDED
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(UNAUDITED) (UNAUDITED)
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JULY 31, 1996 JULY 31, 1995 OCTOBER 31, 1995 OCTOBER 31, 1994
------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenue ..................... $ 1,682,752 $ 1,497,542 $ 2,027,263 $ 2,538,558
General and Administrative
Expenses .................. 1,920,688 1,634,287 2,225,484 2,403,590
----------- ----------- ----------- -----------
Income (Loss) from
Operations ................ (237,936) (136,745) (198,221) 134,968
Net Other Income and
(Expenses) ................ (8,363) 40,045 16,060 28,423
----------- ----------- ----------- -----------
Income before Income Taxes .. (246,299) (96,700) (182,161) 163,391
Income Tax (Expense)
Benefit .................... -- -- 65,059 (58,727)
----------- ----------- ----------- -----------
Net Income (Loss) ........... $ (246,299) $ (96,700) $ (117,102) $ 104,664
=========== =========== =========== ===========
</TABLE>
FISCAL YEAR ENDED OCTOBER 31, 1995 COMPARED TO THE FISCAL YEAR ENDED OCTOBER 31,
1994
Revenue
For the fiscal year ended October 31, 1995, revenue decreased by
$511,000, or 20%, to $2.03 million from fiscal year 1994 revenues of $2.54
million. This decrease was a result of a 28% market drop in the number of
recorded real estate transactions in Yavapai County in the fiscal year 1995 as
compared to the fiscal year 1994. In addition, the Company experienced a
shortage of escrow officers in fiscal year 1995, causing the Company to be
unable to realize additional revenues. This dependency on Yavapai County real
estate transactions is primary to the Company's intent to aggressively expand in
other geographical areas.
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General and Administrative Expenses
For the fiscal year ended October 31, 1995, general and administrative
expenses decreased by $178,000, or approximately 7%, to $2.23 million from $2.40
million in fiscal year 1994. This decrease was a result of the response of
management to cut overhead costs in response to the drop in the number of
recorded real estate transactions, and resulting revenue decrease, in Yavapai
County in fiscal year 1995.
Net Other Income and Expenses
For the fiscal year ended October 31, 1995, net other income decreased
by $12,000 primarily due to a decrease in the amount of insurance recoveries.
NINE MONTH PERIOD ENDED JULY 31, 1996 COMPARED TO THE NINE MONTH PERIOD ENDED
JULY 31, 1995
Revenue
For the nine month period ended July 31, 1996, revenue increased by
$185,000, or 12% to $1.68 million from $1.50 million in fiscal period 1995. This
increase was due to the development and institution of a "Market Penetration
Program" in fiscal period 1996, and the expansion into new geographical areas
within Arizona. The Market Penetration Program is designed to more effectively
orchestrate the marketing efforts of the Company and increase the number and
efficiency of escrow officers. In addition, the Company has significantly
improved its customer services through the installation of an extensive,
networked, on-line computer system enabling the escrow officers to rapidly
respond to their customers needs.
General and Administrative Expenses
For the nine month period ended July 31, 1996, general and
administrative expenses have increased by $286,000, or 18% to $1.92 million from
$1.63 million in fiscal period 1995. This increase was due to additional costs
incurred in implementing the Market Penetration Program, expanding into
additional geographical areas, developing the new computerized customer service
system, recruiting new personnel, and training existing and new personnel to use
the enhanced computer system.
Net Other Income and Expenses
For the nine month period ended July 31, 1996, net other income and
expenses resulted in a net expense of $8,000, as compared to a $40,000 net other
income for the nine month period ended July 31, 1995. This decrease was due
primarily to a $10,000 increase in interest expense due to additional financing,
a decrease in the amount of insurance recoveries, and a favorable insurance
audit adjustment of $27,000 in 1995.
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SEASONALITY
Historically, the Company has experienced little seasonality in its
revenue or operating costs over the past five years. With the Company's
intention of expanding into additional geographical areas, it is contemplated
that any effects of seasonality on revenues or operating costs will be further
reduced.
LIQUIDITY AND CAPITAL RESOURCES
Capital Title Group requires capital to expand its geographical base,
make acquisitions, further implement its Market Penetration Program, recruit and
train new personnel, and purchase additional property and equipment to implement
its expansion program. During the nine month period ended July 31, 1996, the
Company financed its operating and business development activities primarily
through operating revenue, obtaining a $150,000 term loan, and the private
placement of shares of common stock.
During the nine month period ended July 31, 1996, Capital Title Group
commenced a private placement of common stock intending to sell a minimum of
500,000 shares, and a maximum of 1,500,000 shares at $1 per share. As of
September 15, 1996, a total of 1,050,000 shares had been sold in the offering.
It is anticipated that expenses of this offering will be approximately $98,500
which will generate net proceeds for the Company of approximately $951,500
The Company believes that the net proceeds of this offering, together
with its existing cash resources and financing, will be sufficient to meet the
Company's expansion, acquisition and working capital needs for the next 12 to 24
months. The Company, however, may raise capital through the issuance of
long-term or short-term debt or the issuance of securities in private or public
transactions to fund future expansion of its business either before or after the
end of the 24 month period. There can be no assurance that acceptable financing
for future transactions can be obtained on terms acceptable to the Company.
IMPACT OF NEW ACCOUNTING STANDARDS
During October, 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS 123), "Accounting for Stock-Based Compensation", which
establishes a fair value-based method of accounting for stock-based
compensation plans and requires additional disclosures for those companies that
elect not to adopt the new method of accounting. The Company will continue to
account for employee purchase rights and stock options under APB Opinion No.25,
"Accounting for Stock Issued to Employees." SFAS 123 disclosures will be
effective for fiscal years beginning after December 31, 1995.
ITEM 3. PROPERTIES
The Company leases approximately 10,125 square feet of office space in
Phoenix, Arizona for its headquarters under a lease expiring in July 1999.
Capital Title leases approximately 7,698 square feet of office space for its
principal office serving the Prescott,
13
<PAGE> 14
Arizona area, under a lease expiring in December 1997, which has two additional
five-year renewal options. In Yavapai County, Arizona, Capital Title leases two
branch offices in Sedona and one each in Prescott Valley, Cottonwood and Chino
Valley. The Company also leases three branch offices in Maricopa County. The
leases for the Company's branch offices expire at various times from 1998
through 2001, subject to various renewal options. The Company believes that
suitable rental space is and will continue to be available for its current and
planned operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of
Common Stock of the Company as of September 20, 1996 by each director and
executive officer, by all directors and executive officers as a group and by all
persons known by the Company to be the beneficial owners of more than 5% of the
Company's Common Stock.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address Beneficially Held(1) Ownership
- ---------------- --------------------- ----------
<S> <C> <C>
Donald R. Head(2) 2,827,345(3) 28.1%
Andrew A. Johns 963,502 9.6%
Theo F. Lamb(4) 2,225,205 22.1%
Robert B. Liverant 100,000 1.0%
Stephen A. McConnell 50,000 .5%
James R. Evans 25,000 .2%
Dorothy Eichbaum, Trustee of The William 603,791 6.0%
and Dorothy Orth Eichbaum Trust Dated
November 19, 1986
John M. Redfield, Jr. and Linda N. Redfield, 600,490 6.0%
as Trustees under a Revocable Declaration of
Trust dated October 29, 1982
Mark A. Scharmann 606,833 6.0%
Irwin Jacobson 520,833 5.2%
Miller Capital Corporation(5) 590,000 5.9%
All directors and executive officers as a group 6,191,052 61.5%
(12 persons)
</TABLE>
- ----------------
(1) Does not include options to purchase shares of the Company's Common Stock,
none of which are currently vested. See "EXECUTIVE COMPENSATION."
(2) Shares beneficially held in The Head Revocable Trust Dated April 1, 1975.
14
<PAGE> 15
(3) Includes 301,895 shares of Common Stock which Mr. Head has an option to
purchase from The William and Dorothy Eichbaum Trust dated November 19,
1986 anytime during the period ending May 23, 1999 for $.52 per share.
(4) Shares beneficially held in The Lamb Trust Dated October 11, 1983.
(5) Capital Title has entered into a financial advisory agreement with
Miller Capital Corporation dba The Miller Group ("TMG") pursuant to
which TMG provides certain financial advisory, valuation business
planning, consulting and other services. Under the financial advisory
agreement, TMG purchased 590,000 shares of the Company's Common Stock
for a total of $100 upon completion of the Acquisition Transaction. In
connection with a private placement by the Company of a maximum of
1,500,000 shares at a price of $1.00 per share (the "Private
Placement"), TMG is entitled to receive an amount equal to 7% of the
gross proceeds of the Private Placement.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names, ages and positions of
directors and executive officers of the Company as of September 20, 1996. A
summary of the background and experience of each of these individuals is set
forth after the table.
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Donald R. Head 58 Chairman of the Board; Chief
Executive Officer
Andrew A. Johns 59 President; Director
James Clifford 36 Vice President
James P. Stamas 36 Vice President
Nick Velimirovich 46 Vice President
Deborah Campbell 39 Treasurer
Kimberly Sue DeJong 28 Secretary
Jeffrey P. Anderson 46 Director
James R. Evans 50 Director
Theo F. Lamb 54 Director
Robert B. Liverant 67 Director
Stephen A. McConnell 43 Director
</TABLE>
Directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. Officers are chosen
by and serve at the discretion of the Board of Directors.
15
<PAGE> 16
DONALD R. HEAD is a co-founder of Capital Title and has served as its
Chairman of the Board since its inception. Mr. Head is also the Chairman of the
Board and Chief Executive Officer of Capital Title Group. Mr. Head has engaged
in a number of entrepreneurial activities within the real estate industry. He
was a co-founder of the Prescott Mining Company Restaurant, and developed the
Prescott Air Park, a 35,000 square foot industrial and office park, the Plaza
West Commerce Centre, a five acre office park and a 112 unit townhouse complex,
all in Prescott, Arizona. Since 1988, Mr. Head has lived in Scottsdale, Arizona
where he has continued his real estate development. He co-founded Centurian
Development and Investments, Inc., which is a custom designer and builder of
residential homes for some of the most prestigious residential communities in
the exclusive North Scottsdale area. Mr. Head is also a partner in America West
Capital One LC, which acquired 677 acres of land currently under development as
a residential community in Verde Valley in Yavapai County, Arizona. Mr. Head has
served as a board member on both U.S. and Canadian public companies. He is a
graduate of Arizona State University with a BA in Business and holds a law
degree from the University of Arizona.
ANDREW A. JOHNS joined Capital Title in April 1996 as Vice President in
charge of Special Projects and shortly thereafter was named President. Mr.
Johns has also been a Director of Capital Title since March 1996 and a Director
of the Company since the Acquisition Transaction in May 1996. Mr Johns is also
the President of the Company. Mr. Johns has more than 28 years of experience in
the title insurance industry. Prior to joining the Company, Mr. Johns served in
a senior management position with United Title Company for 12 years, expanding
its operational presence from Orange County, California to encompass the entire
Southern California market. United Title purchased TRW Title, Inc. changing its
name to Nations Title, Inc. When Nations Title, Inc. expanded into Arizona in
1994 through Nations Title of Arizona, Mr. Johns was selected to establish and
implement its operations. Nations Title of Arizona was merged into Network
Escrow Title Agency, which later changed its name to Nations Title Insurance of
Arizona, Inc., and operated under Mr. Johns as Executive Vice President. In
January 1996, Nations Title Insurance of Arizona, Inc., and its operating
entities were acquired by Fidelity National Title Company, one of the top ten
title companies in the nation, for in excess of $30 million. Prior to United
Title Company, Mr. Johns was employed by Stewart Title of California for nine
years holding several executive positions including President. He was directly
responsible for developing fourteen profitable branches for Stewart Title. He
began his career with First American Title Insurance Company in California. Mr.
Johns is a graduate of Compton College.
JIM CLIFFORD joined Capital Title in July 1996 as a Vice President and
was named Vice President of the Company in June 1996. Mr. Clifford also serves
as the President of Capital Title's Maricopa County operations. Prior to joining
the Company, Mr. Clifford was employed by United Title Agency, Inc. for more
than 17 years, where he most recently served as the Chief Operating Officer.
JAMES P. STAMAS joined the Company in July 1996 as Vice President and
also serves as the Executive Vice President-Legal of Capital Title. Prior to
joining Capital Title Agency, Mr. Stamas was Senior Vice President/General
Counsel for United Title Agency of Arizona, Inc.
16
<PAGE> 17
Mr. Stamas has over nine years of experience in the industry. He is also an
active member of the Land Title Association of Arizona, its Legislative
Committee and California Trustee's Association.
NICK VELIMIROVICH joined Capital Title in July 1996 as a Vice President
and was named Vice President of the Company in June 1996. Mr. Velimirovich also
serves as the Chief Executive Officer of Capital Title's Maricopa County,
Arizona operations. Prior to joining the Company, Mr. Velimirovich was employed
by United Title Agency, Inc. for more than 23 years, where he most recently
served as the Arizona District Manager.
DEBORAH L. CAMPBELL is a Vice President of Capital Title. In such
capacity, she is responsible for all administrative and accounting functions for
Capital Title's operations. Ms. Campbell has been employed by Capital Title for
more than 13 years and she has held various positions, including serving as a
trust officer and overseeing all compliance regulations. Ms. Campbell is also
the Company's Treasurer. Ms. Campbell is an active member of the Arizona Trustee
Association and Land Title Association of Arizona.
KIMBERLY SUE DEJONG is the Secretary of the Company and is responsible
for the accounting services, including escrow services accounting, of Capital
Title. Ms. DeJong has been with Capital Title since 1992. Prior to joining the
Company in 1992, Ms. DeJong was employed by Lifeline Ambulance.
JEFFREY P. ANDERSON has been a Director of Capital Title Group since
September 1996. From 1992 until 1996, Mr. Anderson was Executive Vice President,
Southwest Region, for First Interstate Bank in Phoenix, Arizona. He also served
concurrently as Chairman of the Board of First Interstate Bank of Colorado. From
1986 until 1992, Mr. Anderson was employed by Security Pacific Corporation
serving at various periods as Senior Vice President or Managing Director in the
Energy/Utilities Group, Corporate Finance and Banking Department and Special
Industries Department. Mr. Anderson holds a B.S. degree in Finance and
Management from the University of Southern California and an M.B.A. from
California State University, Long Beach.
JAMES R. EVANS has been a Director of Capital Title Group since
September 1996. Since 1980, Mr. Evans has been the Chairman and President of
Sunrise Preschools, Inc. Sunrise Preschools is a public company that operates
and provides management contracts for child care centers offering comprehensive
child care services primarily for children ages six weeks to twelve years. From
1960 to 1980, Mr. Evans was an executive with Smitty's, a major grocery and
general merchandise retailer in Phoenix, Arizona. While employed by Smitty's,
Mr. Evans was responsible for opening a number of new facilities and
participated in the sale of the corporation in 1981.
THEO F. LAMB is a co-founder of Capital Title and has served as a
Director since its inception. Mr. Lamb has been a Director of the Company since
the Acquisition Transaction in May 1996. He is the owner of Lamb Chevrolet, Inc.
in Prescott, Arizona, a retail car
17
<PAGE> 18
dealership for Cadillac, Oldsmobile, Chevrolet, Subaru and Nissan automobiles.
He has served as a member of the Chevrolet and Subaru National Dealer Counsels
and was elected to the Regional Dealer Counsels for Oldsmobile and Cadillac. He
was the managing partner in several successful land and commercial property
developments in the Prescott area. Mr. Lamb is a graduate of Southern Methodist
University holding a B.S. degree in Business.
ROBERT B. LIVERANT is a retired Chartered Accountant who was a Senior
Partner in the Firm of Liverant Yip and Co. in British Columbia for 20 years,
specializing in audits of public companies. Mr. Liverant was also a partner in
the firm of Smythe Ratcliffe and Associates and a member of the firm of Pannell
Kerr Forester, an international accounting firm. Mr. Liverant has several real
estate investments including significant holdings in Saturna Beach Estates LTD,
an 80-acre recreation and vineyard development in British Columbia, for which he
also serves as a director. He has served as a director of more than 15 Canadian
public companies. Mr. Liverant holds a B.A. degree with an economics major from
the University of British Columbia. He now resides in Cave Creek, Arizona.
STEPHEN A. MCCONNELL has been a Director of Capital Title Group since
September 1996. He is the President of Solano Ventures, a firm involved in
private capital investments. He has served, since 1991, as Chairman of the Board
and majority shareholder in Mallco Lumber & Building Materials, Inc., wholesale
distributor of construction lumber and doors. From 1991 to 1995, Mr. McConnell
was President of Belt Perry Associates, Inc., a property tax appeal firm. He was
President and Chief Executive Officer of N-W Group, Inc., a publicly held
corporation, from 1985 through 1991. Mr. McConnell presently serves on the board
of a number of public companies. Mr. McConnell holds a B.A. and M.B.A. from
Harvard University.
ITEM 6. EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the Company's
Chief Executive Officer (the "Named Executive Officer"), for services rendered
in all capacities to Capital Title during the fiscal years ended October 31,
1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
-------------------------------- ----------------------- -------
Restricted Securities
Name and Fiscal Other Annual Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Award(s) Option(s) Payouts Compensation
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald R. Head 1995 $48,000 $0 $-0- $-0- 0 $-0- $-0-
Chairman of the Board
and Chief Executive 1994 $38,000 $0 $-0- $-0- 0 $-0- $-0-
Officer
1993 $37,850 $0 $-0- $-0- 0 $-0- $-0-
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are entitled to receive
$12,000 annually as a retainer, $1,000 per meeting attended (with a minimum of
four meetings annually), $250 for each telephonic meeting, plus reimbursement of
reasonable expenses. Directors who are employees of the Company do not receive
compensation for such services. Directors who are not employees of the Company
also participate in the Company's Non-Employee Directors Stock Option Plan.
EMPLOYMENT CONTRACT
On June 1, 1996, Donald R. Head entered into an Employment Agreement
with the Company, which provides for his services as Chairman of the Board and
Chief Executive Officer (the "Agreement"). The initial term of the Agreement
expires on May 31, 2001. The Agreement is subject to automatic renewal for
additional ten-year terms on the initial expiration date and on each renewal
date thereafter unless notice of termination is provided to Mr. Head sixty days
prior to the expiration date or if Mr. Head provides written notice of
resignation to the Board sixty days prior to the expiration date. The Agreement
may be terminated by the Company for cause including upon (i) conviction of a
willful or intentional crime, (ii) absence from work for more than 180
consecutive days and (iii) the material failure by Mr. Head to perform his
duties.
The Agreement provides for an initial salary of $96,000 for the first
year and an annual salary of $150,000 for the second and each succeeding year,
plus an annual bonus equal to 6% of the Company's pretax net profits on all
Company operations, calculated according to generally accepted accounting
principles applicable to title insurance agencies consistently applied. Such
bonus shall be prorated in the first year of employment for the period remaining
in the Company's fiscal year if less than twelve months. Such bonus shall be
determined and paid within three months following the end of each fiscal year.
Beginning with the second year of employment, estimated compensation can be paid
with appropriate adjustments spread over twelve months in the event of any under
or over estimated payments. In addition, the Agreement provides for a car
allowance of $800 per month.
The Agreement provides that if Mr. Head resigns or if the Agreement is
terminated by the Company for any reason during a sixty-month period following a
Change-in-Control (as defined in the Agreement) of the Company, the Company
shall continue to pay to Mr. Head all compensation which he is entitled to under
the Agreement for its remaining term.
STOCK OPTION PLANS
1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "1996 Plan") authorizes the
Board to grant options to employees of the Company to purchase up to an
aggregate of 1,000,000 shares of
19
<PAGE> 20
Common Stock. Officers and other employees of the Company who, in the opinion of
the Board of Directors, are responsible for the continued growth and development
and the financial success of the Company are eligible to be granted options
under the 1996 Plan. Options may be non-qualified options, incentive stock
options, or any combination of the foregoing. In general, options granted under
the 1996 Plan are not transferable and expire five years after the date of
grant. The per share exercise price of an incentive stock option granted under
the 1996 Plan may not be less than the fair market value of the Common Stock on
the date of grant. Incentive stock options granted to persons who have voting
control over 10% or more of the Company's capital stock are granted at 110% of
the fair market value of the underlying shares on the date of grant. No option
may be granted after December 31, 2006.
The 1996 Plan provides the Board of Directors with the discretion to
determine when options granted thereunder will become exercisable. Unless
otherwise provided, 50% of the options granted may be exercised after two years
from the date of grant and the remaining 50% of the options may be exercised
after three years from the date of grant at any time prior to expiration, so
long as the optionee remains employed by the Company. No option granted under
the 1996 Plan is transferable by the optionee other than by will or the laws of
descent and distribution, and each option is exercisable during the lifetime of
the optionee only by the optionee.
As of September 15, 1996, the Board has authorized the grant under the
1996 Plan of options to purchase 991,500 shares of Common Stock, with the
exercise prices of all such options being $1.00 per share. Of such options,
90,000 were granted to Mr. Head, 100,000 were granted to Mr. Johns and an
aggregate of 450,000 were granted to the other executive officers of the
Company.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Company also has a Non-Employee Directors Stock Option Plan (the
"Directors Plan"), under which only non-employee directors are eligible to
receive options. Options to purchase up to 100,000 shares are authorized for
issuance under the Directors Plan. To date, 75,000 options have been granted
under the Directors Plan at an exercise price of $1.00 per share. All options
granted under the Directors Plan will be subject to the same vesting schedule
applicable to options granted under the 1996 Plan. All options granted or to be
granted under the Directors Plan are non-qualified stock options.
Each non-employee director who joins the Board of Directors will
receive an option to acquire 15,000 shares of the Company's Common Stock. In
addition to the foregoing option grants, each year, every non-employee director
automatically receives an option to acquire 10,000 shares of the Company's
Common Stock on the third business day following the date the Company publicly
announces its annual financial results; provided that such director has attended
at least 75% of the meetings of the Board of Directors and of the Board
Committees of which such non-employee director is a member in the preceding
fiscal year. The exercise price of all
20
<PAGE> 21
options granted under the Directors Plan is the fair market value of the
Company's Common Stock on the date of grant.
No option granted under the Directors Plan is transferable by the
optionee other than by will or the laws of descent and distribution, and each
option is exercisable during the lifetime of the optionee only by the optionee.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1996, Capital Title assumed a 10% note from PWCC, Inc. to
Bank One Arizona, NA in the amount of $150,000. The terms of the note require
Capital Title to make sixty equal monthly installment payments to Bank One
Arizona, NA in the amount of $3,187.05. In consideration of such assumption,
PWCC contributed $150,000 to Capital Title. PWCC, Inc. is a corporation wholly
owned equally by Mr. Head and Mr. Lamb.
During fiscal 1994 and 1995, Capital Title Agency paid $53,061 and
$86,546, respectively, to Dale A. Head for legal services rendered to Capital
Title Agency. Dale A. Head is Donald R. Head's brother. In September, 1996, the
Company granted an option to Dale A. Head to acquire 20,000 shares of Common
Stock of the Company at an exercise price of $1.00 per share.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, par value of $.001 per share. Each share of
Common Stock entitles the holder thereof to one vote in the election of
directors and all other matters submitted to a vote of the Company's
stockholders. Common stockholders do not have cumulative voting rights. Holders
of Common Stock are entitled to share ratably in all dividends declared by the
Board of Directors, if any, and in all assets available for distribution upon
liquidation. No holder of the Company's Common Stock has any preemptive right to
subscribe for or purchase additional shares of the Company's Common Stock.
21
<PAGE> 22
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
No public trading market having the characteristic of depth, liquidity
and orderliness exists for the Company's Common Stock. Upon effectiveness of
this Form 10-SB, the Company plans to apply for quotation of the Common Stock on
the Electronic Bulletin Board operated by the National Association of Securities
Dealers, Inc. under the symbol CGTI. As of September 20, 1996, the Company had
issued and outstanding 10,070,786 shares of Common Stock. In addition, 1,000,000
shares are reserved for issuance under the 1996 Plan, 100,000 shares are
reserved for issuance under the Directors Plan, and 1,500,000 shares had been
reserved for issuance in connection with the Private Placement. (See "Security
Ownership of Certain Beneficial Owners and Management.") Of the Company's
10,070,786 shares of issued and outstanding Common Stock, 1,686,158 shares are
eligible for resale under Rule 144. At August 15, 1996, there were
approximately 97 record holders of the Company's Common Stock.
The Company has never paid a dividend on its Common Stock. The Company
does not anticipate paying any dividends on its Common Stock in the foreseeable
future. Rather, the Company anticipates that its earnings, if any, will be
retained to fund the Company's working capital needs and the planned expansion
of its business. The payment of any dividends will be dependant upon the
discretion of the Board of Directors. Furthermore, under Delaware corporate law,
in the absence of current or retained earnings, the Company may be prohibited
from paying dividends (whether in cash or otherwise).
ITEM 2. LEGAL PROCEEDINGS
Capital Title is a defendant in certain legal actions arising out of
the ordinary course of its title business. The Company believes that none of
these claims are material, either individually or in the aggregate.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
The Company, which, until the Acquisition Transaction on May 23, 1996,
had no substantial business operations, has nevertheless been audited in each of
the last two fiscal years. For the fiscal year ended 1994, the Company's
financial statements were audited by Duane V. Midgley ("Midgley"). In 1995, with
the approval of the Company's Board of Directors, the Company engaged
Schvaneveldt & Company ("Schvaneveldt") as its independent auditors for the
fiscal year ended December 31, 1995 to replace Midgley.
The reports of Midgley on the Company's financial statements for the
fiscal year ended December 31, 1994 contained an adverse opinion in that they
expressed substantial doubt about the Company's ability to continue as a going
concern.
22
<PAGE> 23
In connection with the audit of the Company's financial statements for
the year ended December 31, 1994, there were no disagreements with Midgley on
any matters of accounting principle or practices, financial statement
disclosure, or auditing scope and procedures, which if not resolved to the
satisfaction of Midgley, would have caused Midgley to make reference to the
matter in his report.
The Company authorized Midgley to respond fully to any inquires from
Schvaneveldt & Company.
The Company requested Midgley to furnish it a letter addressed to the
Securities and Exchange Commission stating whether it agrees with the above
statements. A copy of that letter, dated September 23, 1996, is filed as an
Exhibit to this Form 10-SB.
The financial statements of Capital Title, the Company's operating
subsidiary, for the fiscal years ending October 31, 1994 and 1995 were audited
by John E. Jones, CPA ("Jones"). After completion of the Acquisition Transaction
in 1996 and with the approval of the Company's Board of Directors, the Company
engaged Semple & Cooper, CPA, PLC ("Semple") as its independent auditors for the
fiscal year ended October 31, 1996 to replace Schvaneveldt and Jones.
The report of Schvaneveldt on the Company's financial statements for
the fiscal year ended December 31, 1995 and the reports of Jones on Capital
Title's financial statements for the fiscal years ended October 31, 1994 and
1995 did not contain an adverse opinion, or a disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with the audit of the Company's financial statements for
the year ended December 31, 1995 and in connection with the audits of Capital
Title's financial statements for the fiscal years ended October 31, 1994 and
1995, there were no disagreements with Schvaneveldt or Jones on any matters of
accounting principle or practices, financial statement disclosure, or auditing
scope and procedures, which if not resolved to the satisfaction of Schvaneveldt
or Jones, would have caused either of them to make reference to the matter in
their respective reports.
The Company and Capital Title have authorized Schvaneveldt and Jones to
respond fully to any inquires from Semple.
The Company and Capital Title have requested Schvaneveldt and Jones to
furnish them with letters addressed to the Securities and Exchange Commission
stating whether they agree with the above statements. Copies of those letters,
each of which is dated September 23, 1996, are filed as Exhibits to this Form
10-SB.
23
<PAGE> 24
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On July 9, 1993, the Company sold an aggregatre of 100,000 shares of
its Common Stock to Irwin Jacobson and Mark A. Scharmann for $13,000 in cash.
These shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act of 1933 (the "Securities Act").
From time to time prior to December 31, 1994, the Company's officers
had advanced operating funds to the Company in the amount of $48,411. In 1995,
the Company issued 200,000 shares of its common stock in satisfaction of these
loans. These shares were issued in reliance upon the exemption from registration
provided by Section 4(2) of the Securities Act.
On March 4, 1996, the Company issued to its President, 150,000 shares
of its common stock in full satisfaction of his loan to the Company, which had a
balance of $29,035. These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act.
On May 23, 1996, the Company issued 6,744,628 shares of Common Stock to
the following shareholders of Capital Title in connection with the Acquisition
Transaction:
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
The Head Revocable Trust Dated: April 1, 1975 2,225,205
The Lamb Trust Dated: October 11, 1983 2,225,205
Andrew A. Johns 963,502
Dorothy Eichbaum, Trustee of The William and 603,791
Dorothy Orth Eichbaum Trust Dated November 19,
1986
John M. Redfield, Jr. and Linda N. Redfield, as 600,490
Trustees under a Revocable Declaration of Trust dated
October 29, 1982.
Walter Serrano 97,161
Nancy Simmons 29,148
</TABLE>
These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
On May 23, 1996, the Company commenced the Private Placement, pursuant
to which it offered for sale a minimum of 500,000 shares and a maximum of
1,500,000 shares of its Common Stock at a price of $1.00 per share. As of
September 20, 1996, the Company had issued and sold 1,050,000 of the shares to
the following persons at a price of $1.00 per share:
24
<PAGE> 25
<TABLE>
<CAPTION>
Name Number of Shares
- ---- ----------------
<S> <C>
LLoyd and Marilyn G. Boswell ........................... 25,000
Mosier Family Partner Ltd. ............................. 200,000
Robert B. Liverant ..................................... 100,000
Stephen A. McConnell ................................... 50,000
Gary A. and Janette B. Lamb ............................ 25,000
Charles Walden Company, Inc. ........................... 25,000
James R. and Sharon T. Evans ........................... 25,000
Classic Real Estate Corporation ........................ 25,000
Money Purchase Pension Plan
Fred Gallow IRA ........................................ 25,000
John J. Connolly and Jean Ann Connolly ................. 25,000
The Jack D. Vander Woude, Ph.D. Trust .................. 25,000
James J. Sexton ........................................ 50,000
David E. and Madelyn A. Garrison ....................... 200,000
Carl F. Raine .......................................... 25,000
Yavapai Medical Center Profit Sharing Plan ............. 50,000
James P. Keeley ........................................ 25,000
Retirement Accounts, Inc. CUST ......................... 12,500
FBO James A. Van Houten 46994
Retirement Accounts, Inc. CUST ......................... 12,500
FBO Jeanne K. Van Houten 46993
Geraldine M. and John P. Wolfe ......................... 25,000
Patricia K. and Andrew Philippakis ..................... 50,000
Susan J. Giblin ........................................ 25,000
Daniel E. Giblin ....................................... 25,000
</TABLE>
These shares were issued in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933 and in
reliance of Rule 506 of Regulation D promulgated thereunder.
25
<PAGE> 26
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Delaware law authorizes a Delaware corporation to eliminate or limit
the personal liability of a director to the corporation and its stockholders for
monetary damages for breaches of certain fiduciary duties as a director. The
Company believes that such a provision is beneficial in attracting and retaining
qualified directors, and accordingly the Company's Certificate of Incorporation
(the "Certificate") includes a provision eliminating liability for monetary
damages for any breach of fiduciary duty as a director, except (i) for any
breach of the duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, or (iii) for any transaction for which the director
derived an improper personal benefit or certain other actions. Pursuant to
Delaware law, directors of the Company are not insulated from liability for
breach of their duty of loyalty or for claims arising under the federal
securities laws. The foregoing provisions of the Certificate may reduce the
likelihood of derivative litigation against directors and may discourage or
deter stockholders or management from bringing a lawsuit against directors for
breaches of their fiduciary duties, even though such an action, if successful,
might otherwise have benefitted the Company and its stockholders.
Article IX of the Company's Certificate and Article 5 of the Company's
Bylaws require indemnification of directors and officers of the Company to the
fullest extent permitted by Delaware law for claims against them in their
official capacities, including stockholders' derivative actions.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
26
<PAGE> 27
PART F/S
Financial Statemments
CAPITAL TITLE GROUP, INC.
AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
For The Nine Month Periods Ended
July 31, 1996 and 1995 (Unaudited)
and
For The Years Ended
October 31, 1995 and 1994
27
<PAGE> 28
To The Stockholders and Board of Directors of
Capital Title Group, Inc. (Formerly Norvex, Inc.) and Subsidiary
We have audited the accompanying consolidated balance sheet of Capital Title
Group, Inc. (formerly Norvex, Inc.) and Subsidiary as of October 31, 1995, and
the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended October 31, 1995 and 1994. The
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits of the consolidated financial
statements provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Capital Title Group,
Inc. (formerly Norvex, Inc.) and Subsidiary as of October 31, 1995, and the
results of their operations, stockholders' equity (deficit), and cash flows for
the years ended October 31, 1995 and 1994, in conformity with generally accepted
accounting principles.
Certified Public Accountants Semple & Cooper, P.L.C.
Phoenix, Arizona
September 5, 1996
F-1
<PAGE> 29
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
(UNAUDITED)
July 31, October 31,
1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents (Notes 1 and 3) $ 115,161 $ 810
Accounts receivable, net of allowance for
doubtful accounts (Note 1) 25,992 --
Prepaid expenses 8,696 --
---------- -----
Total Current Assets 149,849 810
---------- -----
Property and Equipment: (Notes 1, 6 and 7)
Equipment 655,383 --
Furniture and fixtures 137,163 --
Leasehold improvements 105,904 --
Vehicles 47,990 --
---------- -----
946,440 --
Less: accumulated depreciation (356,266) --
---------- -----
590,174 --
---------- -----
Other Assets:
Deposits 50,725 --
Deferred tax asset (Notes 1 and 5) 16,358 --
Deferred acquisition costs (Note 1) 69,071 --
Goodwill, net of accumulated
amortization (Note 1) 15,400 --
Title plant (Note 1) 175,000 --
---------- -----
326,554 --
---------- -----
Total Assets $1,066,577 $ 810
========== =====
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-2
<PAGE> 30
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
(UNAUDITED)
July 31, October 31,
1996 1995
---- ----
<S> <C> <C>
Current Liabilities:
Note payable - current portion (Note 6) $ 6,153 $ --
Notes payable to related party - current
portion (Note 10) 25,583 16,089
Capital lease obligation - current portion
(Notes 1 and 7) 2,365 --
Accounts payable - trade 235,744 3,048
Accrued liabilities 33,875 178
---------- ----------
Total Current Liabilities 303,720 19,315
---------- ----------
Long-Term Liabilities:
Notes payable - long-term portion (Note 6) 8,529 --
Notes payable - related party - long-term
portion (Note 10) 128,550 --
Capital lease obligation - long-term
portion (Notes 1 and 7) 9,445 --
---------- ----------
146,524 --
---------- ----------
Commitments and Contingencies: (Notes 9 and 11) -- --
Stockholders' Equity: (Notes 4, 10 and 14)
Common stock, $.001 par value, 50,000,000 shares
authorized and 9,695,786 and 1,536,158 shares
issued and outstanding, respectively 9,696 1,536
Paid-in capital 1,183,076 265,945
Retained deficit (576,439) (285,986)
---------- ----------
Total Stockholders' Equity (Deficit) 616,333 (18,505)
---------- ----------
Total Liabilities and Stockholders'
Equity (Deficit) $1,066,577 $ 810
========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-3
<PAGE> 31
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Nine Month Periods Ended July 31, 1996 and 1995 (Unaudited)
and For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
July 31, July 31, October 31, October 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 414,263 $ -- $ -- $ --
General and Administrative
Expenses 600,136 1,589 18,578 3,189
----------- ----------- ----------- -----------
Loss from Operations (185,873) (1,589) (18,578) (3,189)
----------- ----------- ----------- -----------
Other Income:
Interest expense (3,294) -- -- --
Interest income 1,094 2 4 4
Escrow losses recovered and
lawsuit settlements 200 -- -- --
----------- ----------- ----------- -----------
Other Income (Expense) (2,000) 2 4 4
----------- ----------- ----------- -----------
Net Loss $ (187,873) $ (1,587) $ (18,574) $ (3,185)
=========== =========== =========== ===========
Net Loss per Share
(Note 2) $ (.05) $ (.00) $ (.01) $ (.00)
=========== =========== =========== ===========
Weighted Average Shares
Outstanding (Note 2) 3,506,230 1,536,158 1,536,158 1,536,158
=========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-4
<PAGE> 32
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For The Nine Month Period Ended July 31, 1996 (Unaudited)
and For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock Paid-in Retained
Shares Amount Capital Deficit
------ ------ ------- -------
<S> <C> <C> <C> <C>
Balance, October 31, 1993 1,336,158 $ 1,336 $ 217,734 (264,227)
Net loss for the year ended
October 31, 1994 -- -- -- (3,185)
---------- ---------- ---------- ----------
Balance, October 31, 1994 1,336,158 1,336 217,734 (267,412)
Shares issued in satisfaction
of officer debt 200,000 200 48,211 --
Net loss for the year ended
October 31, 1995 -- -- -- (18,574)
---------- ---------- ---------- ----------
Balance, October 31, 1995 1,536,158 1,536 265,945 (285,986)
Shares issued in satisfaction
of officer debt 150,000 150 28,885 --
Shares issued for consulting
services 590,000 590 5,310 --
Shares issued to purchase
subsidiary accounted for as
a reverse acquisition 6,744,628 6,745 231,672 (102,580)
Shares issued in private
placement 675,000 675 651,244 --
Net loss for the nine month
period ended July 31, 1996 -- -- -- (187,873)
---------- ---------- ---------- ----------
Balance, July 31, 1996 9,695,786 $ 9,696 $1,183,076 $ (576,439)
========== ========== ========== ==========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-5
<PAGE> 33
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Month Periods Ended July 31, 1996 and 1995 (Unaudited)
and For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
July 31, July 31, October 31, October 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(187,873) $ (1,587) $ (18,574) $ (3,185)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Depreciation 21,965 -- -- --
Changes in Assets and Liabilities:
Accounts receivable 29 -- -- --
Prepaid expenses 1,117 -- -- --
Deposits (50,725) -- -- --
Accounts payable - trade 117,965 -- 3,048 --
Accrued liabilities 951 -- 178 --
--------- --------- --------- ---------
Net cash used by operating
activities (96,571) (1,587) (15,348) (3,185)
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (400,836) -- -- --
Payments for deferred acquisition
costs (35,242) -- -- --
--------- --------- --------- ---------
Net cash used by investing
activities (436,078) -- -- --
--------- --------- --------- ---------
Cash flows from financing activities:
Issuance of common stock, net of
issue cost 651,919 -- -- --
Repayment of long-term debt (556) -- -- --
Repayment of debt to related party (4,023) -- -- --
Repayment of obligations under
capital lease (340) -- -- --
Increase in note payable to
related party -- 2,078 16,089 3,160
--------- --------- --------- ---------
Net cash provided by financing
activities 647,000 2,078 16,089 3,160
--------- --------- --------- ---------
Net increase (decrease) in
cash 114,351 491 741 (25)
Cash at beginning of period 810 69 69 94
--------- --------- --------- ---------
Cash at end of period $ 115,161 $ 560 $ 810 $ 69
========= ========= ========= =========
</TABLE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-6
<PAGE> 34
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Nature of Corporation:
Capital Title Group, Inc. (formerly Norvex, Inc.) (the Company) was organized
on September 12, 1983, in the State of Utah. On May 8, 1989, Articles of
Merger were filed in the State of Utah, merging Norvex, Inc. into
Pharmaceutics International, Inc., a Delaware corporation. Pharmaceutics
International, Inc. was the survivor corporation. On or about July 9, 1993,
the Company amended its Certificate of Incorporation, changing its name back
to Norvex, Inc., a Delaware corporation. On May 23, 1996, the Company
acquired Capital Title Agency, Inc. in a transaction accounted for as a
reverse acquisition. The intent of Capital Title Group, Inc. is to act as the
parent holding company of Capital Title Agency, Inc. As such, Norvex, Inc.
changed its name to Capital Title Group, Inc.
Capital Title Agency, Inc. is a Corporation which has been duly formed and
organized under the laws of the State of Arizona, and operates under the
authority of the State Banking Commission. The Corporation was approved by
the State of Arizona on November 1, 1981. The principal business purpose of
the Corporation is to offer title, collection and escrow services to the
general public, primarily in the southwestern United States.
The Corporation currently operates five (5) offices located throughout
Arizona. In July, 1996, the Company signed lease agreements for five (5) more
offices in Arizona. Operations for the new offices began subsequent to July
31, 1996.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Unaudited Financial Information:
The financial statements for the nine month periods ended July 31, 1996 and
1995 are unaudited. In the opinion of management, the interim financial
statements for the nine month periods ended July 31, 1996 and 1995 reflect
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of the results of the interim periods. The results of
operations for the nine month period ended July 31, 1996 are not necessarily
indicative of the results for the entire year.
Cash and Cash Equivalents:
Cash and cash equivalents include all highly liquid investments purchased
with an initial maturity of three (3) months or less.
Accounts Receivable:
The Corporation uses the allowance method to account for uncollectible
accounts receivable. The allowance is established based upon a review of the
individual accounts and the Company's prior history. At July 31, 1996, the
Company believes the receivables are fully collectible; accordingly, no
allowance has been established.
F-7
<PAGE> 35
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies: (Continued)
Property and Equipment:
Property and equipment are stated at cost and are being depreciated using the
straight-line and double-declining methods of depreciation over estimated
useful lives of five (5) to seven (7) years. For the nine month period ended
July 31, 1996 (unaudited), depreciation expense was $21,965.
Capital Lease Obligation:
The Company is the lessee of office equipment under a capital lease agreement
which expires in November, 2000. The asset and liability under the capital
lease are recorded at the lower of the present value of the minimum lease
payments or the fair market value of the asset. The asset is depreciated over
the lower of its related lease term or its estimated productive life.
Depreciation of the asset under the capital lease agreement is included in
depreciation expense noted above.
Goodwill:
Goodwill represents the value placed on Capital Title Group, Inc. (formerly
Norvex, Inc.) common stock acquired by Capital Title Agency, Inc. in an
acquisition recorded as a reverse acquisition, and the value of the stock
option given to the Company's financial advisor. Goodwill is being amortized
on the straight-line method over five (5) years. Amortization expense charged
to operations for the period from the date of acquisition, May 23, 1996,
through July 31, 1996 was $500. The carrying value of goodwill will be
periodically reviewed by the Company and impairments, if any, will be
recognized when expected future operating cash flows derived from goodwill
are less than their carrying value.
Title Plant:
The original investment for the purchase of the title plant is carried at
cost and is not being amortized.
Deferred Acquisition Costs:
Deferred acquisition costs represent costs incurred in relation to a pending
acquisition, and will be accounted for as a portion of the purchase price, or
charged to expense if the acquisition does not materialize.
Income Taxes:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis, and the utilization of the net operating loss carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
Loss Per Share:
The loss per share amount is based on the weighted average number of shares
outstanding for the periods presented, after giving retroactive effect to a
one for ten (1-10) reverse stock split. Fully diluted earnings per share are
not shown, as they are anti-dilutive.
F-8
<PAGE> 36
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Cash in Escrow:
The Company is the custodian of cash deposited by customers with specific
instructions as to its disbursement from active escrow, trust and account
servicing. The balances in these accounts have not been included in these
financial statements. As of July 31, 1996 (unaudited) and October 31, 1995,
the accounts contain a reserve balance of approximately $2,408,000 and
$2,046,499 in the escrow accounts, $3,314 and $6,626 in the trust accounts,
and $116,651 and $70,054 in the account servicing accounts, respectively.
3. Concentration of Credit Risk:
The Company maintains cash and cash equivalents with various financial
institutions. Deposits not to exceed $100,000 at each institution are insured
by the Federal Deposit Insurance Corporation. At July 31, 1996 (unaudited)
and October 31, 1995, the Company had uninsured cash and cash equivalents of
approximately $2,000,000.
4. Business Combinations:
On May 23, 1996, the Company purchased all of the outstanding shares of
Capital Title Agency, Inc. for common share consideration. The acquisition
was accounted for by the purchase method as a reverse acquisition. The
results of operations of Capital Title Agency, Inc. are included in the
accounts from the effective date of the acquisition.
Capital Title Group, Inc. (formerly Norvex, Inc.) is a publicly traded
Company that had 1,686,158 shares issued and outstanding, after a one for 10
(1-10) reverse stock split, at the acquisition date. Capital Title Group,
Inc. issued 6,744,628 shares of its common stock to the shareholders of
Capital Title Agency, Inc. for one hundred percent (100%) of the issued and
outstanding common stock of Capital Title Agency, Inc. The common stock of
Capital Title Group, Inc. (formerly Norvex, Inc.) was assigned a value of
$10,000.
As part of the Acquisition Agreement, the Company agreed to sell 590,000
shares of its common stock for the price of $100 to its financial advisor.
The stock was valued at $.01 per share in the accompanying financial
statements, based upon the value of the services rendered in performing due
diligence procedures.
5. Income Taxes:
The net operating loss carryforwards create a potential tax asset. Scheduled
below at current maximum tax rates for corporations are the potential tax
assets and the valuation allowance:
<TABLE>
<CAPTION>
(UNAUDITED)
July 31, October 31,
1996 1995
---- ----
<S> <C> <C>
Deferred tax asset $16,358 $ 86,000
Valuation allowance - (86,000)
------- --------
Net Asset $16,358 $ -
======= ========
</TABLE>
Capital Title Agency, Inc. has a net operating loss carryforward of
approximately $175,000 that may be offset against future state taxable
income. If not used, the carryforward will expire primarily by October 31,
2000.
F-9
<PAGE> 37
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Income Taxes: (Continued)
As of July 31, 1996, (unaudited) the Company has the following net operating
losses available for carryforwards to offset future state taxable income:
<TABLE>
<CAPTION>
Amount of Loss Expiration Date
-------------- ---------------
<S> <C>
$ 58,000 1998
117,000 2000
--------
$175,000
========
</TABLE>
Changes in operations and changes in majority stockholder control have
adverse effects upon the useability of net operating losses.
6. Notes Payable:
As of July 31, 1996 (unaudited), notes payable consist of the following:
<TABLE>
<S> <C>
8.75% note payable to Primus Automotive, with monthly
installments of $299, including principal and interest,
due June, 1998; secured by a vehicle. $ 6,563
10.5% note payable to First Interstate Bank, with monthly
installments of $309, including principal and interest,
due January, 1999; secured by a vehicle. 8,119
-------
14,682
Less: current portion (6,153)
-------
$ 8,529
</TABLE> =======
The maturities of long-term notes payable are as follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
July 31, Amount
-------- ------
<S> <C>
1997 $ 6,153
1998 6,752
1999 1,777
-------
$14,682
=======
</TABLE>
F-10
<PAGE> 38
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Capital Lease Obligation:
The Company is the lessee of office equipment with an aggregate cost of
$28,919, under a capital lease agreement which expires in November, 2000.
Minimum future lease payments due under the capital lease agreement for the
next five (5) years, are as follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
July 31, Amount
-------- ------
<S> <C>
1997 $ 3,432
1998 3,432
1999 3,432
2000 3,432
2001 1,430
-------
Net minimum lease payments 15,158
Less: amount representing interest (3,348)
-------
Present value of net minimum lease
payments 11,810
Less: current portion (2,365)
-------
Long-term maturities of capital lease
obligation $ 9,445
=======
</TABLE>
The interest rate is imputed based on the lessor's implicit rate of return at
the inception of the lease.
8. Revolving Line of Credit:
Capital Title Group, Inc. had an unsecured revolving line of credit with Bank
One of Arizona for a maximum amount of $50,000. Interest was at prime plus
two and one-half percent (2.5%). At October 31, 1995, the rate was 11%.
Minimum payment due monthly was 4% of the debt balance. All unpaid principal
and interest was due December 1, 1995. The credit line was paid in full and
has not been renewed.
F-11
<PAGE> 39
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Operating Lease Commitments:
The Company leases offices at ten (10) locations. The remaining lease periods
range from twenty-seven (27) months to sixty (60) months with renewal options
up to ten (10) years.
The future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
July 31, Amount
-------- ------
<S> <C>
1997 $ 559,275
1998 478,597
1999 385,760
2000 127,641
2001 71,390
----------
Total lease commitments $1,662,663
==========
</TABLE>
10. Related Party Transactions:
On March 4, 1996, Capital Title Group, Inc. (formerly Norvex, Inc.) resolved
to issue to its then president 1,500,000 shares (150,000 shares after the
reverse split) of its common stock in full satisfaction of an outstanding
loan balance, plus accrued interest in the amount of $29,035.
As of May 23, 1996, Capital Title Group, Inc. granted 275,000 options at $1
per share to related parties under its 1996 Stock Option Plan (See Note 15).
As of May 23, 1996, Capital Title Group, Inc. granted 15,000 options at $1
per share to a related party under its Non-Employee Director Stock Option
Plan (See Note 15).
Capital Title Agency, Inc. receives management and consulting services from a
related business. Charges for these services were $8,000 from the date of
acquisition, May 23, 1996 through July 31, 1996 (unaudited).
Notes Payable to Related Parties:
As of July 31, 1996 (unaudited) and October 31, 1995, notes payable to
related parties consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
July 31, October 31,
1996 1995
---- ----
<S> <C> <C>
10% note payable to a related corporation, in
monthly installments of $3,187, including
principal and interest over 60 months;
unsecured. $ 138,133 $ -
10% note payable to a related party, due on
demand; unsecured. - 16,089
8.5% note payable to a related party, due
October 11, 1997; unsecured. 8,000 -
</TABLE>
F-12
<PAGE> 40
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Related Party Transactions: (Continued)
Notes Payable to Related Parties: (Continued)
<TABLE>
<S> <C> <C>
8.5% note payable to a related party, due
October 11, 1997; unsecured. 8,000 -
-------- --------
154,133 16,089
Less: current portion (25,583) (16,089)
-------- --------
$128,550 $ -
======== ========
</TABLE>
The maturities of long-term notes payable to related parties, are as
follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
July 31, Amount
---------- ------
<S> <C>
1997 $ 25,583
1998 44,262
1999 31,221
2000 34,490
2001 18,577
--------
$154,133
========
</TABLE>
11. Contingencies:
The Company is a defendant in various lawsuits and claims, which it is
vigorously defending. It is management's contention that such matters arose
out of the normal course of business. While the results of litigation cannot
be predicted with certainty, management believes, based on the advice of
legal counsel, that the final outcome of such litigations will not have a
material adverse effect on the Company's financial position.
12. Cash Flow Information:
For the nine month periods ended July 31, 1996 and 1995 (unaudited), and for
the fiscal years ended October 31, 1995 and 1994, no taxes or interest were
paid.
Non-Cash Financing and Investing Activities:
The Company recognized investing and financing activities that affected
assets and liabilities, but did not result in cash receipts or payments, as
follows:
In July, 1996, the Company financed the purchase of property and
equipment in the amount of $12,968 (unaudited) under capital lease and
financing agreements.
In May, 1996, the Company issued 6,744,628 shares of common stock to
purchase all the issued and outstanding shares of Capital Title
Agency, Inc.
F-13
<PAGE> 41
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Cash Flow Information: (Continued)
Non-Cash Financing and Investing Activities: (Continued)
In 1996, the Company issued 150,000 shares of common stock to satisfy
loans payable of $29,035 (unaudited) to its officers.
In 1995, the Company issued 200,000 shares of its common stock to
satisfy loans payable of $48,411 to its officers.
13. Employee Benefit Plans:
Profit Sharing Plan:
The Company maintains a profit sharing plan under Section 401(K) of the
Internal Revenue Code. Under this plan, substantially all full-time
employees may elect to defer up to fifteen percent (15%) of their salary.
The Company contributes $.25 for every $1 the employee contributes, up to a
maximum of one percent (1%) of the employee's earnings. Vesting of matching
contributions is based on certain service requirements. Employees are fully
vested after six (6) years of service. Employer contributions for the period
from the date of inception, May 23, 1996 through July 31, 1996 were $733
(unaudited).
Cafeteria Plan:
The Company maintains an Internal Revenue Code Section 125 Cafeteria Plan as
a benefit to its employees. The plan provides for employee and dependent
coverage to be paid from before tax compensation. As such, there is no
effect on the financial statements.
14. Private Placement Memorandum:
The Company is offering their common stock through a Private Placement
Memorandum at $1 per share, with an intended maximum offering of 1,500,000
shares. As of July 31, 1996 (unaudited), the Company had sold 675,000
shares. The offering is valid through September 30, 1996, with a possible
extension thereafter. As of September 8, 1996, an additional 375,000 shares
had been sold.
15. Stock Option Plans:
1996 Stock Option Plan:
On May 23, 1996, the Company adopted its 1996 Stock Option Plan. Under the
Plan, the Company reserved an aggregate of 1,000,000 shares of common stock
to be granted at the discretion of the Board of Directors. Options granted
under the Plan are not transferrable and expire five (5) years after the
date of grant. The per share exercise price of an incentive stock option
granted under the Plan may not be less than the fair market value of the
common stock on the date of grant.
As of May 23, 1996, the Board of Directors has authorized the grant, under
the 1996 Stock Option Plan, options to purchase 475,000 shares of common
stock, with the exercise prices of all such options being $1 per share. Of
such options, 275,000 were granted to related parties. As of July 31, 1996,
none of the options have been exercised.
F-14
<PAGE> 42
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
(FORMERLY NORVEX, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
15. Stock Option Plans: (Continued)
Non-Employee Directors Stock Option Plan:
On May 23, 1996, Capital Title Group, Inc. adopted a Non-Employee Directors
Stock Option Plan. Under the Plan, the Company reserved an aggregate of
100,000 shares of common stock to be granted.
Each non-employee director who joins the Board of Directors will receive an
option to acquire 15,000 shares of the Company's common stock. In addition
to the foregoing option grants, each year every non-employee director
automatically receives an option to acquire 10,000 shares of the Company's
common stock on the third business day following the date the Company
publicly announces its annual financial results; provided that such director
has attended at least 75% of the meetings of the Board of Directors and of
the Board of Committees of which such non-employee director is a member in
the preceding fiscal year. The exercise price of all options granted under
the Directors Plan is the fair market value of the Company's common stock on
the date of grant.
As of July 31, 1996, 15,000 options have been granted under the Non-Employee
Directors Stock Option Plan at an exercise price of $1 per share. None of
these options have been exercised as of July 31, 1996.
F-15
<PAGE> 43
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited proforma condensed consolidated financial statements
give effect to the acquisition by Capital Title Group, Inc. (formerly Norvex,
Inc.) of Capital Title Agency, Inc., pursuant to the Acquisition Agreement
between the parties, and are based on the estimates and assumptions set forth
herein. This proforma information has been prepared utilizing the historical
financial statements and notes thereto, which are incorporated by reference
herein. The proforma financial data does not purport to be indicative of the
results which actually would have been obtained had the purchase been effected
on the dates indicated or of the results which may be obtained in the future.
The proforma financial information is based on the purchase method of accounting
for the acquisition of Capital Title Agency, Inc. The proforma entries are
described in the accompanying notes to the unaudited proforma condensed
consolidated financial statements. The proforma unaudited condensed consolidated
statements of operations assumes the acquisition took place on the first day of
the period presented.
ACQUISITION
On May 23, 1996, Capital Title Group, Inc. (formerly Norvex, Inc.) acquired one
hundred percent (100%) of the outstanding common stock of Capital Title Agency,
Inc. by issuance of 6,744,628 shares of common stock of Capital Title Group,
Inc. A value of $10,000 was placed on the shares issued to the stockholders of
Capital Title Agency, Inc. The transaction has been accounted for under the
purchase method of accounting, and as a reverse acquisition.
In addition, the Company issued an option to acquire 590,000 shares of common
stock for $100 to its financed advisor in the acquisition. The option was valued
at $5,900 at the date of grant.
F-16
<PAGE> 44
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTH PERIOD ENDED JULY 31, 1996
Unaudited Proforma Condensed Consolidated Financial Statements:
The following represents the unaudited proforma condensed consolidated statement
of operations for the nine month period ended July 31, 1996, assuming the
following transaction was consummated as of November 1, 1995:
Acquisition of Capital Title Agency, Inc. for 6,744,628 shares of common
stock of Capital Title Group, Inc., and the issuance of 590,000 shares for
consulting services. The weighted average shares outstanding gives
retroactive effect to a one for ten (1-10) reverse stock split.
<TABLE>
<CAPTION>
Historical Historical
Capital Title Capital Title
Agency, Inc. Group, Inc.
For The Nine Month
Period Ended Period Ended Proforma
May 23, 1996 July 31, 1996 Proforma Entries Combined
------------ ------------- ---------------- --------
<S> <C> <C> <C> <C>
Revenue $1,268,489 $ 414,263 $1,682,752
General and adminis-
trative expenses 1,368,539 600,136 (1) $1,885 1,910,560
---------- ---------- ----------
Loss from Operations (100,050) (185,873) (287,808)
Other expense (5,314) (2,000) (7,314)
---------- ---------- ----------
Net Loss $ (105,364) $ (187,873) $ (295,122)
========== ========== ==========
Net loss per share $ (.05) $ (.03)
========== ==========
Weighted average
number of shares
outstanding 3,506,230 9,013,918
========== ==========
</TABLE>
(1) To amortize goodwill recorded in connection with the purchase of Capital
Title Agency, Inc. on a straight-line basis over five (5) years.
F-17
<PAGE> 45
CAPITAL TITLE GROUP, INC. AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED OCTOBER 31, 1995
Unaudited Proforma Condensed Consolidated Financial Statements:
The follow represents the unaudited proforma condensed consolidated statement of
operations for the year ended October 31, 1995, assuming the following
transaction was consummated as of November 1, 1994:
Acquisition of Capital Title Agency, Inc. for 6,744,628 shares of common
stock of Capital Title Group, Inc., and the issuance of 590,000 shares for
consulting services. The weighted average shares outstanding gives
retroactive effect to a one for ten (1-10) reverse stock split.
<TABLE>
<CAPTION>
Historical Historical
Capital Capital
Title Title Proforma
Agency, Inc. Group, Inc. Proforma Entries Combined
------------ ----------- ---------------- --------
<S> <C> <C> <C> <C>
Revenue $2,027,263 $ - $2,027,263
General and adminis-
trative expenses 2,225,484 18,578 (1) $3,180 2,247,242
---------- ---------- ----------
Loss from Operations (198,221) (18,578) (219,979)
Other expense 16,060 4 16,064
---------- ---------- ----------
Net loss before
provision for income
tax benefit (182,161) (18,574) (203,915)
Income tax benefit 65,059 - 65,059
---------- ---------- ----------
Net Loss $ (117,102) $ (18,574) $ (138,856)
========== ========== ==========
Net loss per share $ (.01) $ (.02)
========== ==========
Weighted average
number of shares
outstanding 1,536,158 8,870,786
========== ==========
</TABLE>
(1) To amortize goodwill recorded in connection with the purchase of Capital
Title Agency, Inc. on a straight-line basis over five (5) years.
F-18
<PAGE> 46
To The Stockholders and Board of Directors of
Capital Title Agency, Inc.
We have audited the accompanying balance sheet of Capital Title Agency, Inc. as
of October 31, 1995, and the related statements of operations, stockholders
equity, and cash flows for the years ended October 31, 1995 and 1994. The
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits of the financial statements provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Capital Title Agency, Inc. as
of October 31, 1995, and the results of their operations, stockholders' equity,
and cash flows for the years ended October 31, 1995 and 1994, in conformity with
generally accepted accounting principles.
Certified Public Accountants Semple & Cooper, P.L.C.
Phoenix, Arizona
September 5, 1996
F-19
<PAGE> 47
CAPITAL TITLE AGENCY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
May 23, October 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash (Notes 1 and 3) $ 56,019 $ 17,354
Accounts receivable, less allowance for
doubtful accounts of $3,716 (Note 1) 26,021 14,095
Income taxes receivable -- 51,575
Prepaid expenses 9,813 1,604
Deferred income taxes (Notes 1 and 5) 4,387 4,387
--------- ---------
Total Current Assets 96,240 89,015
Property and Equipment, net (Notes 1, 4 and 12) 211,303 193,806
Other Assets:
Investment in title plant (Note 1) 175,000 175,000
Deferred income tax asset (Notes 1 and 5) 11,971 11,971
Deferred acquisition costs (Note 1) 33,829 --
--------- ---------
Total Assets $ 528,343 $ 469,792
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving line of credit (Note 8) $ -- $ 33,104
Notes payable - current portion (Note 6) 6,063 3,197
Notes payable to related parties -
current portion (Note 10) 25,162 16,000
Obligation under capitalized lease -
current portion (Notes 1 and 7) 2,131 1,582
Accounts payable 117,779 171,057
Accrued expenses 32,924 26,595
Income taxes payable -- 15,249
--------- ---------
Total Current Liabilities 184,059 266,784
--------- ---------
Long-Term Liabilities:
Notes payable - long-term portion (Note 6) 9,176 5,547
Notes payable to related party - long-term
portion (Note 10) 132,992 --
Obligation under capitalized lease - long-term
portion (Notes 1 and 7) 10,019 --
--------- ---------
Total Long-Term Liabilities 152,187 5,547
--------- ---------
Stockholders' Equity: (Note 14)
Common stock, no par value, 2,000,000 shares
authorized; 1,165,000 and 1,000,000 shares
issued and outstanding, respectively 580,663 480,663
Accumulated deficit (388,566) (283,202)
--------- ---------
Total Stockholders' Equity 192,097 197,461
--------- ---------
Total Liabilities and Stockholders' Equity $ 528,343 $ 469,792
========= =========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-20
<PAGE> 48
CAPITAL TITLE AGENCY, INC.
STATEMENTS OF OPERATIONS
For the Nine Month Period Ended July 31, 1995 (Unaudited) and
For the Period From November 1, 1995 to May 23, 1996 (Unaudited) and
For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
May 23, July 31, October 31, October 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 1,268,489 $ 1,497,542 $ 2,027,263 $ 2,538,558
General and Adminis-
trative Expenses 1,368,539 1,634,287 2,225,484 2,403,590
----------- ----------- ----------- -----------
Income (Loss) from
Operations (100,050) (136,745) (198,221) 134,968
----------- ----------- ----------- -----------
Other Income (Expense):
Escrow losses
recovered and
lawsuit
settlements 2,864 9,339 10,839 10,230
Gain (loss) on sale
of equipment -- (1,714) 2,800 --
Insurance
recoveries -- 35,732 8,467 23,803
Interest expense (8,430) (3,506) (6,289) (6,786)
Interest income 252 194 243 1,176
----------- ----------- ----------- -----------
(5,314) 40,045 16,060 28,423
----------- ----------- ----------- -----------
Income (loss) before
provision for
income taxes (105,364) (96,700) (182,161) 163,391
Income tax (expense)
benefit (Notes 1
and 5) -- -- 65,059 (58,727)
----------- ----------- ----------- -----------
Net Income (Loss) $ (105,364) $ (96,700) $ (117,102) $ 104,664
=========== =========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-21
<PAGE> 49
CAPITAL TITLE AGENCY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Period From November 1, 1995 To May 23, 1996 (Unaudited) and
For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
Common Stock Total
------------ Accumulated Stockholders'
Shares Amount Deficit Equity
------ ------ ------- ------
<S> <C> <C> <C> <C>
Balance, October 31, 1993 1,000,000 $ 480,663 $(270,764) $ 209,899
Income for the year ended
October 31, 1994 -- -- 104,664 104,664
--------- --------- --------- ---------
Balance, October 31, 1994 1,000,000 480,663 (166,100) 314,563
Loss for the year ended
October 31, 1995 -- -- (117,102) (117,102)
--------- --------- --------- ---------
Balance, October 31, 1995 1,000,000 480,663 (283,202) 197,461
Issuance of stock for cash 165,000 100,000 -- 100,000
Loss for the period ended
May 23, 1996 -- -- (105,364) (105,364)
--------- --------- --------- ---------
Balance, May 23, 1996 1,165,000 $ 580,663 $(388,566) $ 192,097
========= ========= ========= =========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-22
<PAGE> 50
CAPITAL TITLE AGENCY, INC.
STATEMENTS OF CASH FLOWS
For the Nine Month Period Ended July 31, 1995 (Unaudited) and
For the Period From November 1, 1995 to May 23, 1996 (Unaudited) and
For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
May 23, July 31, October 31, October 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (105,364) $ (96,700) $ (117,102) $ 104,664
---------- --------- ---------- ---------
Adjustments to reconcile net
income (loss) to net cash
provided (used) from operating
activities:
(Gain) loss on sale of
vehicle - 1,714 (2,800) -
Depreciation 28,425 36,547 74,563 60,606
Bad debt expense - - 3,716 20,505
Changes in Assets and Liabilities:
Accounts receivable (11,926) 5,932 (38,629) (27,581)
Income taxes receivable 51,575 9,061 - -
Prepaid expenses (8,209) - (1,604) -
Deferred income taxes - (6,187) (13,484) (2,874)
Accounts payable (53,278) 11,720 50,692 81,661
Accrued expenses 6,329 1,029 1,362 (4,924)
Income taxes payable (15,249) (446) 258 (44,187)
---------- --------- ---------- ---------
(2,333) 59,370 74,074 83,206
---------- --------- ---------- ---------
Net Cash Provided (Used) from
Operating Activities (107,697) (37,330) (43,028) 187,870
---------- --------- ---------- ---------
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-23
<PAGE> 51
CAPITAL TITLE AGENCY, INC.
STATEMENTS OF CASH FLOWS (Continued)
For the Nine Month Period Ended July 31, 1995 (Unaudited) and
For the Period From November 1, 1995 to May 23, 1996 (Unaudited) and
For The Years Ended October 31, 1995 and 1994
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
May 23, July 31, October 31, October 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from investing activities:
Purchase of property and
equipment $(22,450) $(13,873) $(16,331) $(153,599)
Proceeds from sale of
vehicle - - 2,800 -
Deferred acquisition costs (33,829) - - -
-------- -------- -------- ---------
Net cash used by investing
activities (56,279) (13,873) (13,531) (153,599)
-------- -------- -------- ---------
Cash flows from financing activities:
Proceeds from notes payable
to related parties 150,000 - 16,000 -
Proceeds from issuance of
common stock 100,000 - - -
Net change in revolving
credit line (33,104) 36,225 33,104 -
Repayment of notes payable (4,009) (2,368) (2,694) (55,272)
Repayment of notes to
related party (7,846) - - -
Repayment of obligations
under capital lease (2,400) (8,349) (12,519) (12,787)
-------- -------- -------- ---------
Net cash provided (used)
by financing activities 202,641 25,508 33,891 (68,059)
-------- -------- -------- ---------
Net increase (decrease) in cash
and cash equivalents 38,665 (25,695) (22,668) (33,788)
Cash and cash equivalents at
beginning of year 17,354 40,022 40,022 73,810
-------- -------- -------- ---------
Cash and cash equivalents at
end of year $ 56,019 $ 14,327 $ 17,354 $ 40,022
======== ======== ======== =========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-24
<PAGE> 52
CAPITAL TITLE AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies:
Operations:
Capital Title Agency, Inc. is a Corporation which has been duly formed and
organized under the laws of the State of Arizona, and operates under the
authority of the State Banking Commission. The Corporation was approved by
the State of Arizona on November 1, 1981. The principal business purpose of
the Corporation is to offer title, collection and escrow services to the
general public, primarily in the southwestern United States.
The Corporation operates five (5) offices located throughout Arizona.
On May 23, 1996, the Company effected a reverse acquisition with Capital
Title Group, Inc. (formerly Norvex, Inc.). Capital Title Group, Inc. will act
as the parent holding company of Capital Title Agency, Inc. and will file
Form 10-SB with the United States Securities and Exchange Commission to
register the Company under the '34 Act (See Note 14).
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Unaudited Financial Information:
The financial statements for the period from November 1, 1995 to May 23, 1996
and the nine month period ended July 31, 1995 are unaudited. In the opinion
of management, the interim financial statements for the above periods reflect
all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of the results of the interim periods. The results of
operations for the period from November 1, 1995 to May 23, 1996, are not
necessarily indicative of the results for the entire year.
Cash and Cash Equivalents:
Cash and cash equivalents include all highly liquid investments purchased
with an initial maturity of three (3) months or less.
Accounts Receivable:
The Corporation uses the allowance method to account for uncollectible
accounts receivable. The allowance is established based upon a review of the
individual accounts outstanding and the Company's prior history.
Property and Equipment:
Property and equipment are stated at cost and are being depreciated using the
straight-line and double-declining methods of depreciation over estimated
useful lives of five (5) to seven (7) years. For the period from November 1,
1995 to May 23, 1996 (unaudited) and the nine month period ended July 31,
1995 (unaudited), depreciation expense was $28,425 and $36,547, respectively.
For the years ended October 31, 1995 and 1994, depreciation expense was
$74,563 and $60,606, respectively.
F-25
<PAGE> 53
CAPITAL TITLE AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies: (Continued)
Capital Lease Obligation:
The Company is the lessee of office equipment under a capital lease agreement
which expires in November, 2000. The assets and liabilities under the capital
lease are recorded at the lower of the present value of the minimum lease
payments or the fair market value of the assets. The assets are depreciated
over the lower of their related lease term or their estimated productive
lives. Depreciation of the assets under the capital lease agreement is
included in depreciation expense noted above.
Title Plant:
The original investment for the purchase of the title plant is carried at
cost and is not being amortized.
Deferred Acquisition Costs:
Deferred acquisition costs represent costs incurred in relation to a pending
acquisition, and will be accounted for as a portion of the purchase price, or
charged to expense if the acquisition does not materialize.
Income Taxes:
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis, and the utilization of the net operating loss carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.
2. Cash in Escrow:
The Company is the custodian of cash deposited by customers with specific
instructions as to its disbursement from active escrow, trust and account
servicing. The balance in these accounts has not been included in these
financial statements. As of May 23, 1996 (unaudited) and October 31, 1995,
the accounts contain a reserve balance of $2,411,397 and $2,046,499 in the
escrow accounts, $2,155 and $6,626 in the trust accounts, and $525,220 and
$70,054 in the account servicing accounts, respectively.
3. Concentration of Credit Risk:
The Company maintains cash and cash equivalents with various financial
institutions. Deposits not to exceed $100,000 at each institution are insured
by the Federal Deposit Insurance Corporation. At May 23, 1996 (unaudited) and
October 31, 1995, the Company had uninsured cash and cash equivalents of
approximately $2,000,000.
F-26
<PAGE> 54
CAPITAL TITLE AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
4. Property and Equipment:
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
May 23, October 31,
1996 1995
---- ----
<S> <C> <C>
Office equipment $ 329,462 $ 303,290
Vehicles 47,990 36,984
Furniture and fixtures 69,308 61,137
Leasehold improvements 98,845 98,272
--------- ---------
545,605 499,683
Less: accumulated depreciation (334,302) (305,877)
--------- ---------
$ 211,303 $ 193,806
========= =========
</TABLE>
5. Income Taxes:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
October 31, October 31,
1995 1994
---- ----
<S> <C> <C>
Current tax benefit (expense) $ 51,575 $ (61,601)
Deferred tax benefit 13,484 2,874
--------- ---------
$ 65,059 $ (58,727)
========= =========
</TABLE>
At May 23, 1996 (unaudited) and October 31, 1995, the tax effects of
temporary differences and carryforwards that give rise to deferred tax
assets consist of the following:
<TABLE>
<S> <C>
Accounts receivable $ 558
Property and equipment 886
Loss carryforwards 14,914
---------
$ 16,358
=========
</TABLE>
A breakdown of current and non-current deferred tax assets as of May 23, 1996
(unaudited) and October 31, 1995, consist of the following:
<TABLE>
<S> <C>
Current $ 4,387
Non-current 11,971
---------
$ 16,358
=========
</TABLE>
As of May 23, 1996, the Company has net operating loss carryforwards of
approximately $175,000 (unaudited) that may be offset against future state
taxable income. If not used, the carryforwards will expire by October 31,
2000.
F-27
<PAGE> 55
CAPITAL TITLE AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
6. Notes Payable:
As of May 23, 1996 (unaudited) and October 31, 1995, notes payable
consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
May 23, October 31,
1996 1995
---- ----
<S> <C> <C>
8.75% note payable to Primus Automotive, with monthly
installments of $299, including principal and interest,
due June, 1998; secured by a vehicle. $ 6,651 $ 8,744
10.5% note payable to First Interstate Bank, with
monthly installments of $309, including principal and
interest, due January, 1999; secured by a vehicle. 8,588 -
------- -------
15,239 8,744
Less: current portion (6,063) (3,197)
------- -------
$ 9,176 $ 5,547
======= =======
</TABLE>
The maturities of long-term notes payable are as follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
May 31, Amount
------- ------
<S> <C>
1997 $ 6,063
1998 6,671
1999 2,505
-------
$15,239
=======
</TABLE>
7. Capital Lease Obligation:
The Company is the lessee of office equipment with an aggregate cost of
$28,919, under a capital lease agreement which expires in November, 2000.
Minimum future lease payments due under the capital lease agreement for the
next five (5) years, are as follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
May 31, Amount
------- ------
<S> <C>
1997 $ 3,432
1998 3,432
1999 3,432
2000 3,432
2001 2,002
-------
Net minimum lease payments 15,730
Less: amount representing interest (3,580)
-------
Present value of net minimum lease payments 12,150
Less: current portion (2,131)
-------
Long-term maturities of lease obligation $10,019
=======
</TABLE>
The interest rate is imputed based on the lessor's implicit rate of
return at the inception of the lease.
F-28
<PAGE> 56
CAPITAL TITLE AGENCY, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
8. Revolving Line of Credit:
The Company has an unsecured revolving line of credit with Bank One of
Arizona for a maximum amount of $50,000. Interest is at prime plus two and
one-half percent (2.5%). At October 31, 1995, the rate was 11%. Minimum
payment due monthly is 4% of the debt balance. All unpaid principal and
interest was due December 1, 1995. The credit line was paid in full on the
due date and has not been renewed.
9. Operating Lease Commitments:
As of May 23, 1996, the Company leases offices at five (5) locations. The
remaining lease periods range from twenty-seven (27) months to thirty-six
(36) months with renewal options up to ten (10) years.
The future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
Year Ended
May 31, Amount
------- ------
<S> <C>
1997 173,544
1998 114,761
1999 39,522
--------
Total lease commitments $327,827
========
</TABLE>
10. Related Party Transactions:
The Company receives management and consulting services from a related
business. Charges for these services were $48,000 and $38,000 for the years
ended October 31, 1995 and 1994, respectively, and $28,000 and $22,166
(unaudited) for the period from November 1, 1995 to May 23, 1996 and for the
nine month period ended July 31, 1995, respectively.
The Company has a lease with a related corporation for computer equipment.
This is included with the capital leases disclosed in Note 7. The balance of
this lease as of October 31, 1995 was $1,582.
As of May 23, 1996 (unaudited) and October 31, 1995, notes payable to related
parties consist of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
May 23, October 31,
1996 1995
---- ----
<S> <C> <C>
10% note payable to a related corporation, in monthly
installments of $3,187, including principal and
interest over 60 months; unsecured. $142,154 $ -
8.5% note payable to a related party, due October
11, 1997; unsecured. 8,000 8,000
8.5% note payable to a related party, due October
11, 1997; unsecured. 8,000 8,000
-------- --------
158,154 16,000
Less: current portion (25,162) (16,000)
-------- --------
$132,992 $ -
======== ========
</TABLE>
F-29
<PAGE> 57
CAPITAL TITLE AGENCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Related Party Transactions: (Continued)
Notes Payable to Related Parties: (Continued)
The maturities of long-term notes payable to related parties, are as follows:
<TABLE>
<CAPTION>
Year Ended (UNAUDITED)
May 31, Amount
------- ------
<S> <C>
1997 $ 25,162
1998 43,796
1999 30,707
2000 33,923
2001 24,566
----------
$ 158,154
==========
</TABLE>
11. Contingencies:
The Company is a defendant in various lawsuits and claims, which it is
vigorously defending. It is management's contention that such matters arose
out of the normal course of business. While the results of litigation cannot
be predicted with certainty, management believes, based on the advice of
legal counsel, the final outcome of such litigations will not have a
material adverse effect on the Company's financial position.
12. Cash Flow Information:
Cash paid (refunded) for interest and income taxes during the period from
November 1, 1995 to May 23, 1996 and for the nine month period ended July
31, 1995 (unaudited), and for the fiscal years ended October 31, 1995 and
1994, is as follows:
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
May 23, July 31, October 31, October 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest $ 7,033 $ 3,506 $ 6,034 $ 6,516
======== ========== ========== ==========
Income taxes $(51,575) $ 15,694 $ - $ 105,868
======== ========== ========== ==========
</TABLE>
Material Non-Cash Transactions:
During the period from November 1, 1995 to May 23, 1996 (unaudited), the
Company recognized an investing and financing activity that affected assets
and liabilities, but did not result in cash receipts or payments, as
follows:
The Company financed the purchase of property and equipment in the
amount of $23,472 under a capital lease and financing agreement.
13. Employee Benefit Plans:
The Company maintains a profit sharing plan under Section 401(K) of the
Internal Revenue Code. Under this plan, substantially all full-time
employees may elect to defer up to fifteen percent (15%) of their salary.
The Company contributes $.25 for every $1 the employee contributes, up to a
maximum of one percent (1%) of the employee's earnings. Vesting of matching
contributions is based on certain service requirements. Employees are fully
vested after six (6) years of service. Employer contributions for the period
from November 1, 1995 to May 23, 1996 and the nine month period ended July
31, 1995, and for the years ended October 31, 1995 and 1994, were
approximately $3,300 and $3,421 (unaudited), and $3,700, and $4,600,
respectively.
F-30
<PAGE> 58
CAPITAL TITLE AGENCY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Employee Benefit Plans: (Continued)
The Company maintains a Section 125 Cafeteria Plan as a benefit to its
employees. The plan provides for employee and dependent coverage to be paid
from before tax compensation. As such, there is no effect on the financial
statements.
14. Business Combinations:
On May 23, 1996, the Capital Title Group, Inc. (formerly Norvex, Inc.)
purchased all of the outstanding shares of Capital Title Agency, Inc. for
common share consideration. The acquisition was accounted for by the
purchase method of accounting as a reverse acquisition.
Capital Title Group, Inc. (formerly Norvex, Inc.) is a publicly traded
company that had 1,686,158 shares issued and outstanding, after a one for 10
(1-10) reverse stock split, at the acquisition date. Capital Title Group,
Inc. (formerly Norvex, Inc.) issued 6,744,628 shares of its common stock to
the stockholders of Capital Title Agency, Inc. for one hundred percent
(100%) of the issued and outstanding common stock of Capital Title Agency,
Inc. The common stock issued by Capital Title Group, Inc. (formerly Norvex,
Inc.) was valued at approximately $10,000.
As part of the Acquisition Agreement, the Company agreed to sell 590,000
shares of its common stock for the price of $100 to its financial advisor.
The stock was valued at $.01 per share in the accompanying financial
statements, based upon the value of the services rendered in performing due
diligence procedures.
F-31
<PAGE> 59
PART III
ITEM 1. INDEX TO EXHIBITS
<TABLE>
<CAPTION> Method of
Exhibit No. Description Filing
- ----------- ----------- ---------
<S> <C>
2 Share Exchange Agreement between Capital Title *
Agency, Inc. and Norvex, Inc. dated May 23,
1996
3.1 Certificate of Incorporation *
3.2 Amended and Restated Bylaws *
10.1 Underwriting Agreement between Capital Title *
Agency, Inc. and Old Republic National Title
Insurance Company dated March 1, 1996
10.2 Underwriting Agreement between Capital Title *
Agency, Inc. and First American Title Insurance
Company dated August 16, 1996
10.3 Image Service Agreement between Capital Title *
Agency, Inc. and Security Union Title Insurance
Company dated June 5, 1996
10.4 Title Plant Service Agreement between Capital *
Title Agency, Inc. and Diversified Information
Services Corporation dated March 1, 1996
10.5 Office Lease between Capital Title Agency, Inc. *
and 4808 Corporation dated June 7, 1996
10.6 Promissory Note between PWCC, Inc. and Bank *
One Arizona, NA dated January 5, 1996
10.7 Assumption Agreement between Capital Title *
Agency, Inc. and PWCC, Inc. dated January 5,
1996
10.8 Employment Agreement between Capital Title *
Group, Inc. and Donald R. Head dated June 1,
1996.
10.9 Employment Agreement between Capital Title *
Group, Inc. and Andrew A. Johns dated June 1,
1996
10.10 Employment Agreement between Capital Title *
Agency, Inc. and James A. Clifford dated
May 17, 1996
</TABLE>
<PAGE> 60
<TABLE>
<S> <C>
10.11 Employment Agreement between Capital Title *
Agency, Inc. and James P. Stamas dated July 22,
1996.
10.12 Employment Agreement between Capital Title *
Agency, Inc. and Nick Velimirovich dated
May 17, 1996
11 Statement re: Computation of Per Share Earnings *
16.1 Letter from Duane V. Midgley dated *
September 23, 1996
16.2 Letter from Schvaneveldt & Company dated *
September 23, 1996
16.3 Letter from John E. Jones dated September 23, 1996 *
21 Subsidiaries *
27 Financial Data Schedule *
</TABLE>
- ------------
* Filed Herewith
<PAGE> 61
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
CAPITAL TITLE GROUP, INC.
Date: September 19, 1996 By /s/ Donald R. Head
---------------------------------
Donald R. Head
Chief Executive Officer
<PAGE> 1
EXHIBIT 2
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated this 23rd day of
May, 1996, is entered into between NORVEX, INC., a Delaware corporation
("Norvex"), CAPITAL TITLE AGENCY, INC., an Arizona corporation ("CTA") and the
shareholders of CTA set forth on Exhibit A attached hereto (the "CTA
Shareholders").
ARTICLE 1
RECITALS
1.1 Share Exchange. The CTA Shareholders and Norvex have determined,
among other things, to enter into a transaction pursuant to which all the
outstanding shares of common stock, $.001 par value per share, of CTA ("CTA
Common Stock") will be exchanged for shares of common stock, $.001 par value per
share, of Norvex ("Norvex Common Stock") on the basis of 5.781 shares of Norvex
Common Stock for each one share of CTA Common Stock (the "Share Exchange").
1.2 Reverse Stock Split. Prior to consummation of the Share Exchange,
Norvex will effect a 1 for 10 reverse stock split on its outstanding shares of
Common Stock, retaining the number of shares of authorized capital stock at
50,000,000 shares of Norvex Common Stock, $.001 par value.
1.3 Debt Conversion. Prior to the Reverse Split, Norvex has converted
all of its outstanding debt into 1,500,000 shares of Common Stock of Norvex (on
a pre-Reverse Split basis).
1.4 Corporate Changes. On the Effective Date of the Share Exchange,
Norvex will (i) take such action as shall be necessary to elect the current
officers and directors of CTA as the officers and directors of Norvex, and (ii)
file a Certificate of Amendment to its Certificate
<PAGE> 2
of Incorporation to change the name of Norvex to "Capital Title Group, Inc.",
and to eliminate the liability of directors of Norvex for breaches of their
fiduciary duties to the fullest extent permitted by the Delaware General
Corporation Law ("Delaware Law").
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE 2
SHARE EXCHANGE
2.1 Conveyance of CTA Common Stock. On the Closing Date (as defined
below) the CTA Shareholders shall transfer and deliver all of the issued and
outstanding CTA Common Stock to Norvex free and clear of any liens, claims,
security interests or other encumbrances.
2.2 Conveyance of Norvex Common Stock. In consideration for the
transfer of the CTA Common Stock, Norvex shall issue and deliver, to each of the
CTA Shareholders, 5.781 shares of Norvex Common Stock for each share of CTA
Common Stock delivered by each such CTA Shareholder to Norvex, which Norvex
Common Stock shall be free and clear of any liens, claims, security interests or
other encumbrances.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CTA SHAREHOLDERS
The CTA Shareholders hereby represent and warrant to Norvex as follows:
3.1 Organization and Qualification. CTA is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona and has the requisite corporate and other power and authority (including
all licenses, permits and authorizations) to own and operate its properties and
to carry on its business as now conducted. The copies of CTA's Articles of
Incorporation which have been furnished by the CTA Shareholders to Norvex
2
<PAGE> 3
prior to the date of this Agreement reflect all amendments made thereto and are
correct and complete. CTA is qualified to do business in every jurisdiction in
which the nature of its business or its ownership of property requires it to be
qualified.
3.2 Due Execution. This Agreement has been duly executed and delivered
by CTA and the CTA Shareholders and constitutes a valid and binding obligation
of CTA and the CTA Shareholders, enforceable in accordance with its terms. The
execution, delivery and performance of the Agreement do not and the consummation
of the transactions contemplated hereby will not, violate any provisions of (a)
CTA's Articles of Incorporation, (b) any agreement, arrangement or understanding
to which CTA or any CTA Shareholder is a party, (c) any license, franchise or
permit of CTA or (d) any law, regulation, order, judgment or decree applicable
to CTA or any CTA Shareholder. No authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the part of CTA
or the CTA Shareholders for the consummation by CTA and the CTA Shareholders of
the transactions contemplated by this Agreement.
3.3 Capitalization. The authorized equity capitalization of CTA
consists of 2,000,000 shares of CTA Common Stock. As of the date hereof,
1,166,667 shares of CTA Common Stock are issued and outstanding, all of which
shares are validly issued, fully paid and nonassessable. As of the date hereof,
there are no options, warrants, conversion privileges or other rights,
agreements, arrangements or commitments obligating CTA to issue or sell shares
of CTA Common Stock. As of the date hereof, there are no stock appreciation,
phantom or similar rights outstanding based upon the market value or any other
attribute of CTA. Upon consummation of the transactions contemplated by this
Agreement, there will be no options,
3
<PAGE> 4
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating CTA to issue or sell any shares of capital stock of CTA
to any person or entity.
3.4 Financial Statements. The CTA Shareholders have heretofore
delivered or caused to be delivered to Norvex statements of financial condition
and related statements of operations and retained earnings and statements of
changes in financial position, together with notes thereto, respecting the
business and operations of CTA for and as of the fiscal years ended October 31,
1994 and 1995, and for the six months ended April 30, 1996 (such financial
statements are hereinafter collectively referred to as the "CTA Financial
Statements"). The CTA Financial Statements present fairly the financial
position, results of operations, and changes in financial position of CTA as of
the dates or for the periods indicated, are consistent with the books and
records of CTA to which they relate and have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved.
3.5 Subsidiaries. CTA has no subsidiaries and does not own any stock,
partnership interests, joint venture interests, or any other securities issued
by any other corporation, organization or entity.
3.6 Tax Matters. Since its inception, CTA has filed all federal,
foreign, state, county and local income, excise, property, sales and other tax
returns that are required to be filed by it, and all such returns are true and
correct; CTA has paid all taxes due and payable by it or which its is obligated
to withhold from amounts owing to any employee, creditor, or third party; CTA
has not waived any statute of limitations in respect of taxes relating to its
business or agreed to any extension of time with respect to a tax assessment or
deficiency relating to its business; the assessment of any additional taxes
relating to its business for periods for which
4
<PAGE> 5
returns have been filed is not expected; and there are no investigations,
unresolved questions or claims concerning the tax liabilities of CTA.
3.7 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or threatened against CTA, at law or in equity, before or
by any federal, state, or municipal court or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
there is no basis known or that should be known to the CTA Shareholders for any
of the foregoing.
3.8 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
CTA.
3.9 Compliance with Laws; Permits; Certain Operations. CTA has complied
in all material respects with all laws and regulations of foreign, federal,
state and local governments and all agencies thereof which affect the businesses
of CTA, the noncompliance with which could have a material adverse effect on the
business or prospects of CTA. No claims have been filed against CTA alleging a
violation of any such law or regulation. CTA holds all of the permits, licenses,
certificates and other authorizations of foreign, federal, state and local
governmental agencies required for the conduct of its business.
3.10 Liabilities. CTA does not have any liabilities, for borrowed money
or otherwise, except (i) as disclosed in the CTA Financial Statements; or (ii)
as incurred in the ordinary course of business since the date of the CTA
Financial Statements. CTA is not directly or indirectly liable upon or obligated
in any other way to provide funds to or to guarantee or assume any debt or
obligation of any individual or any legal entity, except as a consequence of
endorsements made in the ordinary course of business in connection with the
deposit of items for collection.
5
<PAGE> 6
3.11 Absence of Adverse Changes. Other than as contemplated by this
Agreement, since the date of the CTA Financial Statements, CTA taken as a whole:
(a) has not suffered any material adverse change in its business,
assets, financial affairs or prospects;
(b) has conducted its business in the ordinary course and has not
made any unusual commitments, acquisitions, borrowings, purchases,
payments or sales;
(c) has not suffered any damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting its
properties, assets or business; and
(d) has not made any declaration or setting aside or payment of
any dividend or other distribution in respect of the CTA Common Stock,
or any direct or indirect redemption, purchase or other acquisition of
any stock.
3.12 Norvex Stock Received as Investment. The CTA Shareholders
represent and warrant that the shares of Norvex Common Stock being acquired by
them pursuant to the terms and provisions of this Agreement are being acquired
by them for purposes of investment and not with an intention of distribution or
resale thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NORVEX
Norvex hereby represents and warrants to the CTA Shareholders as
follows:
4.1 Organization and Qualification. Norvex is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate and other power and authority
(including all licenses, permits and authorizations) to
6
<PAGE> 7
own and operate its properties and to carry on its business as now conducted.
Norvex is qualified to do business in every jurisdiction in which the nature of
its business or its ownership of property requires it to be qualified.
4.2 Authority Relative to this Agreement; Due Execution. Norvex has the
requisite corporate and other power and authority to enter into this Agreement
and to carry out its obligations hereunder. The execution and delivery of this
Agreement by Norvex and the consummation by Norvex of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Norvex and, if necessary, the shareholders of Norvex, and no other corporate
proceedings on the part of Norvex are necessary to authorize this Agreement and
such transactions. This Agreement has been duly executed and delivered by Norvex
and constitutes a valid and binding obligation of Norvex, enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement do not, and the consummation of the transactions contemplated hereby
will not, violate any provisions of (a) Norvex's Certificate of Incorporation,
(b) any agreement, arrangement or understanding to which Norvex is a party, (c)
any license, franchise or permit of Norvex or (d) any law, regulation, order,
judgment or decree applicable to Norvex. Other than any filings which may be
required by the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), no authorization, consent or approval of, or filing with, any public
body, court or authority is necessary on the part of Norvex for the consummation
by Norvex of the transactions contemplated by this Agreement.
4.3 Capitalization. The authorized equity capitalization of Norvex
consists of 50,000,000 shares of Norvex Common Stock. As of the date hereof,
16,861,571 shares of Norvex Common Stock are issued and outstanding, all of
which shares are validly issued, fully paid and nonassessable, and following the
Reverse Split there will be 1,686,157 shares of
7
<PAGE> 8
Norvex Common Stock issued and outstanding. The outstanding shares of Norvex
Common Stock include 1,500,000 shares (on a pre-Reverse Split basis) issued to
convert all of Norvex's outstanding debt to equity. There are no options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating Norvex to issue or sell any shares of capital stock of
Norvex or securities or obligations of any kind convertible into or exchangeable
for any shares of capital stock of Norvex or of any other corporation, nor are
there any stock appreciation, phantom or similar rights outstanding based upon
the market value or any other attribute of Norvex. The holders of outstanding
shares of Norvex Common Stock are not entitled to any preemptive or other
similar rights. There will be no options, warrants, conversion privileges or
other rights, agreements, arrangements or commitments obligating Norvex to issue
or sell any shares of capital stock of Norvex to any person or entity.
4.4 Financial Statements. The audited financial statements of Norvex as
of and for the fiscal years ended December 31, 1994 and 1995, and the unaudited
financial statements as of and for the quarter ended March 31, 1996, which have
previously been provided to the CTA Shareholders, present fairly the financial
position, results of operations and changes in financial position of Norvex as
of the dates or for the periods indicated, are consistent with the books and
records of Norvex to which they relate and have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved. Norvex has not been required to file reports under the
Exchange Act within the preceding twenty-four months.
4.5 Subsidiaries. Norvex has no subsidiaries and does not own any
stock, partnership interests, joint venture interests, or any other securities
issued by any other corporation, organization or entity.
8
<PAGE> 9
4.6 Tax Matters. Norvex has filed all federal, foreign, state, county
and local income, excise, property, sales and other tax returns that are
required to be filed by it, and all such returns are true and correct; Norvex
has paid all taxes due and payable by it or which it is obligated to withhold
from amounts owing to any employee, creditor, or third party; Norvex has not
waived any statute of limitations in respect of taxes relating to its business
or agreed to any extension of time with respect to a tax assessment or
deficiency relating to its business; the assessment of any additional taxes
relating to its business for periods for which returns have been filed is not
expected; and there are no investigations, unresolved questions or claims
concerning the tax liabilities of Norvex.
4.7 Litigation. There are no actions, suits, proceedings, orders or
investigations pending or threatened against Norvex, at law or in equity, before
or by any federal, state, or municipal court or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
there is no basis known or should be known to Norvex for any of the foregoing.
4.8 Brokerage. There are no claims for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of
Norvex.
4.9 Compliance with Laws; Permits; Certain Operations. Norvex has
complied in all material respects with all laws and regulations of foreign,
federal, state and local governments and all agencies thereof which affect the
businesses of Norvex, the noncompliance with which could have a material adverse
effect on the business or prospects of Norvex. No claims have been filed against
Norvex alleging a violation of any such law or regulation. Norvex holds all
9
<PAGE> 10
of the permits, licenses, certificates and other authorizations of foreign,
federal, state and local governmental agencies required for the conduct of its
business.
4.10 Liabilities. Norvex does not have any liabilities for borrowed
money, and has no other liabilities other than accounts payable which as of the
Closing Date will not exceed $0. Norvex is not directly or indirectly liable
upon or obligated in any other way to provide funds to or to guarantee or assume
any debt or obligation of any individual or any legal entity, except as a
consequence of endorsements made in the ordinary course of business in
connection with the deposit of items for collection.
4.11 Disclosure Materials; Untrue Statements. In connection with the
execution and delivery of this Agreement, Norvex has provided or caused to be
provided to the CTA Shareholders (including its agents, advisors and
representatives) various documents and other materials relating to Norvex. Such
documents and other materials, together with the representations and warranties
of Norvex contained in this Agreement, and the schedules, exhibits and
certificates furnished by Norvex to the CTA Shareholders in connection with the
execution of this Agreement or in connection with the transactions contemplated
hereby are referred to herein as the "Norvex Disclosure Materials". The Norvex
Disclosure Materials, taken as a whole, contain an accurate description of the
current business and operations of Norvex. Norvex has not directly or indirectly
made, in connection with the offer and transfer of the Norvex Common Stock to
the CTA Shareholders (i) any statement which as of the date thereof is false or
misleading with respect to any material fact; or (ii) omitted or failed to state
any material fact (a) necessary in order to make the statements made in the
light of the circumstances in which they were made, not false or misleading; or
(b) necessary to correct an earlier statement that has subsequently become false
or misleading.
10
<PAGE> 11
4.12 Absence of Adverse Changes. Other than as contemplated by this
Agreement, since the date of the Norvex Financial Statements, Norvex taken as a
whole:
(a) has not suffered any material adverse change in its business,
assets, financial affairs or prospects;
(b) has conducted its business in the ordinary course and has not
made any unusual commitments, acquisitions, borrowings, purchases,
payments or sales;
(c) has not suffered any damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting its
properties, assets or business; and
(d) has not made any declaration or setting aside or payment of
any dividend or other distribution in respect of the Norvex Common
Stock, or any direct or indirect redemption, purchase or other
acquisition of any stock.
4.13 Norvex Stock Received as Investment. Norvex represents and
warrants that the shares of CTA Common Stock being acquired by it pursuant to
the terms and provisions of this Agreement are being acquired by it for purposes
of investment and not with an intention of distribution or resale thereof.
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE CLOSING DATE
5.1 Conduct of Business Pending the Closing Date. Norvex and CTA
covenant and agree that, prior to Closing Date, unless the other party shall
otherwise agree in writing or as otherwise expressly contemplated or permitted
by this Agreement:
11
<PAGE> 12
(a) neither Norvex nor CTA shall directly or indirectly, do or
permit to occur any of the following: (i) issue, sell, pledge, dispose of or
encumber any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, any of its capital
stock; (ii) amend or propose to amend its Articles or Certificate of
Incorporation; (iii) split, combine or reclassify any outstanding shares of its
capital stock, or declare, set aside or pay any dividend or other distribution
payable in cash, stock, property or otherwise with respect to shares of CTA
Common Stock; (iv) redeem, purchase or acquire or offer to acquire any shares of
its capital stock; (v) acquire (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof; (vi) incur
any indebtedness for borrowed money or issue any debt securities; or (vii) enter
into or propose to enter into, or modify or propose to modify, any agreement,
arrangement or understanding with respect to any of the matters set forth in
this Section 5.1(a);
(b) neither Norvex nor CTA shall directly or indirectly: (i) enter
into or modify any employment, severance or similar agreements or arrangements
with, or grant any bonuses, salary increases, severance or termination pay to,
any officers or directors or consultants; or (ii) in the case of employees who
are not officers or directors or consultants, take any action with respect to
the grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof;
(c) neither party shall adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan or group arrangement for the benefit
or welfare of any employees or any
12
<PAGE> 13
bonus, profit sharing, compensation, stock option plan, agreement or
arrangements for the benefit or welfare of any director; and
(d) Norvex and CTA: (i) shall maintain their good standing under
the laws of their respective states of incorporation; (ii) shall not take any
action which would render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at, or at any
time prior to, the Closing Date; (iii) shall notify the other party of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated); and (iv) shall
notify the other party if it shall discover that any representation or warranty
made by it or the CTA Shareholders, as applicable in this Agreement was when
made, or has subsequently become, untrue or incomplete.
ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions to Obligations of Each Party To Effect the Share
Exchange. The respective obligations of each party to effect the Share Exchange
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) there shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which would make consummation of
this Agreement illegal;
(b) there shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly to restrain or prohibit, the consummation of
this Agreement, or seeking to obtain material damages in connection with this
Agreement, (ii) seeking to require direct or indirect divestiture by the CTA
Shareholders of any shares of Norvex Common Stock, (iii) seeking or causing any
material
13
<PAGE> 14
diminution in the direct or indirect benefits expected to be derived by Norvex
and its shareholders and/or the CTA Shareholders as a result of the transactions
contemplated by this Agreement, (iv) invalidating or rendering unenforceable any
material provision of this Agreement or (v) which otherwise might materially
adversely affect Norvex or CTA;
(c) there shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction proposed, enacted, entered, enforced,
promulgated, issued or deemed applicable to this Agreement by any federal, state
or foreign court, government or governmental authority or agency that may,
directly or indirectly, result in any of the consequences referred to in (b)
above; and
(d) no party hereto shall have terminated this Agreement as
permitted herein.
6.2 Additional Conditions to Obligation of Norvex. The obligation
of Norvex to effect the Share Exchange on the Closing Date is also subject to
the following conditions:
(a) the representations and warranties of the CTA Shareholders in
this Agreement shall be true and correct in all material respects as of the
Closing Date as if made on and as of the Closing Date, and the CTA Shareholders
shall in all material respects have performed each obligation and agreement and
complied with each covenant to be performed and complied with by them hereunder
at or prior to the Closing Date; and
(b) the CTA Shareholders shall have furnished to Norvex a
certificate in which the CTA Shareholders shall certify that they have no reason
to believe that the conditions set forth in this Section 6.2 have not been
fulfilled.
6.3 Additional Conditions to Obligations of CTA. The obligations of
the CTA Shareholders to effect the Share Exchange on the Closing Date are also
subject to the following conditions:
14
<PAGE> 15
(a) the representations and warranties of Norvex in this Agreement
shall be true and correct in all material respects as of the Closing Date as if
made on and as of the Closing Date, and Norvex shall in all material respects
have performed each obligation and agreement and complied with each covenant to
be performed and complied with by it hereunder at or prior to the Closing Date;
(b) Norvex shall have furnished to the CTA Shareholders (i) a copy
of the text of the resolutions by which the board of directors and, if
applicable, the shareholders of Norvex approved this Agreement; and (ii) a
certificate executed on behalf of Norvex by its corporate secretary certifying
to CTA that such copy is a true, correct and complete copy of such resolutions
and that such resolutions were duly adopted and have not been amended or
rescinded;
(c) the Board of Directors and stockholders of Norvex shall have
effected the Reverse Split;
(d) the Certificate of Amendment to the Certificate of
Incorporation of Norvex attached hereto as Exhibit B, shall have been filed with
the Delaware Secretary of State pursuant to Delaware Law and evidence of such
filing shall have been provided to the CTA Shareholders;
(e) Norvex shall have duly elected Donald R. Head, Andrew A. Johns
and Theo F. Lamb as the directors of Norvex; and
(f) Norvex shall have furnished to the CTA Shareholders a
certificate in which Norvex shall certify that it has no reason to believe that
the conditions set forth in this Section 6.3 have not been fulfilled.
15
<PAGE> 16
ARTICLE 7
CLOSING
7.1 The Closing. The Closing shall take place at 9:00 A.M., Pacific
Standard time, on May 23 1996, (the "Closing Date") at the offices of Squire,
Sanders & Dempsey, 40 North Central Avenue, Phoenix, Arizona 85004, or at such
other time, date and place as shall be mutually agreed upon between the parties.
7.2 Exchange of Securities. On the Closing Date:
(a) the CTA Shareholders shall transfer and deliver certificates,
duly endorsed in blank, representing all of the issued and outstanding CTA
Common Stock to Norvex as well as the documents and certificates required by
Section 6.2; and
(b) Norvex shall issue and deliver to the CTA Shareholders duly
executed certificates representing 5.781 shares of Norvex Common Stock for each
share of CTA Common Stock delivered by each such CTA Shareholders as well as the
documents and certificates required by Section 6.3.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Expenses. Each party shall bear its own costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
8.2 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by
16
<PAGE> 17
this Agreement, including using reasonable efforts to obtain all necessary
waivers, consents and approvals and to effect all necessary filings.
8.3 No Negotiations, etc. Until the Termination Date, Norvex shall not,
directly or indirectly, through any officer, director, agent or otherwise,
solicit, initiate or encourage submission of any proposal or offer from any
person or entity (including any of its or their officers or employees) relating
to any liquidation, dissolution, recapitalization, merger, consolidation or
acquisition or purchase of any equity interest in Norvex or any other similar
transaction or business combination involving Norvex, or, unless Norvex's Board
of Directors receives a written opinion from Norvex's outside counsel stating
that there would be a material risk of liability on the part of the members of
Norvex's Board of Directors to Norvex's shareholders for failure to do so,
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person or entity to do or seek any of the foregoing. Until the Termination Date,
CTA shall not, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage submission of any proposal or offer
from any person or entity (including any of its or their officers or employees)
relating to any liquidation, dissolution, recapitalization, merger,
consolidation or acquisition or purchase of any equity interest in CTA or any
other similar transaction or business combination involving CTA, or, unless
CTA's Board of Directors receives a written opinion from CTA's outside counsel
stating that there would be a material risk of liability on the part of the
members of CTA's Board of Directors to CTA's shareholders for failure to do so,
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise
17
<PAGE> 18
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person or entity to do or seek any of the
foregoing. Each party shall promptly notify the other party if any such proposal
or offer, or any inquiry from or contact with any person with respect thereto,
is made and shall promptly provide the other party with such information
regarding such proposal, offer, inquiry or contact as the other party may
reasonably request.
8.4 Notification of Certain Matters. Each party shall give prompt
notice to the other party of any material failure of such party, or any officer,
director, shareholder, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
8.5 Access to Information. Until the Closing Date, CTA and their
attorneys, accountants, consultants and representatives shall continue to have
access to the books and records of Norvex and such other information pertaining
to the business and assets of Norvex as CTA shall reasonably request, and Norvex
and its attorneys, accountants, consultants and representatives shall continue
to have access to the books and records of CTA and such other information
pertaining to the business and assets of CTA as Norvex shall reasonably request.
Each of CTA and Norvex shall provide the other with reasonable access to its
officers and other personnel for the purpose of conducting due diligence.
8.6 Confidentiality. During the course of due diligence, CTA and Norvex
each from time to time may provide the other with certain information regarding
the business, operations and financial condition of the other. Other than as
described in subparagraph (b) below, any such information delivered by one party
to the other in accordance with this Agreement is referred to as the
"Information". CTA and Norvex acknowledge and agree
18
<PAGE> 19
that any Information provided to the other is proprietary and confidential and
that a violation of this Section 8.6 shall entitle the non-breaching party to
pursue, among other remedies available, equitable relief, including permanent or
temporary injunctive relief. Accordingly, in consideration of the furnishing of
such Information by CTA and Norvex to each other, CTA and Norvex agree to
maintain the confidentiality of any Information obtained from the other, on the
following terms and conditions:
(a) each party hereto agrees that it will hold in strict
confidence all Information obtained from the other party and will use such
Information only in connection with the transactions contemplated hereby. Each
party shall restrict access to the Information to those officers, directors,
employees, agents and representatives whose duties require them to have access
to the Information. Before disclosing any Information to any such person, each
party shall require such person to be subject to the same restrictions and
requirements respecting use, nondisclosure and confidentiality as contained
herein. Neither party nor any of its officers, directors, employees, agents or
representatives may provide originals, copies or other reproductions of any of
the Information to any third party without the prior written consent of the
other party, except as required by law, legal process, rule, regulation or
regulatory authority;
(b) it is understood and agreed that neither party has an
obligation to maintain confidential any information that:
(1) Such party can establish to have been known to it at the
time the information was disclosed;
19
<PAGE> 20
(2) Such party can establish to have been or become known to
the general public, other than as a result of a violation of this Agreement or
any other agreement with the other party; or
(3) Such party can establish to have become known to it from
any independent third party who had the right to disclose such information.
(c) neither party nor any of its officers, directors, employees,
agents or representatives shall use any of the Information, directly or
indirectly, for competitive purposes or for any purpose other than in connection
with the transactions contemplated hereby;
(d) any consent given by the other party may be conditioned on
the requirement that the party seeking consent obtain from the third party a
written agreement providing for the third party to be subject to the same
restrictions and requirements respecting use, nondisclosure and confidentiality
as contained in this Agreement; and
(e) all Information will remain the property of the party
providing such Information. All documents provided by one party to the other or
any one or more of its officers, directors, employees, agents or representatives
in connection with the transactions contemplated hereby and all copies or other
reproductions of any and all of such documents, shall, at the request of the
party providing such documents, on or after the Termination Date (as defined in
Section 9.1 hereof), be returned to such party, at the other party's cost and
expense, and the other party and its officers, directors, employees, agents or
representatives shall maintain strictly confidential all Information contained
in the documents.
20
<PAGE> 21
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by mutual consent of the CTA Shareholders and the Board of
Directors of Norvex;
(b) by the CTA Shareholders if any person or business entity
(other than the CTA Shareholders) shall have publicly announced any proposal to
acquire Norvex or shall have solicited proxies from Norvex's shareholders with
the intent of acquiring or influencing control of Norvex, which announcement or
solicitation, in the judgment of the CTA Shareholders, makes it inadvisable for
the CTA Shareholders to continue to pursue consummation of this Agreement; or
(c) by either Norvex or the CTA Shareholders if this Agreement
shall not have been consummated by May 31, 1996; provided, however, that no
party shall have the right to terminate this Agreement unilaterally if the event
giving rise to such right shall be primarily attributable to such party or to
any affiliated party. The date on which the termination occurs shall be the
"Termination Date."
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall become void and there
shall be no liability or further obligation hereunder on the part of Norvex or
CTA or their respective shareholders, officers or directors, or the CTA
Shareholders except as set forth in Section 8.1 and except for liability arising
from a willful breach of this Agreement.
21
<PAGE> 22
9.3 Waiver. At any time prior to the Closing Date, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of this Agreement of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements and conditions are intended for its
benefit.
ARTICLE 10
GENERAL PROVISIONS
10.1 Public Statements. Except as required by applicable law, neither
CTA nor Norvex shall make any public announcement or statement with respect to
this Agreement or any related transaction without the prior approval of the
other party, which approval will not be unreasonably withheld or delayed.
10.2 Notices. All notices and other communications hereunder shall be
in writing and shall be sufficiently given if made by hand delivery, by
telecopier, or by registered or certified mail (postage prepaid and return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):
If to CTA and the Capital Title Agency, Inc.
CTA Shareholders: 138 North Montezuma
Prescott, Arizona 86301
Attention: Donald R. Head, Chairman
If to Norvex: Norvex, Inc.
1661 Lakeview Circle
Ogden, Utah 84403
Attention: Mark Scharmann, President
All such notices and other communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; three business days
after being deposited in
22
<PAGE> 23
the mail, postage prepaid, if delivered by mail; and when receipt acknowledged,
if telecopied.
10.3 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated. Words such as
"herein," "hereinafter," "hereof," "hereto," "hereby" and "hereunder," and words
of like import, unless the context requires otherwise, refer to this Agreement.
As used in this Agreement, the masculine, feminine and neuter genders shall be
deemed to include the others if the context requires.
10.4 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
10.5 Miscellaneous. This Agreement (together with all other documents
and instruments referred to herein): (i) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; (ii) is not
intended to confer upon any other person any rights or remedies hereunder; (iii)
shall not be assigned by operation of law or otherwise and (iv) shall be
governed in all respects, including validity, interpretation and effect, by the
internal laws of the State of Delaware, without giving effect to the principles
of conflict of laws thereof.
23
<PAGE> 24
This Agreement may be executed in two or more counterparts (including by
facsimile signature) which together shall constitute a single agreement.
IN WITNESS WHEREOF, Norvex and the CTA Shareholders have caused this
Agreement to be executed on the date first written above by their respective
officers thereunder duly authorized.
NORVEX, INC.
By: /s/
------------------------------------------
Its:
----------------------------------
"NORVEX"
CAPITAL TITLE AGENCY, INC.
By: /s/Donald R. Head
------------------------------------------
Its: Chief Executive Officer
----------------------------------
"CTA"
THE HEAD REVOCABLE TRUST DATED
APRIL 1, 1975
By: /s/Donald R. Head
------------------------------------------
Its: Trustee
----------------------------------
THE LAMB TRUST DATED OCTOBER 11, 1983
By: /s/Theo Lamb
------------------------------------------
Its: Trustee
----------------------------------
/s/Andrew A. Johns
----------------------------------------------
ANDREW A. JOHNS
24
<PAGE> 25
THE WILLIAM AND DOROTHY ORTH
EICHBAUM TRUST DATED NOVEMBER 19, 1986
By: /s/Dorothy Eichbaum
-------------------------------------------------
Dorothy Eichbaum, Trustee
/s/John M. Redfield, Jr.
-----------------------------------------------------
JOHN M. REDFIELD, JR., as Trustee under a
Revocable Declaration of Trust dated October 29, 1982
/s/Linda N. Redfield
-----------------------------------------------------
LINDA N. REDFIELD, as Trustee under a Revocable
Declaration of Trust dated October 29, 1982
/s/Walter Serrano
-----------------------------------------------------
WALTER SERRANO
/s/Nancy Simmons
-----------------------------------------------------
NANCY SIMMONS
"CTA" SHAREHOLDERS"
25
<PAGE> 26
EXHIBIT A
CAPITAL TITLE AGENCY, INC. STOCKHOLDERS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Number of Shares
Name and Address Beneficially Held
- ------------------------------------------------------------------------------------------
<S> <C>
The Head Revocable Trust Dated: April 1, 1975 384,917
- ------------------------------------------------------------------------------------------
The Lamb Trust Dated: October 11, 1983 384,917
- ------------------------------------------------------------------------------------------
Andrew A. Johns 166,667
- ------------------------------------------------------------------------------------------
Dorothy Eichbaum, Trustee of The William and Dorothy Orth 104,444
Eichbaum Trust Dated November 19, 1986
- ------------------------------------------------------------------------------------------
John M. Redfield, Jr. and Linda N. Redfield, as Trustees under a 103,873
Revocable Declaration of Trust dated October 29, 1982.
- ------------------------------------------------------------------------------------------
Walter Serrano 16,807
- ------------------------------------------------------------------------------------------
Nancy Simmons 5,042
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
PHARMACEUTICS INTERNATIONAL, INC.
The undersigned incorporator hereby forms a corporation pursuant to the
General Corporation Law of the State of Delaware.
ARTICLE I
NAME
The name of the Corporation is:
PHARMACEUTICS INTERNATIONAL, INC.
ARTICLE II
Registered Office
The registered office of the Corporation in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington, Delaware, County of New Castle.
The registered agent in charge thereof at such address is The Corporation Trust
Company.
ARTICLE III
Purposes
The nature of the business and the objects and purposes proposed to be
transacted, promoted, and carried on, are to do any or all things herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz.:
"The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of Delaware".
ARTICLE IV
Capital Stock
The amount of the total authorized capital stock of this Corporation
shall consist of One Hundred Thousand Dollars ($100,000) divided into
100,000,000 shares of $.001 par value each. All shares shall be designated as
Common Stock. Shareholders shall not have pre-emptive rights or be entitled to
cumulative voting in connection with the shares of the Company's Common Stock.
<PAGE> 2
ARTICLE V
Incorporated
The name and mailing address of the incorporator of the Company is:
A. O. Headman, Jr. 420 East South Temple,
Suite 334
Salt Lake City, Utah 84111
ARTICLE VI
Board of Directors
The powers of the incorporator(s) shall terminate upon the filing of
this Certificate of Incorporation. The name and mailing address of the person to
serve as director until the first annual meeting of stockholders or until
successors are elected and qualify is:
Name of Director Mailing Address
A. O. Headman, Jr. 420 East South Temple,
Suite 334
Salt Lake City, UT 84111
The number of members of the Board of Directors shall be fixed from
time to time by the Board of Directors. If any vacancy occurs, the remaining
directors, by an affirmative vote of a majority thereof, may elect a director to
fill the vacancy until the next annual meeting of stockholders.
ARTICLE VII
Certain Contracts
No contract or transaction between the Corporation and one or more of
its directors or officers or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of its
directors or officers are directors or officers or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the board of
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
1. The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
Committee, and the Board or committee,
2
<PAGE> 3
in good faith, authorizes the contract or transaction by a vote sufficient for
such purpose without counting the vote of the interested director or directors;
or
2. The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or
3. The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
ARTICLE VIII
Bylaws
The Board of Directors shall have the power to make, adopt, amend, or
repeal the Bylaws of the Corporation.
ARTICLE IX
Indemnification
Section 1. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fee),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of
3
<PAGE> 4
the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
3. To the extent that any person referred to in paragraphs 1 and 2 of
this Article IX has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to therein or in defense of any claim, issue
or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
4. Any indemnification under paragraphs 1 and 2 of this Article IX
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs 1 and 2 of this Article
IX. Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (b) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as provided
in this Article IX.
6. The indemnification provided by this Article IX shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any statute, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
7. The Corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted
4
<PAGE> 5
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such liability under the provisions of this Article IX.
8. For the purposes of this section, references to "the corporation"
include all constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person who is or was
a director, officer, employee or agent of such a constituent corporation or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this section with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
ARTICLE X
Stockholder Action by Consent
Any corporation action upon which a vote of stockholders is required or
permitted may be taken without a meeting or vote of stockholders with the
written consent of stockholders having not less than a majority of all of the
stock entitled to vote upon the action if a meeting were held; provided, that in
no case shall the written consent be by holders having less than the minimum
percent of the vote required by statute for the proposed corporate action and
provided that prompt notice be given to all stockholders of the taking of
corporate action without a meeting and by less than unanimous written consent.
ARTICLE XI
Amendment
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
The undersigned, for the purpose of forming a corporation under the
laws of the State of Delaware, does make, file, and record this certificate, and
does certify that the facts stated herein are true; and has executed this
Certificate of Incorporation.
Dated: March 16, 1989.
/s/A. O. Headman, Jr.
------------------------------------
A. O. Headman, Jr.
5
<PAGE> 6
STATE OF UTAH )
) ss.
COUNTY OF SALT LAKE )
On the 16th day of March, 1989, personally appeared before me, A. O.
Headman, Jr., who being by me first duly sworn, declared that he is the person
who signed the foregoing document as an incorporator and that the statements
therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 16th day
of March, 1989.
/s/Kristin Brown
-----------------------------------------
NOTARY PUBLIC
Residing at Salt Lake City, UT
-----------------------------
My Commission expires:
November 1991
- ------------------------------
6
<PAGE> 7
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION OF
PHARMACEUTICS INTERNATIONAL, INC.
Pursuant to Section 242 of Title 8 of the General Corporation Law of
the State of Delaware, the undersigned corporation hereby adopts the following
Certificate of Amendment to its Certificate of Incorporation:
FIRST: The name of the corporation is Pharmaceutics International,
Inc.
SECOND: The following amendment to the Certificate of Incorporation
of Pharmaceutics International, Inc. was duly adopted by the shareholders of the
corporation at a meeting held July 9, 1993, in the manner prescribed by the
General Corporation Law of the State of Delaware, to Wit:
Article I - Name. The name of this corporation is NORVEX, INC.
Article IV. Capital Stock. The amount of the authorized capital
stock of this corporation shall consist of Fifty Thousand Dollars
($50,000) divided into 50,000,000 shares of $.001 par value each. All
shares shall be designated as common stock. Shareholders shall not have
pre-emptive rights or be entitled to cumulative voting in connection
with the shares of the Company's Common Stock.
THIRD: The number of shares of the Corporation outstanding at the
time of the adoption of such amendments was 14,291,667 and the number entitled
to vote thereon was 14,291,667.
FOURTH: The designation and number of outstanding shares of each
class entitled to vote thereon as a class were as follows, to-wit:
Class Number of Shares
------ ----------------
Common 14,291,667
FIFTH: The number of shares voted for such amendments was
12,613,396, with -0- opposing and -0- abstaining.
SIXTH: This amendment does not provide for any exchange,
reclassification or cancellation of issued shares.
SEVENTH: This amendment does not effect a change in the stated capital
of the corporation.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned president and secretary having been
thereunto duly authorized, have executed the foregoing Certificate of Amendment
to Certificate of Incorporation for the corporation this 9th day of July, 1993,
under penalties of perjury that this instrument is the act of the corporation
and the facts stated herein are true.
PHARMACEUTICS INTERNATIONAL, INC.
By /s/Mark Scharmann
--------------------------------------
Mark Scharmann, President
Attest
/s/David Knudson
- ----------------------------------
David Knudson, Secretary
<PAGE> 9
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
NORVEX, INC., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Norvex, Inc. (the
"Corporation") on May 23, 1996, resolutions were duly adopted setting forth
proposed amendments to the Certificate of Incorporation of the Corporation,
declaring said amendments to be advisable and directing that said amendments be
considered by the stockholders of the Corporation. The resolutions setting forth
the proposed amendment are as follows:
RESOLVED, that Article I of the Corporation's Certificate of
Incorporation, as amended, be, and hereby is, amended in its entirety
to read as follows:
ARTICLE I
NAME
The name of the Corporation is: CAPITAL TITLE GROUP, INC.
FURTHER RESOLVED, that Article IV of the Corporation's Certificate of
Incorporation, as amended, be and hereby is, amended to read as
follows:
ARTICLE IV
CAPITAL STOCK
Effective May 23, 1996, the 16,861,571 shares of the
Common Stock of the Corporation outstanding on that date have
been reverse split on the basis of one share for each ten
shares outstanding. Notwithstanding such reverse split, the
total number of shares of capital stock which the Corporation
shall have authority to issue is Fifty Million (50,000,000)
shares of Common Stock of the par value of $.001 per share.
Shareholders shall not have pre-emptive rights or be entitled
to cumulative voting in connection with the shares of the
Company's Common Stock.
FURTHER RESOLVED, that the Corporation's Certificate of Incorporation,
as amended, be, and hereby is, amended to add a new Section 8 to
Article IX to read as follows:
<PAGE> 10
8. No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director; provided,
however, that nothing contained herein shall eliminate or
limit the liability of a director of the Corporation to the
extent provided by applicable laws (i) for any breach of the
director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) for liability imposed under Section 174 of Title 8
of the Delaware General Corporation Law or successor
provisions thereof, or (iv) for any transaction from which the
director derived an improper personal benefit. The limitation
of liability provided herein shall continue after a director
has ceased to occupy such position as to acts or omissions
occurring during such director's term or terms of office.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a consent in lieu of special meeting of the stockholders of the
Corporation dated May 23, 1996, was received from stockholders holding a
majority of the outstanding shares of Common Stock of the Corporation, which
consent in lieu contained the necessary number of shares voted in favor of the
amendments, as required by the General Corporation Law of the State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, NORVEX, INC. has caused this certificate to be
signed by MARK A. SCHARMANN, its President, and attested by DAVID KNUDSON, its
Secretary, this 23rd day of May, 1996.
NORVEX, INC.
By /s/Mark A. Scharmann
---------------------------------
Mark A. Scharmann, President
ATTEST:
/s/David Knudson
- ----------------------------------
David Knudson, Secretary
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
CAPITAL TITLE GROUP, INC.
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the board of directors or the president or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meetings. The annual meeting of stockholders for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting, shall be held on the second Tuesday of
the third month after the end of the Corporation's fiscal year, at a time fixed
by the board of directors or the president. If this date shall fall upon a legal
holiday, then such meeting shall be held on the next succeeding business day at
the same hour. If no annual meeting is held in accordance with the foregoing
provisions, the board of directors shall cause the meeting to be held as soon
thereafter as convenient or a special meeting may be held in lieu of the annual
meeting, and any action taken at that special meeting shall have the same effect
as if it had been taken at the annual meeting, and in such case all references
in these Bylaws to the annual meeting of the stockholders shall be deemed to
refer to such special meeting.
1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the chairman of the board of directors, by the board of directors or
by the holders of not less than one-fourth (1/4) of all the shares entitled to
vote at the meeting. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes stated in the
notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called.
1.5 Voting List. The officer who has charge of the stock ledger of the
Corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the holders of a majority of the shares of the
capital stock of the Corporation
<PAGE> 2
issued and outstanding are entitled to vote at the meeting, present in person or
represented by proxy, shall constitute a quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these Bylaws by the stockholders present or represented at the meeting and
entitled to vote, although less than a quorum, or, if no stockholder is present,
by any officer entitled to preside at or to act as secretary of such meeting. If
the adjournment is for more than 30 days, or if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At the adjourned meeting, the Corporation may transact any business
which might have been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the secretary of the Corporation. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. No proxy
shall be voted or acted upon after three years from the date of its execution,
unless the proxy expressly provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these Bylaws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
1.10 Action Without Meeting. Any action required or permitted to be
taken at any annual or special meeting of stockholders of the Corporation may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on such action were present and voted. Prompt notice of the
taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the Corporation shall
be managed by or under the direction of a board of directors, who may exercise
all of the powers of the
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<PAGE> 3
Corporation except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws. In the event of a vacancy on the board of
directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full board of directors until the vacancy is filled.
2.2 Number; Election and Qualification. The number of directors which
shall constitute the whole board of directors shall be determined by resolution
of the stockholders or the board of directors, but in no event shall be less
than three. The number of directors may be decreased at any time and from time
to time either by the stockholders or by a majority of the directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more directors. The
directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote in such election. Directors need not be
stockholders of the corporation.
2.3 Enlargement of the Board. The number of directors may be increased
at any time and from time to time by the stockholders or by a majority of the
directors then in office.
2.4 Tenure. Each director shall hold office until the next annual
meeting and until such time as his successor is elected and qualified, or until
his earlier death, resignation or removal.
2.5 Vacancies. Unless and until filled by the stockholders, any vacancy
in the board of directors, however occurring, including a vacancy resulting from
an increase in the number of directors, may be filled by vote of a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office, and a director chosen to fill a
position resulting from an increase in the number of directors shall hold office
until the next annual meeting of stockholders and until his successor is elected
and qualified, or until his earlier death, resignation or removal.
2.6 Resignation. Any director may resign by delivering his written
resignation to the Corporation at its principal office or to the secretary. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
2.7 Regular Meetings. Regular meetings of the board of directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the board of directors,
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the board of
directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.8 Special Meetings. Special meetings of the board of directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the chairman of the Board, president or two or more directors, or
by one director in the event that there is only a single director in office.
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<PAGE> 4
2.9 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the secretary or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 48 hours in
advance of the meeting, (ii) by sending a telegram or telex, or delivering
written notice by hand to his last known business or home address at least 48
hours in advance of the meeting, or (iii) by mailing written notice to his last
known business or home address at least 72 hours in advance of the meeting. A
notice or waiver of notice of a meeting of the board of directors need not
specify the purpose of the meeting.
2.10 Meetings by Telephone Conference Calls. Directors or any members
of any committee designated by the directors may participate in a meeting of the
board of directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.11 Quorum. A majority of the whole board of directors shall
constitute a quorum at all meetings of the board of directors. In the event one
or more of the directors shall be disqualified to vote at any meting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the whole
board of directors constitute a quorum. In the absence of a quorum at any such
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice other than announcement at the meeting, until a
quorum shall be present.
2.12 Action at Meeting. At any meeting of the board of directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these Bylaws.
2.13 Action by Consent. Any action required or permitted to be taken at
any meeting of the board of directors or of any committee of the board of
directors may be taken without a meeting, if all members of the board of
directors or committee, as the case may be, consent to the action in writing,
and the written consents are filed with the minutes of proceedings of the board
of directors or committee.
2.14 Removal. Any one or more or all of the directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors, except that (i) the directors elected by
the holders of a particular class or series of stock may be removed without
cause only by vote of the holders of a majority of the outstanding shares of
such class or series and (ii) in the case of a corporation having cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire board of
directors.
2.15 Committees. The board of directors may, by resolution passed by a
majority of the whole board of directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member of any meeting of the
committee. In the absence or disqualification of a member of a
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<PAGE> 5
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors
and subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the board
of directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
subsection (a) of Section 151 of the General Corporation Law of the State of
Delaware, fix the designations and any of the preferences of rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, unless the resolution, Bylaws or Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger. Each such committee shall keep minutes
and make such reports as the board of directors may from time to time request.
Except as the board of directors may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the board of
directors.
2.16 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the board of directors may from time to time determine. No such payment shall
preclude any director from serving the Corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
3.1 General. The officers of the Corporation shall consist of a
chairman of the board, a president, a secretary, a treasurer and such other
officers with such other titles as the board of directors may determine,
including a vice chairman of the board, and one or more vice presidents,
assistant treasurers, and assistant secretaries. The board of directors may
appoint such other officers with such other powers and duties as it may deem
appropriate.
3.2 Election. The chairman of the board, president, treasurer and
secretary shall be elected annually by the board of directors at its first
meeting following the annual meeting of stockholders. Other officers may be
appointed by the board of directors at such meeting or at any other meeting.
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<PAGE> 6
3.3 Qualification. No officer need by a stockholder. Any two or more
offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the Corporation at its principal office or to the
president or secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
Any officer may be removed at any time, with or without cause, by vote
of a majority of the entire number of directors then in office.
Except as the board of directors may otherwise determine, no officer
who resigns or is removed shall have any right to any compensation as an officer
for any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 Vacancies. The board of directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of president, treasurer
and secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice Chairman of the Board. The chairman
of the board of directors shall be the chief executive officer of the
Corporation. Subject to the direction of the board of directors, the chairman of
the board of directors shall have general charge and supervision of the business
of the Corporation, and shall have full authority to take all lawful actions
necessary to implement corporate and business policy established by the board of
directors. In addition, the chairman of the board of directors shall perform
such duties and possess such other powers as are assigned to him by the board of
directors. Unless otherwise provided by the board of directors, the chairman of
the board of directors shall preside at all meetings of the stockholders and the
board of directors. The board of directors may appoint a vice chairman of the
board of directors who may, in the absence or disability of the chairman,
perform the duties and exercise and powers of the chairman and perform such
other duties and possess such other powers as from time to time are authorized
by the board of directors.
3.8 President. The president shall be the chief operating officer of
the Corporation and shall have charge and supervision of the day to day business
operations of the Corporation, subject to the authority of the chairman of the
board of directors and of the board of directors. Unless the board of directors
or chairman of the board of directors shall otherwise direct, all executive
officers of the Corporation shall report, directly or through their immediate
superior
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<PAGE> 7
officers, to the president. The president shall perform such other duties and
shall have such other powers as the board of directors may from time to time
prescribe.
3.9 Vice Presidents. The vice president shall perform such duties and
shall have such powers as the board of directors, chairman of the board of
directors or the president may from time to time prescribe. The vice president
shall discharge the duties of the president when the president, for any reason,
cannot discharge the duties of his office. He shall have such other powers and
perform such other duties as shall be prescribed by the directors.
Any assistant vice presidents shall perform such duties and possess
such powers as the board of directors, the chairman of the board of directors,
the president or the vice president may from time to time prescribe.
3.10 Secretary and Assistant Secretaries. The secretary shall perform
such duties and shall have such powers as the board of directors, chairman of
the board of directors or the president may from time to time prescribe. In
addition, the secretary shall perform such duties and have such powers as are
incident to the office of the secretary, including without limitation, the duty
and power to give notices of all meetings of stockholders and special meetings
of the board of directors, to attend all meetings of stockholders and the board
of directors and keep a record of the proceedings, to maintain a stock ledger
and prepare lists of stockholders and their addresses as required, to be
custodian of corporate records and the corporate seal, if any, and to affix and
attest to the same on documents.
Any assistant secretary shall perform such duties and possess such
powers as the board of directors, the chairman of the board of directors, the
president or the secretary may from time to time prescribe. In the event of the
absence, inability or refusal to act of the secretary, the assistant secretary
(or if there be more than one, the assistant secretaries in the order determined
by the board of directors) shall perform the duties and exercise the powers of
the secretary.
In the absence of the secretary or any assistant secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The treasurer shall perform
such duties and shall have such powers as from time to time be assigned to him
by the board of directors, the chairman of the board of directors or the
president. In addition, the treasurer shall perform such duties and have such
powers as are incident to the office of treasurer, including without limitation
the duty and power to keep and be responsible for all funds and securities of
the Corporation, to deposit funds of the Corporation in depositories selected in
accordance with these Bylaws, to disburse such funds as ordered by the board of
directors, the chairman of the board of directors, the president or any vice
president of the Corporation so authorized to act by specific authorization of
the board of directors or chairman of the Directors, to make proper accounts of
such funds, and to render, as required by the board of directors, chairman of
the board of directors or president, statements of all such transactions and of
the financial condition of the Corporation.
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<PAGE> 8
The assistant treasurers shall perform such duties and possess such
powers as the board of directors, the chairman of the board of directors, the
president or the treasurer may from time to time prescribe. In the event of the
absence, inability or refusal to act of the treasurer, the assistant treasurer
(or if there shall be more than one, the assistant treasurers in the order
determined by the board of directors) shall perform the duties and exercise the
powers of the treasurer.
3.12 Salaries. Officers of the Corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the board of directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the Corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the board of directors in such manner, for such
consideration and on such terms as the board of directors may determine.
4.2 Certificates of Stock. Every holder of stock of the Corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the board of directors, certifying the number and class of shares
owned by him in the Corporation. Each such certificate shall be signed by, or in
the name of the Corporation by the chairman or vice chairman, if any, of the
board of directors, or the president or a vice president, and the treasurer or
an assistant treasurer, or the secretary or an assistant secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
Bylaws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the Corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
4.3 Transfers. Except as otherwise established by rules and regulations
adopted by the board of directors, and subject to applicable laws, shares of
stock may be transferred on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the Corporation or its transfer agent may reasonable require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these Bylaws, the Corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect to such
stock, regardless of any transfer, pledge or other disposition of such stock
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these Bylaws.
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<PAGE> 9
4.4 Lost, Stolen or Destroyed Certificates. The Corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen or destroyed, upon such terms and conditions as the
board of directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving such indemnity as the
board of directors may require for the protection of the Corporation or any
transfer agent or registrar.
4.5 Record Date. The board of directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 days prior to any other
action to which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the date
on which the board of directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - Indemnification
The Corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as that Section may be
amended and supplemented from time to time, indemnify any director, officer or
trustee which it shall have power to indemnify under that Section against any
expenses, liabilities or other matters referred to in or covered by that
Section. The indemnification provided for in this Article (i) shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) shall continue as to a person
who has ceased to be a director, officer or trustee, and (iii) shall inure to
the benefit of the heirs, executors and administrators of such a person. The
Corporation's obligation to provide indemnification under this Article shall be
offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the Corporation or
any other person.
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ARTICLE 6 - General Provisions
6.1 Fiscal Year. The fiscal year of the Corporation shall be determined
by the board of directors.
6.2 Corporate Seal. The corporate seal, if any, shall be in such form
as shall be approved by the board of directors.
6.3 Written Notice of Meetings. Whenever written notice is required to
be given to any person pursuant to law, the Certificate of Incorporation or
these Bylaws, it may be given to such person, either personally or by sending a
copy thereof by first class mail, or by telegram, charges prepaid, to his
address appearing on the books of the Corporation, or to his business or other
address supplied by him to the Corporation for the purpose of notice. If the
notice is sent by first class mail or by telegraph, it shall be deemed to have
been given to the person entitled thereto when deposited in the United States
mail or with a telegraph office for transmission to such person. Such notice
shall specify the place, day and hour of the meeting and, in case of a special
meeting of the shareholders, the general nature of the business to be
transacted.
6.4 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these Bylaws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.5 Voting of Securities. Except as the directors may otherwise
designate, the president or treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
Corporation (with or without power of substitution) at any meeting of
stockholders or shareholders of any other Corporation or organization, the
securities of which may be held by this Corporation.
6.6 Evidence of Authority. A certificate by the secretary, or an
assistant secretary, or a temporary secretary, as to any action taken by the
stockholders, directors, a committee or any officer of representative of the
Corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
6.7 Certificate of Incorporation. All references in these Bylaws to the
Certificate of Incorporation shall be deemed to refer to the certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
6.8 Transactions with Interested Parties. No contract or transaction
between the Corporation and one or more of the directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
10
<PAGE> 11
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the board of directors or a committee of the
board of directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest as to
the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in
good faith authorized the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified by the board of
directors, a committee of the board of directors, or the stockholders,
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
6.9 Severability. Any determination that any provision of these Bylaws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these Bylaws.
6.10 Pronouns. All pronouns used in these Bylaws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 7 - Amendments
7.1 By the Board of Directors. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
7.2 By the Stockholders. These Bylaws may be altered, amended or
repealed or new Bylaws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alternation,
amendment, repeal or adoption of new Bylaws shall have been stated in the notice
of such special meeting.
11
<PAGE> 12
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the ____ day of _________, 1996, before me, the undersigned Notary
Public, personally appeared ___________________________________________, who
acknowledged himself to be the ________________ of FIRST AMERICAN TITLE
INSURANCE COMPANY, a California corporation, and that he as such officer being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________________
Notary Public
My Commission Expires:
__________________________________
*************************
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the ____ day of ___________, 1996, before me, the undersigned Notary
Public, personally appeared
____________________________________________________________, who acknowledged
himself to be the _____________________________ of CAPITAL TITLE AGENCY, INC.,
an Arizona corporation, and that he as such officer being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________________
Notary Public
My Commission Expires:
__________________________________
9
<PAGE> 1
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the ____ day of _________, 1996, before me, the undersigned Notary
Public, personally appeared ___________________________________________, who
acknowledged himself to be the ________________ of FIRST AMERICAN TITLE
INSURANCE COMPANY, a California corporation, and that he as such officer being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________________
Notary Public
My Commission Expires:
__________________________________
*************************
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the ____ day of ___________, 1996, before me, the undersigned Notary
Public, personally appeared
____________________________________________________________, who acknowledged
himself to be the _____________________________ of CAPITAL TITLE AGENCY, INC.,
an Arizona corporation, and that he as such officer being authorized so to do,
executed the foregoing instrument for the purposes therein contained, by signing
the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_________________________________________
Notary Public
My Commission Expires:
__________________________________
9
<PAGE> 2
EXHIBIT 10.1
UNDERWRITING AGREEMENT
THIS AGREEMENT entered into as of the 1st day of March, 1996 by and between OLD
REPUBLIC NATIONAL TITLE INSURANCE COMPANY, with its principal place of business
in Minneapolis, Minnesota, hereinafter referred to as "INSURANCE COMPANY," and
CAPITAL TITLE AGENCY, INC., hereinafter referred to as "UNDERWRITTEN COMPANY."
WITNESSETH
WHEREAS, INSURANCE COMPANY is qualified and has a Certificate Of Authority to
conduct the business of title insurance in the State of Arizona.
WHEREAS, UNDERWRITTEN COMPANY is licensed to transact the business of an
underwritten title company in Yavapai County, State of Arizona, and desires that
policies of title insurance, endorsements, commitments, title guarantees and
title certificates, hereinafter collectively referred to as title policy or
policies, be made available to its customers from INSURANCE COMPANY in said
area.
NOW, THEREFORE, it is agreed as follows:
1. UNDERWRITTEN COMPANY agrees to issue title policies of INSURANCE
COMPANY to its customers during the term of this agreement and INSURANCE COMPANY
agrees that it will cause to be issued through and upon the request of
UNDERWRITTEN
<PAGE> 3
COMPANY and to persons designated by UNDERWRITTEN COMPANY, title policies
insuring titles to real property located in above mentioned County. INSURANCE
COMPANY reserves the right to prescribe the form of such policies to be issued
and to include in any policy such exceptions as it may deem appropriate or
necessary.
2. UNDERWRITTEN COMPANY AGREES:
(a) That it will fully comply with all requirements of the State of
Arizona for the conduct of business as an UNDERWRITTEN COMPANY within each of
the counties in which it may do business.
(b) That it will issue preliminary reports, and title policies of
INSURANCE COMPANY, only in accordance with the generally accepted standards of
underwriting in the State of Arizona and in accordance with the provisions of
this contract and the written instructions of INSURANCE COMPANY with respect
thereto, which instructions shall be reasonable and in accordance with the
competitive practices of the industry.
(c) No policies shall be issued insuring a mineral leasehold, mineral
estate or oil and gas interest, separate and apart from the surface interest,
without the prior written consent of INSURANCE COMPANY.
(d) No policies shall be issued waiving the printed Conditions and
Stipulations from INSURANCE COMPANY'S policies without the prior written consent
of INSURANCE COMPANY except by use of filed endorsements or as approved by
INSURANCE COMPANY. UNDERWRITTEN COMPANY will be liable for loss suffered by an
insured under a usual form of policy where any printed exceptions, conditions or
stipulations have been eliminated or modified without the prior written approval
of INSURANCE COMPANY.
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<PAGE> 4
(e) UNDERWRITTEN COMPANY will be liable for any and all losses payable
on the basis of erroneous preliminary reports or other reports when no insurance
is contemplated.
(f) UNDERWRITTEN COMPANY will be liable for any and all loss payable
over the stated liability on policy when an insured makes a successful claim
based on negligence in the preparation and issuance of title insurance.
(g) It is understood that when construction has commenced prior to the
recordation of the deed of trust to be insured, that UNDERWRITTEN COMPANY will
not waive the mechanic's lien exception without prior written approval of
INSURANCE COMPANY on any policy written in excess of $150,000.00. If
UNDERWRITTEN COMPANY does not receive said approval, it shall be solely liable
for any loss of damage occasioned by any mechanic's liens filed in connection
therewith.
(h) That INSURANCE COMPANY, at any reasonable time, may examine its
title plant and its records, including its escrow accounts, and UNDERWRITTEN
COMPANY agrees to comply with any recommendations or suggestions of INSURANCE
COMPANY pertaining thereto, provided that they are required for the safety and
preservation of said records or escrow accounts.
(i) That no single title policy in excess of $1,000,000.00 will be
issued without prior approval from INSURANCE COMPANY, or its designated agents.
The $1,000,000.00 may be modified from time to time by the separate agreement of
the parties.
(j) To keep a separate file on each title policy issued through its
office, which file shall contain a copy of said policy, a copy of the
preliminary report, and such other documents such as certificates of survey,
affidavits, and the like which are necessary to support the policy
3
<PAGE> 5
issued. Upon termination of this Agreement, UNDERWRITTEN COMPANY agrees to
deliver to INSURANCE COMPANY, upon written demand, an accurate copy of each such
file, when INSURANCE COMPANY has received a query regarding a policy issued
under this Agreement from an insured or claimant asserting or reasonably
expected to assert a claim. During the term of this Agreement INSURANCE COMPANY
agrees that such copies will be used solely for the purpose of investigating
queries with regard to policies issued by UNDERWRITTEN COMPANY and not in any
manner competitive to UNDERWRITTEN COMPANY.
(k) Nothing in this Agreement is intended to constitute UNDERWRITTEN
COMPANY a general agent of INSURANCE COMPANY, but solely as a title policy
issuing agent.
(l) UNDERWRITTEN COMPANY shall not accept escrows, receipts for money,
documents or securities, deposit funds, or issue checks, or accept service of
summons in the name or as a representative of INSURANCE COMPANY, without the
consent of INSURANCE COMPANY.
3. Title policies issued hereunder shall be issued by the office of the
President and the Secretary and the facsimile corporate seal of the INSURANCE
COMPANY shall be engraved upon blank policy forms, but such engraving shall not
be deemed the validating of such policies by INSURANCE COMPANY until such
policies, duly filled out, are actually signed by a validating signatory
designated in writing by INSURANCE COMPANY. INSURANCE COMPANY agrees to appoint
in writing one or more validating signatories who will be employees of
UNDERWRITTEN COMPANY and each of whom will be authorized to execute
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<PAGE> 6
and deliver said policies on behalf of INSURANCE COMPANY and UNDERWRITTEN
COMPANY.
4. INSURANCE COMPANY shall furnish forms of title policies (including
preliminary reports), but shall not be required to furnish forms necessary for
the internal operation of UNDERWRITTEN COMPANY or for use in connection with its
escrow department.
5. INSURANCE COMPANY agrees that:
(a) It will, upon request, furnish to UNDERWRITTEN COMPANY counsel of
qualified officers or employees on questions of insurability of title which may
arise in the preparation or issuance of preliminary reports and title policies.
Such counsel shall be at no cost to UNDERWRITTEN COMPANY, and shall be given to
UNDERWRITTEN COMPANY by counsel located in San Francisco, California by letter,
telephone or personal conference.
(b) Any approval by INSURANCE COMPANY or its agent required by this
Agreement as a condition to the issuance of title policy shall not be
unreasonably withheld. Such approval shall be requested by UNDERWRITTEN COMPANY
by written notice, which notice shall state that if such approval is not given
within five (5) working days UNDERWRITTEN COMPANY shall be allowed to obtain
title insurance similar to that described in the notice from any other title
insurance company, which company need not be specified in said notice. If
approval is denied by INSURANCE COMPANY, or if no approval is granted within
said five (5) working day period, UNDERWRITTEN company shall be allowed to
obtain such similar title insurance from any other title insurance company of
its selection, with no further obligation with respect thereto to INSURANCE
COMPANY.
5
<PAGE> 7
(c) INSURANCE COMPANY shall designate such agent or agents in the San
Francisco Bay Area to receive requests for and grant approvals for the issuance
of title policies hereunder as shall be sufficient in number and location to
permit expeditious consideration and disposition of such requests.
(d) Requests for approval, whether addressed to INSURANCE COMPANY or an
agent, shall be promptly and diligently considered, and approvals, when granted,
shall be given at the earliest possible time in order to allow UNDERWRITTEN
COMPANY to give prompt, efficient service to its customers.
(e) In all actions under this agreement, including, but not limited to
granting or withholding approval for the issuance of title policies, costs,
fees, terms and/or conditions of title policies servicing, consideration, and
disposition of claims, INSURANCE COMPANY shall act promptly and in a reasonable
manner, competitive with other title insurance companies, and in such a fashion
as to allow UNDERWRITTEN COMPANY to compete reasonably and effectively with
other companies in its business.
(f) INSURANCE COMPANY shall at all times be financially sound and
viable. It shall promptly furnish to UNDERWRITTEN COMPANY its annual report and
all public reports, financial statements, and registration statements.
(g) INSURANCE COMPANY shall be and remain approved by all significant
institutional lenders doing business in Arizona as real estate lenders.
6. (a) INSURANCE COMPANY shall have the right to accept coinsurance or
reinsurance risks on lands in said county/counties from other insurance
companies without obligation to UNDERWRITTEN COMPANY. Any co-insurance or
reinsurance of any policy
6
<PAGE> 8
issued pursuant to this Agreement shall be subject to this Agreement, and shall
not relieve INSURANCE COMPANY from any obligations hereunder, nor shall it
impose any additional obligations on UNDERWRITTEN COMPANY. All responsibility
for or in any way dealing with any coinsurer or re-insurer shall be on INSURANCE
COMPANY, and UNDERWRITTEN COMPANY shall continue to deal only with INSURANCE
COMPANY with respect to all matters under this agreement.
(b) The parties hereto understand that INSURANCE COMPANY may underwrite
other underwritten companies in the county/counties covered by this Agreement
and that UNDERWRITTEN COMPANY issues policies of other insurance companies in
such counties.
(c) If reinsurance and/or co-insurance is required by an insured or on
risks in excess of $25,000,000.00 where INSURANCE COMPANY desires to purchase
reinsurance and/or co-insurance, said reinsurance/co-insurance costs will be
shared by the parties in the same proportions as the parties share the title
premiums (which is more particularly set forth in Schedule A).
(d) If reinsurance and/or co-insurance is required as set forth in
Paragraph 6.(b) above, UNDERWRITTEN COMPANY agrees to send INSURANCE COMPANY,
within 5 days of closing, the following:
1. Two copies of all policies
2. Request for Reinsurance (form)
3. Copy of Request to Issue High Liability Policy ("Hi Li")
4. All reinsurance requirements
5. Estimated reinsurance fees
7
<PAGE> 9
Any reinsurance premiums not remitted by UNDERWRITTEN COMPANY to INSURANCE
COMPANY as prescribed hereinabove shall be deemed delinquent and will bear
interest at the rate of one and one half percent (1.5%) per month on the unpaid
balance.
7. UNDERWRITTEN COMPANY agrees that it will at all times maintain a
fidelity bond covering all its employees as required by the Insurance
Commissioner.
8. UNDERWRITTEN COMPANY agrees to rent, lease, purchase or build a
current title plant in the counties covered by this Agreement which complies
with common industry standards in such Counties.
9. UNDERWRITTEN COMPANY agrees to keep accurate books of account of all
its transactions related to this agreement, including but not limited to escrow
accounts, which said books of account shall be at all reasonable times open to
the examination or audit by INSURANCE COMPANY, but INSURANCE COMPANY'S rights to
examine shall be limited to those accounts which pertain to UNDERWRITTEN
COMPANY'S responsibilities to INSURANCE COMPANY under this Agreement, and shall
not include UNDERWRITTEN COMPANY`S general financial records, shareholder lists
or information, customer lists, and customer information not relevant to this
Agreement. All records and accounts of UNDERWRITTEN COMPANY, whether or not open
to examination or audit by INSURANCE COMPANY, shall remain the property of
UNDERWRITTEN COMPANY.
10. UNDERWRITTEN COMPANY agrees that it will keep a policy register in
which it will enter all blank title policy forms furnished by INSURANCE COMPANY
and keep an accurate record of the disposition of all such forms. UNDERWRITTEN
COMPANY further agrees to send INSURANCE COMPANY all policy copies and
remittances, prescribed in
8
<PAGE> 10
Schedule "A" attached hereto and made a part hereof; within fifteen (15) days
after the end of each calendar month, or as UNDERWRITTEN COMPANY is directed in
writing by INSURANCE COMPANY. Said copies shall not be used by INSURANCE
COMPANY, or others, as a starter basis or as the basis for building a title
plant until after termination of this Agreement. INSURANCE COMPANY agrees that
it will give UNDERWRITTEN COMPANY thirty (30) days written notice prior to the
effective date of any change required in the submission of policies or
remittance of premium.
11. INSURANCE COMPANY is liable for the full amount of each title
policy issued hereunder and UNDERWRITTEN COMPANY has no liability for
contribution except as expressly provided herein. The liabilities of
UNDERWRITTEN COMPANY to INSURANCE COMPANY hereunder in the event of title losses
or escrow losses are as follows:
(a) UNDERWRITTEN COMPANY shall not be liable for loss due to reliance
on a false affidavit as to possession or reliance on a properly certified survey
where the surveyor has made an error of which the UNDERWRITTEN COMPANY is
unaware of which would not have been discovered by a reasonably prudent title
officer. UNDERWRITTEN COMPANY shall not be liable for non-record matters such as
forgery, undisclosed heirs, or those matters of similar nature which are often
characterized as "pure title insurance losses."
(b) UNDERWRITTEN COMPANY shall be liable for the following items of
loss:
(1) Loss arising from the intentional elimination of reference to
defects in title reflected in a title search and examination or a
physical inspection of the land insured without adequate evidence
or basis to justify such elimination, unless prior written
authorization by INSURANCE COMPANY.
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<PAGE> 11
(2) Loss arising on reports of forms of title evidence where no policy
of INSURANCE COMPANY is expected to be written; or
(3) Losses arising as a result of the violation of INSURANCE COMPANY'S
written instructions, not inconsistent with the terms of this
Underwriting Agreement.
(c) For all other losses, UNDERWRITTEN COMPANY shall be responsible for
the first $5,000.00 of each loss.
All other losses, except as above enumerated, shall be the obligation
of INSURANCE COMPANY.
So long as this contract is in existence, INSURANCE COMPANY will issue
closing letters to customers of UNDERWRITTEN COMPANY at the request of
UNDERWRITTEN COMPANY as long as such letters do not assume substantially greater
liability than the form of letter now provided to customers by INSURANCE
COMPANY. Issuance of such letters shall not increase the liability of
UNDERWRITTEN COMPANY to INSURANCE COMPANY.
12. Neither party hereto has any power or authority to incur any
obligations for expenses chargeable to the other party, to adjust any claim or
loss for which the other party is or may be liable, or to accept service of
process upon the other party in any state unless it has been specifically
appointed to do so in writing, signed by an officer of the other party.
13. UNDERWRITTEN COMPANY agrees that upon that assertion of any claim
under a policy of title insurance (except as otherwise provided herein),
INSURANCE COMPANY shall be the sole judge of INSURANCE COMPANY'S liability under
the policy and the extent thereof and that INSURANCE COMPANY shall have the full
right to, and shall, investigate, settle, and/or defend said claim and any
action arising therefrom.
10
<PAGE> 12
In considering, investigating, settling, reviewing, or defending any
such claim and/or settlement, INSURANCE COMPANY and/or any agent shall act
diligently, reasonably, promptly and in a manner maintaining UNDERWRITTEN
COMPANY'S competitive position in the industry.
Upon the reimbursement to INSURANCE COMPANY by UNDERWRITTEN COMPANY of
any loss, UNDERWRITTEN COMPANY shall be entitled to any rights of subrogation or
other rights acquired by INSURANCE COMPANY under a title policy in the
proportion that such reimbursement bears to the total loss.
Each of the parties hereto agrees to notify the other, in writing,
within a reasonable time, of any claim of loss under any title policy issued
hereunder, and of any factor or circumstances which come to its attention which
may result in the assertion of a claim or loss under any such policy.
UNDERWRITTEN COMPANY shall immediately forward any claim, made to the
UNDERWRITTEN COMPANY, to the INSURANCE COMPANY.
If suit is brought upon any claim of loss under any title policy issued
hereunder and which INSURANCE COMPANY is liable for under the terms of this
Agreement, qualified outside legal counsel shall be retained forthwith by
INSURANCE COMPANY (or if they fail to do so, by UNDERWRITTEN COMPANY on behalf
of INSURANCE COMPANY), the cost of such litigation, including all legal fees,
shall be borne by INSURANCE COMPANY and UNDERWRITTEN COMPANY in the same manner
as set forth in Paragraph 11 herein. It is recognized by the parties that the
relationship of UNDERWRITTEN COMPANY with its customers and prospective
customers will be adversely affected by involvement in litigation,
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<PAGE> 13
UNDERWRITTEN COMPANY should be insulated from conspicuous participation therein
to the maximum extent reasonably possible.
14. The respective obligations of the parties relating to liability for
losses and costs incidental thereto shall survive any termination of this
Agreement, and UNDERWRITTEN COMPANY hereby agrees that INSURANCE COMPANY shall
have the right to examine the books, records and papers of UNDERWRITTEN COMPANY
in the event of any claim or notice of loss or possible loss, whether or not
this Agreement has been terminated, but such right of examination shall be
strictly limited to such books, records, and papers, and portions thereof, as
are directly related to any such claim or notice.
15. UNDERWRITTEN COMPANY agrees to furnish, at its own expense,
necessary quarters and trained personnel for the proper conduct of its business.
UNDERWRITTEN COMPANY, upon written request of INSURANCE COMPANY, based upon good
cause shown and set forth in said request, shall promptly dispense with the
services of any person or persons whose ability is significantly below the
industry standard for the position held, unless good cause exists for not
discharging said person or persons, including UNDERWRITTEN COMPANY'S personnel
rules and regulations.
16. This contract shall continue in force and be binding on the parties
and their successors, representatives and assigns for a period ending February
28, 1998, unless terminated earlier as provided hereinafter:
(a) In the event either party shall be declared bankrupt or shall
enter into any type of creditor receivership, or shall be
ordered liquidated by a court of competent jurisdiction, this
contract shall automatically be terminated forthwith.
12
<PAGE> 14
(b) This Agreement may be terminated forthwith by the party
designated in the following circumstances:
1. By either party in the event the other party shall
fail to remedy a breach of this contract within 30
days after written notice specifying the breach so to
do.
2. By UNDERWRITTEN COMPANY in the event the authority of
INSURANCE COMPANY to issue title insurance policies
be revoked or suspended and not reinstated within 10
days, and if the period exceeds 10 days, UNDERWRITTEN
COMPANY may purchase title insurance for its
customers from any other insurance company.
3. By INSURANCE COMPANY as to the county or counties
involved in the event UNDERWRITTEN COMPANY shall lose
its authority to act as an underwritten title company
and such authority shall not be reinstated within 10
days.
4. By INSURANCE COMPANY in the event that any audit
shall disclose willful and substantial or material
violation of the escrow obligations of UNDERWRITTEN
COMPANY, or if the opportunity of INSURANCE COMPANY
to make any such audit shall be refused or
unreasonably impeded.
5. By UNDERWRITTEN COMPANY or INSURANCE COMPANY, in the
event it or the parent company owning stock, is
acquired by another
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<PAGE> 15
entity. The party desiring to cancel shall give the
other party 90 days written notice of intent to
cancel.
6. By INSURANCE COMPANY if the losses incurred during
any twelve (12) month period exceeds the underwriting
premiums paid during said twelve (12) month period,
UNDERWRITTEN COMPANY shall be given ninety (90) days
written notice of intent to cancel.
17. All notices provided for herein shall be in writing signed by the
party hereby giving the same and sent to the other party by certified United
States Mail, addressed to such other party at the following address, or such
address as shall hereafter be substituted by notice duly given.
INSURANCE COMPANY UNDERWRITTEN COMPANY
OLD REPUBLIC NATIONAL TITLE CAPITAL TITLE AGENCY, INC.
INSURANCE COMPANY 138 North Montezuma Street
333 Bush Street, Suite 2000 Prescott, AZ 86301
San Francisco, CA 94104
A notice shall be effective the second day after deposit except for
notice of change of address, which shall be effective upon receipt.
18. In the event this contract is terminated in any of the manners
hereinbefore set forth in paragraph 16, UNDERWRITTEN COMPANY agrees to furnish
INSURANCE COMPANY with a copy of all policies issued by it and a copy of its
policy register at INSURANCE COMPANY'S expense.
19. In the event that a written notice of intent to cancel is made by
INSURANCE COMPANY pursuant to paragraphs 16(b) or 16.4 (when the breach is on
the part of UNDERWRITTEN COMPANY), INSURANCE COMPANY may place its
representative(s) in
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<PAGE> 16
the UNDERWRITTEN COMPANY'S main office for the purpose of approving all
evidences of title to be issued by UNDERWRITTEN COMPANY subsequent to the
posting of such notice of cancellation and to observe all pending escrows in
connection with which INSURANCE COMPANY might be obligated to issue its
policies.
To implement the foregoing paragraph UNDERWRITTEN COMPANY shall furnish
to INSURANCE COMPANY'S representative(s) all necessary space and reasonable
assistance required by INSURANCE COMPANY representative(s) to accomplish said
purpose.
20. The covenants, agreements and conditions hereof are for
the sole benefit of the parties, and nothing expressed in or to be implied from
this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy of claim.
This Agreement is not assignable by either party without the consent of
the other party. If there is a substantial change in the ownership or management
of either party or if either party is acquired by merger, purchase or other
means, the other party shall have the option of continuing this contract or
terminating it upon 90 days written notice.
21. UNDERWRITTEN COMPANY agrees to comply with the provisions of
Schedule A attached hereto in charging for and collecting for policies of title
insurance written hereunder and in paying to INSURANCE COMPANY premiums for its
acceptance of hazards involved in the insuring of title and the issuance of its
policies of title insurance.
22. If any paragraph above is deemed to be invalid it will not affect
the validity of remaining portions of this Agreement.
23. This Agreement and all provisions thereof shall be construed in
California and in accordance with California law.
15
<PAGE> 17
24. Any dispute which may be resolved hereunder shall be accomplished
by arbitration in San Francisco, California, as follows: the parties shall
mutually agree upon a single arbitrator if they can do so within ten (10) days.
If not, each party shall appoint one arbitrator and the two so appointed shall
appoint a third. Should the two so appointed by unable to agree upon a third
within ten (10) days, the third shall be appointed by the presiding judge of the
Superior Court of San Francisco, California. A decision of the majority of the
arbitrators shall be final. The fees of the arbitrators shall be divided equally
between parties. The decision of the arbitrators shall be final on all matters
of fact, but matters of law shall be subject to appeal to the Superior Court of
San Francisco, California. The arbitration shall be in accordance with
California law. No such dispute shall interfere with the performance of any
obligation hereunder.
OLD REPUBLIC NATIONAL TITLE CAPITAL TITLE AGENCY, INC.
INSURANCE COMPANY
By: /s/Robert J. Soper By:
----------------------------- ------------------------
ROBERT J. SOPER DONALD R. HEAD
Vice President President
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<PAGE> 18
SCHEDULE A
1. It is understood and agreed that UNDERWRITTEN COMPANY is prepared to
engage in the business of an underwritten title company within the area covered
by the attached Agreement, and said Agreement is entered into for the purpose of
enabling UNDERWRITTEN COMPANY to furnish title insurance on lands within said
area; and that, upon the issuance of any policy of title insurance as provided
in said agreement, there shall become due and payable to INSURANCE COMPANY the
premium thereof as hereinafter set forth.
2. (a) UNDERWRITTEN COMPANY agrees to charge and collect for policies
of title insurance written hereunder fees according to the "Fee Schedule" of
INSURANCE COMPANY presently in effect and filed in the office of the Insurance
Commissioner of the State of Arizona, or as said "Fee Schedule" may from time to
time be amended. Printed schedules of such fees shall be made available to the
public.
(b) UNDERWRITTEN COMPANY agrees to pay INSURANCE COMPANY as a
premium for the acceptance by INSURANCE COMPANY of the hazard involved in the
insuring of the title and the issuing of its policy of title insurance a
percentage of the gross fees charged to the customer and reported to INSURANCE
COMPANY as set forth in said "Fee Schedule," which percentage shall be xxxxxx
Percent.
Gross fees as used in this subparagraph (b) shall be deemed to include
any additional charge made for an extension of coverage, but not including
charges for physically preparing separate policies or additional policies, which
charges are in addition to the "Basic Insurance Rate," or applicable percentages
thereof (i.e. the extra policy charge on ALTA lender's policies issued
concurrently with owner's policies would not be subject to the underwriting
charges) and
17
<PAGE> 19
shall not include fees for escrow service, or for preliminary reports where no
policy of title insurance is issued, or extra work charges.
(c) The premium due INSURANCE COMPANY set forth herein shall
be remitted to INSURANCE COMPANY by UNDERWRITTEN COMPANY within 15 days of the
receipt of the policy register and invoice by the UNDERWRITTEN COMPANY. Any
premiums not remitted by UNDERWRITTEN COMPANY to INSURANCE COMPANY as prescribed
hereinabove shall be deemed delinquent and will bear interest at the rate of one
and one half percent (1.5%) per month on the unpaid balance.
3. The balance of the gross title fees charged to customers over and
above the amounts defined as premiums by paragraph 2 of this Schedule "A" shall
be retained as compensation by UNDERWRITTEN COMPANY for its services to the
insured in preparing the report thereon and for such other services to the
insured as may be included in the fee so charged, and INSURANCE COMPANY shall
receive no part thereof.
4. In the event the premium tax that is presently charged INSURANCE
COMPANY is increased, INSURANCE COMPANY and UNDERWRITTEN COMPANY will share in
the said increased tax. In the event said tax more than doubles, the parties
hereto shall negotiate as to the division of such increased tax. In the event
the parties cannot agree to such a division, the division will be arbitrated in
accordance with paragraph 24 of the Underwriting Agreement.
18
<PAGE> 20
AMENDMENT TO UNDERWRITING AGREEMENT
WHEREAS, OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY and
CAPITAL TITLE AGENCY, INC. entered into an Underwriting Agreement as of March 1,
1996; and
WHEREAS, said Underwriting Agreement covers the county of Yavapai in
the State of Arizona; and
WHEREAS, the parties to the Agreement desire to add the county of
Maricopa in the State of Arizona to said Agreement.
NOW, THEREFORE, it is agreed as follows:
Said Underwriting Agreement now contains the county of Maricopa in the
State of Arizona.
No other provisions of said Agreement shall be deemed to be changed or
altered by this Amendment.
This Amendment is to be effective May 1, 1996.
OLD REPUBLIC NATIONAL TITLE CAPITAL TITLE AGENCY, INC.
INSURANCE COMPANY
By: /s/Robert J. Soper By: /s/Donald R. Head
--------------------------- ----------------------------------
ROBERT J. SOPER DONALD R. HEAD
Vice President Chairman
<PAGE> 1
EXHIBIT 10.2
UNDERWRITING AGREEMENT
THIS AGREEMENT, entered into this 16th day of August, 1996, between
FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation, hereinafter
called "Insurance Company", and CAPITAL TITLE AGENCY, INC., an Arizona
corporation, hereinafter called "Title Company";
WHEREAS, Insurance Company is qualified to conduct a title insurance
business in the State of Arizona.
NOW, THEREFORE, it is agreed as follows:
1) Insurance Company agrees that during the term of this agreement it
will issue upon request of Title Company and to persons designated by Title
Company, policies of title insurance of Insurance Company insuring title to real
property located in Maricopa County in the State of Arizona, reserving the right
to prescribe the form of policy to be issued and to include in any policy such
printed exceptions as it may deem appropriate or necessary. Either party shall
have the absolute right, with or without cause, to terminate this agreement at
any time by giving to the other party 90 days written notice, in the manner set
forth in Paragraph 19, of its intention to terminate.
2) The agreement of Insurance Company in Paragraph 1) hereof is subject
to the following conditions:
a) Prior to the issuance of a policy insuring any title, Title
Company will have made a complete examination of the title, including an
examination of all pertinent records of the State, County and City in which the
land is located and of any other public agency or special taxing district which
might affect that title, all in accordance with usual and customary
<PAGE> 2
practices and procedures and recognized underwriting principles and in full
compliance with instructions, rules and regulations of the Insurance Company;
and shall have prepared a written report showing the correct conditions of the
title and all defects to which it is subject.
b) Prior to the issuance of such policy which will include
coverage as to matters affecting real property which cannot be ascertained by
the above-referenced records, Title Company agrees to make an examination of the
property and the necessary investigation and survey where required. The type of
coverage referred to hereunder shall be both standard and extended coverage
policies for owners and lenders and endorsements which require an inspection of
the land.
c) At the time Insurance Company is requested to issue a
policy, Title Company is not in default in the performance of any of its
obligations and agreements herein contained.
d) No policy in a liability amount exceeding $300,000.00,
where coverage is to be afforded on a risk basis with respect to liens, or
rights to liens, for services, labor or material theretofore or thereafter
furnished shall be issued without the proper written approval of an authorized
officer of Insurance Company. All indemnities and security therefor shall run in
favor of Insurance Company and shall be transmitted together with all supporting
documentation to Insurance Company for safekeeping and administration. No policy
carrying a liability in excess of $500,000.00 shall be issued without the proper
written approval of an authorized officer of Insurance Company.
e) Title Company warrants it will maintain its plant in
Maricopa County in accordance with the usual and customary practices for title
plant maintenance in said county.
2
<PAGE> 3
f) Title Company agrees to exercise that degree of care in
examination of documents pertaining to the issuance of title policies as is
reasonable and necessary to insure compliance with the standards of title
examination set forth in Paragraph 2) a) above.
g) Title Company will, at all times, maintain a fidelity bond
covering all of its employees in the amount of $200,000.00 or a greater amount
as required by the Arizona State Banking Department. Said bond requirements may
be increased at the request of Insurance Company should the escrow funds on
deposit with Title Company reach such an amount that an increased undertaking is
considered desirable, when said increase is mutually agreed upon by all parties.
h) Title Company will maintain all of its accounts and
financial transactions in accordance with procedures acceptable to the Arizona
State Banking Department and shall annually furnish Insurance Company a copy of
its audited balance sheet and profit and loss statement prepared by a certified
public accountant together with any companion report of exceptions or notes made
by said accountant.
i) Title Company shall charge for policies issued in
accordance with the schedule of fees the Insurance Company has filed with the
Arizona Department of Insurance.
j) Title Company shall remit to Insurance Company on or before
the 15th of each calendar month, xxxxx of the total amount of fees billed for
title insurance policies of Insurance Company issued through its offices during
the preceding calendar month.
Notwithstanding the above, should Insurance Company's losses
(paid and reserved) relating to policies issued by Title Company exceed 40% of
the amount remitted
3
<PAGE> 4
during any calendar year, the percentage of fees billed for title insurance
policies shall increase by 2% of the otherwise applicable percentage for all of
the succeeding year.
k) Title Company shall reimburse Insurance Company for the
charges made for any reinsurance purchased by Insurance Company on any policies
covered by this Agreement.
3) Title insurance policies shall be issued at the office of Title
Company. A facsimile signature of the President and Secretary shall be engraved
upon such blank policy forms together with a facsimile corporate seal. The
policies shall be deemed to be executed by Insurance Company when they have been
duly filled out and delivered to the Insured. Forms of title insurance policies
and endorsements will be furnished by Insurance Company.
4) Insurance Company agrees that it will furnish without charge and
upon request of Title Company, the opinion and advice of its Chief Title
Officer, Legal Counsel and other qualified employees on questions of law and
title practice which may arise in the examination of titles, the preparation of
and issuance of reports and policies of Insurance Company only.
5) Title Company agrees to forward to Insurance Company within 15 days
after the end of each calendar month, a copy of each title policy issued through
its office during the preceding month.
6) Title Company agrees it shall be liable for:
a) Unless specifically waived in writing by Insurance Company,
the first $5,000.00 of each and every loss under any single policy of title
insurance. Loss as used in this agreement shall refer to all loss, cost or
damage, including reasonable attorney's fees and
4
<PAGE> 5
declaratory judgments filed by Insurance Company against its insured to
determine policy coverage.
b) Any loss resulting solely from the intentional elimination
from a policy of title insurance of any reference to defects in title reflected
in the preliminary report of title or in the title search file unless said
elimination has been approved in writing by Insurance Company, in which case
only Paragraph 6a shall apply.
c) Any loss resulting solely from the intentional elimination
from a policy of title insurance of any reference to defects in title disclosed
by a physical examination, survey of the property or investigation of unrecorded
matters as required prior to issuance of a policy which insures against loss or
matters not otherwise disclosed by the public records. Title Company shall not
be liable for elimination of such matters if approved in writing by Insurance
Company, except to the extent provided in Paragraph 6a.
d) Any loss or darnage suffered by any patron of Title Company
arising from any error, fault, or negligence by Title Company in handling any
escrow whether or not such loss or damage is covered by any policy of title
insurance issued through or in connection with such escrow.
e) Any loss suffered by an insured under a usual form of
policy where any printed exceptions, conditions or stipulations have been
eliminated or modified without approval of Insurance Company, where the same
would have otherwise been applicable to such loss.
f) Any and all loss payable on the basis of erroneous
preliminary reports or other title reports when no insurance is given.
5
<PAGE> 6
g) Any and all loss payable over the stated liability on a
policy when an insured makes a claim on the basis of negligence in the
preparation and issuance of the policy of title insurance.
7) Except as provided in Paragraph 6a, Insurance Company agrees it
shall be liable for:
a) Those risks which, for illustration but not limited to such
illustration, may be called "insurance risks", such as forgery, false
impersonation or execution of documents by minors.
b) A proposed risk which is submitted to Insurance Company and
the latter, by its authorized representative, has approved the assumption of the
risk on the basis of the facts submitted and representation made by Title
Company, said facts and representation being accurate and complete to the best
of the Title Company's knowledge.
8) Each of the parties hereto agree to notify the other immediately in
writing of any claim of loss under any policy issued hereunder howsoever such
claim may come to its attention which might result in the assertion of a claim
of loss under any such policy and of the commencement of any litigation which
might result in any such claim of loss. Failure to give such notice in a timely
manner shall not affect the rights of the parties under this contract unless
such failure prejudices the rights of the other party. Said notice shall be
addressed to the other party at its principal place of business.
9) When a claim of loss is asserted under a policy of title insurance,
Title Company agrees that Insurance Company shall be the sole judge of the
existence of Insurance Company's liability under the policy of title insurance
and upon Insurance Company making any payment
6
<PAGE> 7
or settlement of such claim, Title Company agrees to forthwith repay to
Insurance Company the amount thereof to the extent of the liability assumed by
Title Company under any portion of Paragraph 6) above. If there is a money
recovery from a salvage asset by Insurance Company, no portion of said money
shall be reimbursed to Title Company until all costs and expenses, both direct
and indirect, as determined in the sole discretion of Insurance Company, have
been reimbursed to Insurance Company and then only to the extent which Title
Company paid toward the resolution of the claim. However, Title Company shall
have the option at the time of settlement of a claim of acquiring the salvage
asset, provided all costs and expenses, both direct and indirect, as determined
by Insurance Company, are reimbursed to Insurance Company.
10) Each of the parties hereto shall be entitled to the rights of
subrogation arising in connection with any policy in proportion to the liability
paid respectively by each of them thereunder.
11) The respective obligations of the parties relating to liability for
losses and defending, appearing in and applying the costs of litigation shall
survive any termination of this agreement. In the event of any litigation which
might result in the assertion of any claim of loss under any policy issued
hereunder, or in the event that Insurance Company is informed of any
circumstances which might result in a claim of loss under any such policy,
Insurance Company shall have the right to make such examination of the pertinent
books, records and papers of Title Company as it may deem advisable or
necessary, whether or not this agreement has been otherwise terminated, and
Title Company agrees that such books, records and papers will be kept intact and
reasonably available and will not be destroyed without the proper written
approval of Insurance Company.
7
<PAGE> 8
12) The term of this agreement is one (1) year. In the absence of a
timely termination by Insurance Company, Title Company shall have the option to
extend this agreement on the same terms for additional one (1) year periods. If,
at least 90 days before the end of said term, neither party gives to the other
notice of termination, the same terms shall continue in effect for another one
(1) year period.
13) Title Company shall provide written notice to Insurance Company of
any significant change in ownership and/or management of Title Company or its
parent company.
14) If any clause, paragraph or part of this agreement shall at any
time be held illegal or unlawful by a court of competent jurisdiction, the
remainder thereof shall remain in full force and effect between the parties
hereto.
15) Insurance Company and Title Company are mindful of the complete
faith and credit each must have for the other, and the close cooperation and
unity of purpose that must exist between Insurance Company and Title Company,
Insurance Company shall have the right of summary cancellation of this agreement
in the event it determines, in good faith and after reasonable investigation,
that any of the following conditions exist with respect to Title Company:
Credible allegations of fraud or mishandling of any escrow
funds, insolvency, the filing of a petition in bankruptcy, cancellation of a
license or permit to do business or the instigation of legal proceedings by the
State of Arizona or Federal authorities, which proceedings, if successful, might
lead to a receivership or the cancellation of permit or license to do business.
8
<PAGE> 9
16) Any notice of summary cancellation shall be given as provided in
Paragraph 19). In the event of a summary cancellation of the agreement by either
party, Title Company shall cease issuing policies of title insurance or any
other evidence of title bearing the name of Insurance Company, and shall
forthwith turn over to Insurance Company all unused policies of title insurance,
evidences of title and other forms bearing the name of Insurance Company.
However, Insurance Company shall have the right to honor all validly issued
commitments to insure delivered by Title Company prior to the date of a written
notice of cancellation and, to that end, Title Company agrees that Insurance
Company shall have the right to place its employee or employees in Title
Company's place of business for the purpose of supervising all pending escrows
in connection with which Insurance Company might be obligated to issue its
policy of title insurance. Title Company shall furnish all necessary secretarial
help and equipment as well as adequate work space as required by the employee or
employees of Insurance Company.
17) It is agreed between the parties that this written contract
represents the complete contract between said parties and any change,
modification or discharge shall not be effective unless made in writing and
signed by the party to be bound thereby.
18) This agreement is not assignable without the consent of the other
party hereto.
19) All written notices permitted or required to be given under this
agreement may be personally delivered or mailed by Registered United States Mail
or by Certified United States Mail, when addressed as follows:
Insurance Company: FIRST AMERICAN TITLE INSURANCE COMPANY
ATTN: LEGAL DEPARTMENT
111 WEST MONROE, SUITE 111
PHOENIX, AZ 85003
9
<PAGE> 10
Title Company: CAPITAL TITLE AGENCY, INC.
ATTN: PRESIDENT
4808 NORTH 22ND STREET
PHOENIX, AZ 85016
20) Insurance Company agrees that it shall furnish its customary
indemnity letters requested by banks, financial institutions, and lenders to
enable them to fund loans to Title Company for disbursement by Title Company in
escrow.
21) Title Company agrees that it will not, during the term of this
agreement, furnish to or procure for anyone any policy of title insurance on
real property in the State of Arizona issued by any insurer other than Insurance
Company except in Maricopa, Yavapai and other counties in which Insurance
Company does not operate, or as may be required by a customer.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly and properly executed by their respective officers having full authority to
do so, to be effective as of the day and year first above written.
FIRST AMERICAN TITLE INSURANCE
COMPANY, a California corporation
By /s/Gary L. Kermott
----------------------------------
Its: Regional Vice President
CAPITAL TITLE AGENCY, INC., an Arizona
corporation
By /s/Nick Velimirovich
-----------------------------------
Its: CEO
10
<PAGE> 11
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the 21st day of August, 1996, before me, the undersigned Notary
Public, personally appeared Gary L. Kermott, who acknowledged himself to be the
Regional Vice President of FIRST AMERICAN TITLE INSURANCE COMPANY, a California
corporation, and that he as such officer being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/Sally R. Cryder
-------------------------------
Notary Public
My Commission Expires:
June 2, 1999
- ----------------------
*****************
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the 16th day of August, 1996, before me, the undersigned Notary
Public, personally appeared NICK VELIMIROVICH, who acknowledged himself to be
the Chief Executive Officer of CAPITAL TITLE AGENCY, INC., an Arizona
corporation, and that he as such officer being authorized so to do, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/Robert W. Catalana
----------------------------------
Notary Public - Robert W. Catalana
My Commission Expires:
September 3, 1998
- ---------------------
11
<PAGE> 12
GUARANTY
As an inducement to FIRST AMERICAN TITLE INSURANCE COMPANY, a California
corporation, ("Principal") to continue the Underwriting Agreement attached
hereto as "Exhibit A" and incorporated herein with CAPITAL TITLE AGENCY, INC.
("Agent"), the undersigned does hereby guarantee the full, prompt and complete
performance by Agent of all the terms and conditions contained in the
Underwriting Agreement attached hereto as "Exhibit A", and the undersigned does
hereby further promise and guarantee the unconditional payment of all
obligations of every nature and kind arising out of or in connection with the
said Underwriting Agreement, whether now owing or due by whomsoever or
howsoever, heretofore or hereafter created, or arising, or evidenced, and hereby
waive demand, protest, and notice of nonpayment of any and all said obligations.
The undersigned does further promise and guarantee the unconditional fulfillment
by Agent of all the obligations of Agent under said Underwriting Agreement.
Authority and consent are hereby expressly given the Principal from time to
time, and without any notice to the undersigned, to give and make such
extensions, renewals, settlements, and compromises as it may deem proper with
respect to said Underwriting Agreement which is covered by this Guaranty.
It is understood that this is a continuing, absolute and unconditional guaranty,
co-extensive with said contract between Principal and Agent, and the undersigned
hereby expressly waives notice of acceptance of this guaranty and of all
defaults by the Agent and of nonpayment of any indebtedness or obligations under
said Underwriting Agreement.
Executed by the undersigned, this 16th day of August , 1996.
CAPITAL TITLE GROUP, INC.
BY: /s/Donald R. Head
----------------------
Its: Chairman
<PAGE> 13
"EXHIBIT A"
UNDERWRITING AGREEMENT
THIS AGREEMENT, entered into this ______ day of _________, 1996,
between FIRST AMERICAN TITLE INSURANCE COMPANY, a California corporation,
hereinafter called "Insurance Company", and CAPITAL TITLE AGENCY, INC., an
Arizona corporation, hereinafter called "Title Company";
WHEREAS, Insurance Company is qualified to conduct a title insurance
business in the State of Arizona.
NOW, THEREFORE, it is agreed as follows:
1) Insurance Company agrees that during the term of this agreement it
will issue upon request of Title Company and to persons designated by Title
Company, policies of title insurance of Insurance Company insuring title to real
property located in Maricopa County in the State of Arizona, reserving the right
to prescribe the form of policy to be issued and to include in any policy such
printed exceptions as it may deem appropriate or necessary. Either party shall
have the absolute right, with or without cause, to terminate this agreement at
any time by giving to the other party 90 days written notice, in the manner set
forth in Paragraph 19, of its intention to terminate.
2) The agreement of Insurance Company in Paragraph 1) hereof is subject
to the following conditions:
a) Prior to the issuance of a policy insuring any title, Title
Company will have made a complete examination of the title, including an
examination of all pertinent records of the State, County and City in which the
land is located and of any other public agency or special taxing district which
might affect that title, all in accordance with usual and customary practices
and procedures and recognized underwriting principles and in full compliance
with instructions, rules and regulations of the Insurance Company; and shall
have prepared a written report showing the correct conditions of the title and
all defects to which it is subject.
b) Prior to the issuance of such policy which will include
coverage as to matters affecting real property which cannot be ascertained by
the above-referenced records, Title Company agrees to make an examination of the
property and the necessary investigation and survey where required. The type of
coverage referred to hereunder shall be both standard and extended coverage
policies for owners and lenders and endorsements which require an inspection of
the land.
2
<PAGE> 14
c) At the time Insurance Company is requested to issue a
policy, Title Company is not in default in the performance of any of its
obligations and agreements herein contained.
d) No policy in a liability amount exceeding $300,000.00,
where coverage is to be afforded on a risk basis with respect to liens, or
rights to liens, for services, labor or material theretofore or thereafter
furnished shall be issued without the proper written approval of an authorized
officer of Insurance Company. All indemnities and security therefor shall run in
favor of Insurance Company and shall be transmitted together with all supporting
documentation to Insurance Company for safekeeping and administration. No policy
carrying a liability in excess of $500,000.00 shall be issued without the proper
written approval of an authorized officer of Insurance Company.
e) Title Company warrants it will maintain its plant in
Maricopa County in accordance with the usual and customary practices for title
plant maintenance in said county.
f) Title Company agrees to exercise that degree of care in
examination of documents pertaining to the issuance of title policies as is
reasonable and necessary to insure compliance with the standards of title
examination set forth in Paragraph 2) a) above.
g) Title Company will, at all times, maintain a fidelity bond
covering all of its employees in the amount of $200,000.00 or a greater amount
as required by the Arizona State Banking Department. Said bond requirements may
be increased at the request of Insurance Company should the escrow funds on
deposit with Title Company reach such an amount that an increased undertaking is
considered desirable, when said increase is mutually agreed upon by all parties.
h) Title Company will maintain all of its accounts and
financial transactions in accordance with procedures acceptable to the Arizona
State Banking Department and shall annually furnish Insurance Company a copy of
its audited balance sheet and profit and loss statement prepared by a certified
public accountant together with any companion report of exceptions or notes made
by said accountant.
i) Title Company shall charge for policies issued in
accordance with the schedule of fees the Insurance Company has filed with the
Arizona Department of Insurance.
j) Title Company shall remit to Insurance Company on or before
the 15th of each calendar month, 10% of the total amount of fees billed for
title insurance policies of Insurance Company issued through its offices during
the preceding calendar month.
Notwithstanding the above, should Insurance Company's losses (paid and
reserved) relating to policies issued by Title Company exceed 40% of the amount
remitted during any
3
<PAGE> 15
calendar year, the percentage of fees billed for title insurance policies shall
increase by 2% of the otherwise applicable percentage for all of the succeeding
year.
k) Title Company shall reimburse Insurance Company for the
charges made for any reinsurance purchased by Insurance Company on any policies
covered by this Agreement.
3) Title insurance policies shall be issued at the office of Title
Company. A facsimile signature of the President and Secretary shall be engraved
upon such blank policy forms together with a facsimile corporate seal. The
policies shall be deemed to be executed by Insurance Company when they have been
duly filled out and delivered to the Insured. Forms of title insurance policies
and endorsements will be furnished by Insurance Company.
4) Insurance Company agrees that it will furnish without charge and
upon request of Title Company, the opinion and advice of its Chief Title
Officer, Legal Counsel and other qualified employees on questions of law and
title practice which may arise in the examination of titles, the preparation of
and issuance of reports and policies of Insurance Company only.
5) Title Company agrees to forward to Insurance Company within 15 days
after the end of each calendar month, a copy of each title policy issued through
its office during the preceding month.
6) Title Company agrees it shall be liable for:
a) Unless specifically waived in writing by Insurance Company,
the first $5,000.00 of each and every loss under any single policy of title
insurance. Loss as used in this agreement shall refer to all loss, cost or
damage, including reasonable attorney's fees and declaratory judgments filed by
Insurance Company against its insured to determine policy coverage.
b) Any loss resulting solely from the intentional elimination
from a policy of title insurance of any reference to defects in title reflected
in the preliminary report of title or in the title search file unless said
elimination has been approved in writing by Insurance Company, in which case
only Paragraph 6a shall apply.
c) Any loss resulting solely from the intentional elimination
from a policy of title insurance of any reference to defects in title disclosed
by a physical examination, survey of the property or investigation of unrecorded
matters as required prior to issuance of a policy which insures against loss or
matters not otherwise disclosed by the public records. Title Company shall not
be liable for elimination of such matters if approved in writing by Insurance
Company, except to the extent provided in Paragraph 6a.
d) Any loss or damage suffered by any patron of Title Company
arising from any error, fault, or negligence by Title Company in handling any
escrow whether or
4
<PAGE> 16
not such loss or damage is covered by any policy of title insurance issued
through or in connection with such escrow.
e) Any loss suffered by an insured under a usual form of
policy where any printed exceptions, conditions or stipulations have been
eliminated or modified without approval of Insurance Company, where the same
would have otherwise been applicable to such loss.
f) Any and all loss payable on the basis of erroneous
preliminary reports or other title reports when no insurance is given.
g) Any and all loss payable over the stated liability on a
policy when an insured makes a claim on the basis of negligence in the
preparation and issuance of the policy of title insurance.
7) Except as provided in Paragraph 6a, Insurance Company agrees it
shall be liable for:
a) Those risks which, for illustration but not limited to such
illustration, may be called "insurance risks", such as forgery, false
impersonation or execution of documents by minors.
b) A proposed risk which is submitted to Insurance Company and
the latter, by its authorized representative, has approved the assumption of the
risk on the basis of the facts submitted and representation made by Title
Company, said facts and representation being accurate and complete to the best
of the Title Company's knowledge.
8) Each of the parties hereto agree to notify the other immediately in
writing of any claim of loss under any policy issued hereunder howsoever such
claim may come to its attention which might result in the assertion of a claim
of loss under any such policy and of the commencement of any litigation which
might result in any such claim of loss. Failure to give such notice in a timely
manner shall not affect the rights of the parties under this contract unless
such failure prejudices the rights of the other party. Said notice shall be
addressed to the other party at its principal place of business.
9) When a claim of loss is asserted under a policy of title insurance,
Title Company agrees that Insurance Company shall be the sole judge of the
existence of Insurance Company's liability under the policy of title insurance
and upon Insurance Company making any payment or settlement of such claim, Title
Company agrees to forthwith repay to Insurance Company the amount thereof to the
extent of the liability assumed by Title Company under any portion of Paragraph
6) above. If there is a money recovery from a salvage asset by Insurance
Company, no portion of said money shall be reimbursed to Title Company until all
costs and expenses, both direct and indirect, as determined in the sole
discretion of Insurance Company, have been reimbursed to Insurance Company and
then only
5
<PAGE> 17
to the extent which Title Company paid toward the resolution of the claim.
However, Title Company shall have the option at the time of settlement of a
claim of acquiring the salvage asset, provided all costs and expenses, both
direct and indirect, as determined by Insurance Company, are reimbursed to
Insurance Company.
10) Each of the parties hereto shall be entitled to the rights of
subrogation arising in connection with any policy in proportion to the liability
paid respectively by each of them thereunder.
11) The respective obligations of the parties relating to liability for
losses and defending, appearing in and applying the costs of litigation shall
survive any termination of this agreement. In the event of any litigation which
might result in the assertion of any claim of loss under any policy issued
hereunder, or in the event that Insurance Company is informed of any
circumstances which might result in a claim of loss under any such policy,
Insurance Company shall have the right to make such examination of the pertinent
books, records and papers of Title Company as it may deem advisable or
necessary, whether or not this agreement has been otherwise terminated, and
Title Company agrees that such books, records and papers will be kept intact and
reasonably available and will not be destroyed without the proper written
approval of Insurance Company.
12) The term of this agreement is one (1) year. In the absence of a
timely termination by Insurance Company, Title Company shall have the option to
extend this agreement on the same terms for additional one (1) year periods. If,
at least 90 days before the end of said term, neither party gives to the other
notice of termination, the same terms shall continue in effect for another one
(1) year period.
13) Title Company shall provide written notice to Insurance Company of
any significant change in ownership and/or management of Title Company or its
parent company.
14) If any clause, paragraph or part of this agreement shall at any
time be held illegal or unlawful by a court of competent jurisdiction, the
remainder thereof shall remain in full force and effect between the parties
hereto.
15) Insurance Company and Title Company are mindful of the complete
faith and credit each must have for the other, and the close cooperation and
unity of purpose that must exist between Insurance Company and Title Company,
Insurance Company shall have the right of summary cancellation of this agreement
in the event it determines, in good faith and after reasonable investigation,
that any of the following conditions exist with respect to Title Company:
Credible allegations of fraud or mishandling of any escrow
funds, insolvency, the filing of a petition in bankruptcy, cancellation of a
license or permit to do business or the instigation of legal proceedings by the
State of Arizona or Federal authorities, which
6
<PAGE> 18
proceedings, if successful, might lead to a receivership or the cancellation of
permit or license to do business.
16) Any notice of summary cancellation shall be given as provided in
Paragraph 19). In the event of a summary cancellation of the agreement by either
party, Title Company shall cease issuing policies of title insurance or any
other evidence of title bearing the name of Insurance Company, and shall
forthwith turn over to Insurance Company all unused policies of title insurance,
evidences of title and other forms bearing the name of Insurance Company.
However, Insurance Company shall have the right to honor all validly issued
commitments to insure delivered by Title Company prior to the date of a written
notice of cancellation and, to that end, Title Company agrees that Insurance
Company shall have the right to place its employee or employees in Title
Company's place of business for the purpose of supervising all pending escrows
in connection with which Insurance Company might be obligated to issue its
policy of title insurance. Title Company shall furnish all necessary secretarial
help and equipment as well as adequate work space as required by the employee or
employees of Insurance Company.
17) It is agreed between the parties that this written contract
represents the complete contract between said parties and any change,
modification or discharge shall not be effective unless made in writing and
signed by the party to be bound thereby.
18) This agreement is not assignable without the consent of the other
party hereto.
19) All written notices permitted or required to be given under this
agreement may be personally delivered or mailed by Registered United States Mail
or by Certified United States Mail, when addressed as follows:
Insurance Company: FIRST AMERICAN TITLE INSURANCE COMPANY
ATTN: LEGAL DEPARTMENT
111 WEST MONROE, SUITE 111
PHOENIX, AZ 85003
Title Company: CAPITAL TITLE AGENCY, INC.
ATTN: PRESIDENT
4808 NORTH 22ND STREET
PHOENIX, AZ 85016
20) Insurance Company agrees that it shall furnish its customary
indemnity letters requested by banks, financial institutions, and lenders to
enable them to fund loans to Title Company for disbursement by Title Company in
escrow.
21) Title Company agrees that it will not, during the term of this
agreement, furnish to or procure for anyone any policy of title insurance on
real property in the State of Arizona issued by any insurer other than Insurance
Company except in Maricopa, Yavapai
7
<PAGE> 19
and other counties in which Insurance Company does not operate, or as may be
required by a customer.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly and properly executed by their respective officers having full authority to
do so, to be effective as of the day and year first above written.
FIRST AMERICAN TITLE INSURANCE
COMPANY, a California corporation
By
-------------------------------
Its:
CAPITAL TITLE AGENCY, INC., an
Arizona corporation
By
---------------------------------
Its:
8
<PAGE> 20
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the ____ day of _________, 1996, before me, the undersigned Notary
Public, personally appeared ___________________________________________, who
acknowledged himself to be the ________________ of FIRST AMERICAN TITLE
INSURANCE COMPANY, a California corporation, and that he as such officer being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
-----------------------------------
Notary Public
My Commission Expires:
- -----------------------
*************************
STATE OF ARIZONA )
) ss.
County of Maricopa )
On the ____ day of ___________, 1996, before me, the undersigned Notary
Public, personally appeared _________________________________________________,
who acknowledged himself to be the _____________________________ of CAPITAL
TITLE AGENCY, INC., an Arizona corporation, and that he as such officer being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
---------------------------
Notary Public
My Commission Expires:
- ------------------------
9
<PAGE> 1
EXHIBIT 10.3
IMAGE SERVICE AGREEMENT
This Agreement is entered into June 5, 1996, between SECURITY UNION TITLE
INSURANCE COMPANY, a California Corporation, (hereinafter "SECURITY"), and
CAPITAL TITLE AGENCY, an Arizona Corporation (hereinafter "CUSTOMER").
WITNESSETH:
WHEREAS, SECURITY is engaged in the business of collecting, storing, and
disseminating automated real estate information; and
WHEREAS, SECURITY has constructed and maintains a database of electronic copies
of recorded documents, maps, and other relevant material pertaining to real
property in Maricopa County, Arizona, commonly known as the Image Database; and
WHEREAS, CUSTOMER is engaged in the title insurance or title agency business in
Maricopa County, Arizona; and
WHEREAS, CUSTOMER is desirous of having automated access to the Image Database;
and
WHEREAS, SECURITY is desirous of providing automated imaging and related
services for CUSTOMER.
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
SECURITY and CUSTOMER agree as follows:
1. DEFINITIONS
For the purposes of this Agreement the following terms are defined:
DOCUMENT....is defined as a unique item recorded in the office of the
County Recorder and given a separate recording number.
DOCUMENT IMAGES...are defined as electronic representations of
Documents, Maps, Plat Folder, Starters and other material stored in the
Image Database included in electronic form for use in the System.
MAP(S)....are defined as follows:
Plat Maps are items recorded in the office of the County Recorder and
given a unique Book and Page number. These maps represent official
subdivision plats.
Assessor Maps are unique maps maintained by the office of the County
Assessor. These maps show each parcel of land identified for tax
collection purposes.
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<PAGE> 2
ARB Maps are unique maps provided and owned by a participating title
plant entity. These maps are maintained to show specific land
identifiers for the title plant index.
STARTERS....are evidences of policies of title insurance, preliminary
reports, guarantees, binders, or other forms issued by a title
insurance underwriter or title agent in the course of their title
insurance or title agency business.
BASES....are defined as copies of subdivision reports filed with the
Arizona Department of Real Estate.
SYSTEM....is defined as the computer equipment, software programs, and
the database of Document Images.
PLAT FOLDER....is defined as a collection of items related and
organized by a specific Plat Map for the retrieval convenience of
CUSTOMER. Items included are relevant Covenants, Conditions and
Restrictions (CC&R) document images, Plat and Assessors Maps and other
related material SECURITY deems appropriate.
SUPPLIER(S)....are defined as other parties or entities whose products
or data are encompassed as part of the System.
ORDER FOLDER....is defined as the collection of document images stored
in an electronic form related to a specific unit of work that CUSTOMER
has initiated and manages.
IMMEDIATE RETRIEVAL....is defined as providing CUSTOMER immediate
access to the document image data base during SECURITY'S operating
hours: Monday through Friday, except holidays, from 7:00 a.m. until
7:00 p.m.; and Saturdays, except holiday weekends, from 7:00 a.m. until
12:00 p.m. (Noon).
OVERNIGHT RETRIEVAL....is defined as the ordering of Document Images
during the Immediate Retrieval hours for delivery or retrieval of such
images at the beginning of the following business day.
2. DATA BASE
2.1 DATA BASE CONTENT
SECURITY has or will acquire copies of the Document Images for documents
recorded on or after January 1, 1988. SECURITY has or will acquire
electronically scanned image copies of other items defined as Maps, Plat
Folders, and Starters (as available).
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2.2 DATA BASE CURRENCY
SECURITY will use commercially reasonable efforts to update the data base by
acquiring and loading the electronic copies of the document images recorded in
the office of the County Recorder and other related offices or municipalities by
the business day following the availability of source data to SECURITY.
3. DATA BASE ACCESS AND SERVICE
SECURITY hereby agrees to provide nonexclusive access and CUSTOMER hereby agrees
to acquire information described as the Document Image data base for title
searching or other related purposes through use of electronic access, and/or
terminal devices approved by SECURITY.
4. EQUIPMENT
Charges for equipment provided by SECURITY to CUSTOMER, if any, shall be as set
forth in the Exhibits hereto or as added by amendment hereof. CUSTOMER hereby
agrees that no equipment shall be used to access SECURITY'S communication
network and data bases except as provided or approved by SECURITY.
5. ACCESS AND SERVICE FEES
5.1 DOCUMENT ACCESS FEES
CUSTOMER will pay SECURITY fees for the following items accessed by CUSTOMER
each month during the term of this Agreement.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ITEMS IMMEDIATE RETRIEVAL OVERNIGHT RETRIEVAL
<S> <C> <C>
- --------------------------------------------------------------------------------
Documents and Maps $ 0.43 each $ 0.38 each
- --------------------------------------------------------------------------------
Starter/Bases* $ 0.60 each $ 0.50 each
- --------------------------------------------------------------------------------
Plat Folders $ 1.85 (all items) $ 1.50 (all items)
- --------------------------------------------------------------------------------
</TABLE>
* As Available
5.2 IMAGE RETRIEVAL-WORKFLOW SOFTWARE
SECURITY will provide CUSTOMER a nonexclusive right to use the associated
Document Image Retrieval and Workflow software subject to the License Terms
contained in Exhibit "A".
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<PAGE> 4
5.3 NETWORK SUPPORT CHARGE
The Network Support Charge as shown below includes the central and remote site
CSU/DSU, telecommunications control unit, and network management. The Network
Support Charge may vary depending on the CUSTOMER'S method of access..
Monthly Network Support (T-1) $ 350.00 Per Month
5.4 TELECOMMUNICATIONS SUPPORT CHARGE
SECURITY will arrange and manage the required telecommunication services through
the local vendor or suppliers of SECURITY'S choice. The cost for data lines,
including installation and monthly maintenance will be billed to CUSTOMER on a
pass - through basis. This charge may be increased or decreased accordingly,
whenever the telephone company or related communications costs increase or
decrease.
5.5 TRAINING SERVICES
SECURITY will provide an initial training period of up to twenty four (24) hours
on site in the use of the SYSTEM to access and retrieve Document Images at no
additional charge. Additional training requested by CUSTOMER will be scheduled
and provided at SECURITY'S then current charge.
5.6 SPECIAL SERVICES
In the event that CUSTOMER requests SECURITY to supply custom reports of system
usage, services or items, CUSTOMER will pay the then current charges for
SECURITY labor, out-of-pocket expenses and an administrative fee. SECURITY will
provide an estimate of such charges upon request.
5.7 TAXES
The fees and charges do not include taxes. CUSTOMER will pay, or reimburse,
SECURITY for payment of, any applicable sales, use, personal property or similar
taxes and any government charges based on transactions hereunder, exclusive or
corporate income or franchise taxes based on SECURITY'S net income.
5.8 DUE DATE
All monies due from CUSTOMER are due and payable to SECURITY on the tenth (10th)
day after receipt of an invoice from SECURITY. CUSTOMER will also pay SECURITY a
late payment charge equal to ten percent (10%) or the highest amount permitted
by applicable law, if lesser with respect to all amounts not paid within fifteen
(15) days after the sum has become due.
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<PAGE> 5
5.9 FEE ADJUSTMENTS
SECURITY shall increase the fees set forth herein annually as of January 1, by
the percentage amount indicated by the annual change in the Consumer Price
Index, for urban wage earners and clerical workers for the local area as
compiled by the U.S. Department of Labor, Bureau of Labor Statistics ("Index")
for the twelve (12) months immediately preceding the adjustment date or a
minimum of five percent (5%) per annum, of the then current fees being charged,
whichever amount is greater. CUSTOMER can submit for credit against the then
current billing cycle items retrieved in error within 30 days of retrieval.
Credit amount not to exceed 1% of the previous monthly retrieval volume.
SECURITY will monitor credit activity and advise CUSTOMER of abuses. SECURITY
reserves the right to cancel credit privilege in the event of continual abuse.
6. OWNERSHIP RIGHTS AND RESTRICTIONS
6.1 RESTRICTIONS
CUSTOMER agrees that the Document Images or other information provided by
SECURITY are for CUSTOMER'S use only in its title insurance or title agency
business by those of its employees engaged in such line of business. CUSTOMER
will not sell or transfer copies of Document Images to others. CUSTOMER,
however, may furnish paper or fax copies of Document Images to its customers as
part of its "normal customer service" and business practices.
6.2 OWNERSHIP RIGHTS
SECURITY owns the original Document Images or other information contained in the
System. Nothing in this Agreement restricts SECURITY from using the Document
Images or other information provided hereunder for any purpose or granting
access thereto to any other person. Equipment provided by SECURITY, if any,
remains the property of SECURITY. All systems, programs, documentation and data
bases (including without limitation, compression, storage, and retrieval
techniques and formats and any enhancements made thereto), are and will remain
the property of SECURITY, or if applicable, its suppliers. SECURITY supplied
software is licensed to CUSTOMER subject to the terms and conditions set forth
in Exhibit "A".
6.3 PROPRIETARY INFORMATION
CUSTOMER agrees that all SECURITY supplied software, manuals and documentation
provided as part of SECURITY's Automated Image Services are proprietary and
confidential information of SECURITY or its suppliers. CUSTOMER will permit only
its employees or authorized representatives to have access to such material.
CUSTOMER further agrees to not make copies of such manuals, documentation, or
agreements, attachments, and exhibits. CUSTOMER will return all SECURITY
property upon termination or expiration of this Agreement.
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<PAGE> 6
7. LIABILITY
7.1 WARRANTY EXCLUSION AND LIMITATION OF DAMAGE
NEITHER SECURITY NOR ITS SUPPLIERS MAKE ANY WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE SYSTEM, DOCUMENT IMAGES OR
OTHER INFORMATION IN THE SYSTEM OR THEIR ACCURACY OR COMPLETENESS.
CUSTOMER agrees that in no event will SECURITY or its suppliers be liable for
any lost profits or for any special, consequential or exemplary damages, even if
SECURITY has been advised of the possibility of such damages.
7.2 DISCLAIMER OF LIABILITIES
SECURITY and CUSTOMER agree that no other person, firm or corporation not a
party to this Agreement acquires any rights under this Agreement. SECURITY and
CUSTOMER also agree that neither SECURITY nor its suppliers assume any liability
and will not be held liable (a) to CUSTOMER, or (b) to customers of CUSTOMERS,
or (c) to insureds of CUSTOMER, or (d) to any persons to whom CUSTOMER may
furnish any title policy, binder, guarantee, endorsement or other title
assurance, or any report or title information, in each case by reason of any
error, defect or omission, or assertion thereof, (1) in SECURITY'S System or
procedures or (2) in any Document Image or other information furnished to
CUSTOMER by SECURITY.
7.3 INDEMNITY
CUSTOMER will indemnify, defend and hold harmless SECURITY, its affiliates and
its suppliers, and their respective directors, officers, employees and agents
(the "Indemnified Parties"), against and in respect to any and all claims,
demands, losses, costs, expenses, obligations, liabilities, damages, recoveries,
and deficiencies (including but not limited to investigatory costs and
reasonable attorneys' fees) which any Indemnified Party may at any time suffer,
incur, or become subject to as a result of or in connection with any of the
following: (a) the inaccuracy of any representation made by CUSTOMER; (b)
CUSTOMER'S breach of, or failure to perform, any of its warranties, covenants,
promises, or obligations arising under this Agreement; (c) CUSTOMER'S violation
of any Federal or State law, statute, or regulation; or (d) a claim or assertion
by any person (including but not limited to customers of CUSTOMER) that either
SECURITY or any of its suppliers has any responsibility or liability arising
from or related to the services or Document Images or other information provided
by SECURITY through its System. With the written approval of SECURITY, CUSTOMER,
at its own cost, may (i) provide for the defense of SECURITY in any action or
litigation based upon or involving the claim or assertion and (ii) pursue such
litigation to final determination. CUSTOMER will have the right, whether or not
any action or litigation results, to compromise or settle the claim on behalf of
SECURITY, but at the sole cost of CUSTOMER and with notice to SECURITY.
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7.4 REPRESENTATIONS
CUSTOMER hereby represents and warrants to SECURITY that: (a) neither its
execution of this Agreement nor its performance under this Agreement will be a
violation of any other agreement, judgment or order; and (b) it has investigated
SECURITY'S System and maintenance procedures and found them to be satisfactory
for CUSTOMER'S business purposes.
8. TERM
8.1 INITIAL TERM
The term of this agreement shall commence on June 5, 1996 and shall continue for
a sixty (60) month period thereafter.
8.2 RENEWAL TERM
This Agreement shall automatically continue for an additional sixty (60) months
from the normal expiration date, unless either party gives at least 90 days
written notice to the other to terminate this Agreement at the end of the then
current term.
9. SYSTEMS CHANGES
SECURITY may in the future develop or acquire enhancements to the System,
including new hardware requirements and software, but is not obligated to do so.
SECURITY will own all enhancements made by it even if an enhancement was made at
the request, suggestion or expense of CUSTOMER.
10. COMPLIANCE WITH LAWS AND REGULATIONS
CUSTOMER agrees to use the Document Images or other information received from
SECURITY in compliance with all applicable State and Federal laws and
regulations, including the Fair Credit Reporting Act (U.S.C.A. title 15, Chapter
41, Subchapter III).
11. DEFAULT
11.1 TERMINATION ON DEFAULT
If either party does not faithfully perform, or fails to perform, any of its
obligations under this Agreement and does not cure that default within thirty
(30) days after receipt of written notice specifying the default, then this
Agreement may be terminated by the party not in default.
11.2 REMEDIES
In the event that CUSTOMER discovers an error, defect or omission in any
Document Image or other information, SECURITY'S sole obligation, and CUSTOMER'S
exclusive remedy with respect thereto, is to replace such image with a duplicate
image of the applicable Document if
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<PAGE> 8
a better image is available from the source thereof (for example, for a recorded
document, in the official records of the Recorder). In the event of a default in
payment, SECURITY may suspend the CUSTOMER'S access to the System or the
performance of other services without liability. Except as otherwise provided,
any right of termination or suspension of service is in addition to any other
remedy provided by law or equity.
11.3 NONWAIVER
Failure by either party to take action with respect to any breach of this
Agreement will not be construed as a waiver of the breach or any subsequent
breach of the same or any other provision of this Agreement. Either party may at
any time act upon any breach in accordance with applicable provisions of this
Agreement.
12. MISCELLANEOUS
12.1 EXCUSED PERFORMANCE
SECURITY will not be liable for delay in delivery or performance, and is excused
from any failure to deliver or perform, due to causes beyond its reasonable
control. Such causes may include acts of nature, governmental actions, fire,
labor difficulty, shortages, civil disturbances, transportation problems,
interruptions of power or communications, failure of SECURITY'S suppliers or
subcontractors, or natural disasters. In particular, CUSTOMER agrees that
SECURITY will incur no liability to CUSTOMER in the event of damage or
destruction to the System or any part of the System from any cause whatsoever.
SECURITY will not be required to reconstitute or reconstruct the then existing
System if it is damaged or destroyed from any cause whatsoever. SECURITY does,
however, covenant and agree that it will use its best efforts to devise and
implement reasonably adequate security measures to reduce the risk of damage or
destruction of the System or other interruptions of the use of the System, all
in accordance with reasonable prudent business practice.
12.2 SYSTEM RECOVERY
In the event the System is not operational for a period of twenty four (24)
consecutive hours, SECURITY will advise CUSTOMER of it's recovery plan within
seventy two (72) hours from outage event.
12.3 THIRD PARTY SUPPLIER/INFORMATION ARRANGEMENTS
Certain of the material and information provided or made available to CUSTOMER
under this Agreement is obtained by SECURITY from third party suppliers. In the
event that any such supplier fails to deliver (or delays the delivery of) such
material or information (through no fault of SECURITY) or in the event that any
such supplier materially and adversely modifies the conditions, or cost to
SECURITY of obtaining such material or information, then SECURITY, at its
options, may (1) use reasonable efforts to seek alternative sources of supply on
commercially reasonable terms; or (2) notwithstanding any other provision of
this Agreement to the contrary, increase the applicable fees or charges upon
thirty (30) days written notice; or
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<PAGE> 9
(3) any combination of the forgoing. SECURITY will incur no liability to
CUSTOMER with respect to any action or omission under this paragraph. SECURITY
shall provide CUSTOMER supporting documentation of said increase of option two
(2) above.
12.4 ASSIGNMENT OR TRANSFER
(a) Nonassignable:
This Agreement cannot be assigned, in whole or in part, by CUSTOMER without the
prior written consent of SECURITY, which consent shall not be unreasonably
withheld.
(b) Sale of CUSTOMER'S Assets or Stock:
If CUSTOMER sells all or substantially all of its assets, or if there is a
change in effective control of CUSTOMER, then CUSTOMER will promptly notify
SECURITY. In such event, SECURITY, at its option, will have the right to
terminate this Agreement upon written notice.
(c) Other Transfers:
If CUSTOMER'S rights and benefits in this Agreement are transferred in whole or
in part by involuntary method, or by operation of law, or by merger, SECURITY
will have the right to terminate this Agreement if the result is not
satisfactory to SECURITY. The obligations of CUSTOMER including restrictions on
use of Document Images, will continue with any entity which is the survivor of
CUSTOMER by reorganization, merger, or acquisition.
(d) Bankruptcy of CUSTOMER:
Notwithstanding the definite term of this Agreement, it will automatically
terminate upon the filing of a petition in bankruptcy by CUSTOMER, or the
appointment of a receiver for CUSTOMER, or the adjudication in bankruptcy on an
involuntary petition against CUSTOMER or if any general assignment for the
benefit of creditors by CUSTOMER of its assets is made.
(E) Assignment By SECURITY:
SECURITY will have the right, without CUSTOMER'S consent, to assign this
Agreement to any affiliate of SECURITY, to a corporation with which it may merge
or consolidate, or to a purchaser of substantially all of SECURITY'S assets
related to the line of business to which this Agreement pertains.
12.5 BENEFIT OF THE AGREEMENT
This Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assignees.
12.6 NO THIRD PARTY BENEFICIARIES
This Agreement is solely for the benefit of the parties hereto and no third
party will have the right or claim to the benefits afforded either party
hereunder.
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12.7 HEADINGS
The headings used in this Agreement are for convenience only, will not be deemed
to limit, characterize or in any way affect the provisions of this Agreement.
12.8 CONSTRUCTION AND PERFORMANCE
This Agreement will not be construed against the party preparing it, but will be
construed as if all parties prepared this Agreement.
12.9 SAVINGS CLAUSE
If any one or more of the provisions of this Agreement, or its application to
any person or circumstance is to any extent adjudged invalid, unenforceable,
void or violable for any reason by a court of competent jurisdiction, each and
all of the remaining provisions of this Agreement and their application to other
persons or circumstances will not be affected and will be valid and enforceable
to the fullest extent permitted by law.
12.10 SURVIVAL
Following the expiration or termination of this Agreement, whether by its terms,
operation of law or otherwise, any provision regarding ownership rights,
restrictions on use, liability, warranty exclusion, indemnification and monies
owed and any provision required for the interpretation of this Agreement or
necessary for the full observation and performance by each party hereto of all
rights and obligations arising prior to the date of expiration or termination
will survive such expiration or termination.
12.11 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties pertaining
to the subject contained in it and supersedes all prior and contemporaneous
agreements, representations, and understanding of the parties pertaining
thereto. No supplement, modification or amendment of this Agreement will be
binding unless executed in writing by the parties. No waiver will be binding
unless executed in writing by the party making the waiver.
12.12 COUNTERPART EXECUTION
This Agreement may be executed simultaneously in two or more counterparts, each
of which will be deemed an original but which together will constitute one and
the same instrument.
12.13 ATTORNEY FEES AND COSTS
If either party institutes an action against the other party for breach of this
Agreement, the successful party will be entitled to recover costs, expenses and
attorneys' fees as the court directs.
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12.14 GOVERNING LAW
This Agreement is to be construed under the laws of the State of Arizona.
12.15 EXHIBITS
The Exhibits attached to this Agreement are incorporated herein by reference as
if set forth in full.
12.16 NOTICES
(a) Methods and Address:
All written notices permitted or required to be given under this Agreement may
be delivered personally or by reputable overnight courier to the office of each
of the parties, or mailed to the office of each party by Registered or Certified
United States Mail when addressed as set forth below its respective signature.
(b) Changes of Address:
Either party may, by written notice to the other sent in the manner set forth
above, or via first class mail, change the address to which its notices are to
be sent.
(c) Effective Date:
Notices will be deemed communicated on the date delivered, if delivered
personally or by courier, and on the third business day after mailing, if
mailed.
The parties have executed this Agreement as of the date first above written.
SECURITY UNION TITLE INSURANCE COMPANY
BY: /s/Kevin J. Beach
--------------------------------
Authorized Signature
Kevin J. Beach
--------------------------------
Name (print or type)
Vice President
--------------------------------
Title
Notice Address: 1007 East Cooley Drive, Colton, CA 92324
Accepted by:
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CAPITAL TITLE AGENCY
BY: /s/Donald R.Head
--------------------------
Authorized Signature
Donald R. Head
--------------------------
Name (print or type)
CEO
--------------------------
Title
Notice Address: 14555 N. Scottsdale Rd., Suite 140
Scottsdale, AZ 85260
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EXHIBIT "A"
SOFTWARE LICENSE TERMS
Attached to and made a part of that certain Agreement dated June 5, 1996 by and
between SECURITY UNION TITLE INSURANCE COMPANY ("SECURITY"), a California
corporation, and CAPITAL TITLE AGENCY, an Arizona corporation ("CUSTOMER").
1. CERTAIN DEFINITIONS
The "Product" means the software delivered by SECURITY to CUSTOMER, and all
enhancements thereto, for use to access Document Images or other information per
the Agreement to which this License is attached as an exhibit. Other defined
terms have the meanings set forth in the Agreement.
2. COPYRIGHT
The Product is owned or licensed by SECURITY or its suppliers. It is protected
by United States copyright laws and international treaty provisions.
3. CERTAIN RIGHTS
This License grants CUSTOMER the right to use the Product during the Term of the
Agreement on any personal computer or workstation provided by SECURITY or which
meets SECURITY'S specifications solely for the purpose of accessing Document
Images. At the expiration or termination of the Agreement, CUSTOMER will remove
all copies of the Product from its computers and any storage media.
4. BACKUP COPIES
CUSTOMER may make one copy of the Product software for backup purposes. Written
documentation may not be copied or distributed to others.
5. CERTAIN RESTRICTIONS
CUSTOMER may not disclose or transfer the Product except in connection with a
permitted transfer of the Agreement. CUSTOMER may not reverse engineer,
decompile, disassemble, copy or create a derivative work of the Product contrary
to this License or applicable law.
6. LIMITED WARRANTY/LIMITATION OF LIABILITY
The Product is licensed "AS IS" and the exclusions, limitations, disclaimers and
indemnities in paragraph 7 of the Agreement include the Product as part of the
System.
7. U.S. GOVERNMENT RESTRICTED RIGHTS
The Product and related materials are provided with RESTRICTED RIGHTS. Use,
duplication, or disclosure by the Government is subject to restrictions as set
forth in subparagraph (c)(1)(ii)
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of the Rights in Technical Data and Computer Software clause at DFARS
252.227-7013 or subparagraphs (c)(1) and (2) of the Commercial Computer
Software--Restricted Rights clause at 48 CFR 52.227-19, as applicable.
Contractor/manufacturer is Chicago Title and Trust Company and or its affiliated
companies at the address set forth in the Agreement.
Security Union Title Insurance Company CAPITAL TITLE AGENCY
By: /s/Kevin J. Beach By: /s/Donald R. Head
-------------------------- --------------------------
Name: Kevin J. Beach Name: Donald R. Head
------------------------ ------------------------
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EXHIBIT 10.4
TITLE PLANT SERVICE AGREEMENT
THIS AGREEMENT (the "Agreement"), is entered into as of the 1st day of March,
1996, by and between DIVERSIFIED INFORMATION SERVICES CORPORATION, an Arizona
corporation ("DISC"), and CAPITAL TITLE AGENCY, INC, an Arizona corporation
("CTA").
RECITALS:
A. DISC is engaged in the business of owning maintaining, and
operating, through third-party independent contractors or otherwise, a title
plant and a data processing system including computer hardware, software and a
communications network (the "System") to furnish title information and services
concerning Arizona real estate; and
B. CTA is licensed by the State of Arizona as a title insurer or as a
title insurance agent and desires to contract with DISC to obtain access to the
title plant database and tax database maintained by DISC and described in
Schedule A to this Agreement and which concerns Arizona real estate (the "Plant
Data"), and DISC is willing to provide CTA with access to the Plant Data upon
and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the conditions and
mutual covenants contained herein, the parties hereto agree as follows:
1. TERMS AND SERVICES
1.1 Term. Unless sooner terminated pursuant to the terms hereof, this
Agreement shall remain in effect through 5/31/99. CTA shall have the option of
renewing this Agreement for an additional 2 year period by notifying DISC of its
intentions to do so at least 60 days in advance of the original termination
date.
1.2 Services Provided. DISC hereby agrees to provide CTA with the data
processing services and access to the Plant Data described in Schedule A to this
Agreement.
1.3 System Equipment. DISC will, with the system, provide the services
described herein and access to the Plant Data, for the conduct of CTA's business
as a title insurance company or a title insurance agency. CTA shall arrange to
provide approved equipment at the sites where CTA chooses to use such services
(including without limitation data communications equipment, connections,
modems, data lines, terminals and printers) as necessary for CTA to use the
System. The connection of any of CTA equipment to the System must be approved in
writing by DISC prior to connecting to the System. Any subsequent modification
or changes to such equipment may only be made upon prior written approval of
DISC. DISC shall not unreasonably require CTA to implement modifications or
upgrades that would significantly impact communications or hardware costs to
CTA.
1.4 Use of System. CTA agrees that all Plant Data and services supplied
by DISC hereunder, shall be for exclusive use of CTA. CTA may use said Plant
Data and services t provide title insurance and tax services to its customers in
the usual course of business. CTA
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shall not allow the System or Plant Data to be used or copied by any other title
insurance agent, underwriter, abstractor, escrow service, person, firm or
corporation without the written consent of DISC. CTA and DISC agree that due to
the size, complexity, accuracy and nature of the data files in which the indexes
to recorded documents are maintained, DISC has provided CTA with various
alternative methods of searching and retrieving indexes. It is CTA's intent and
DISC's understanding that CTA will use such capabilities in a judicious and
economical manner. DISC reserves the right to limit CTA's use of certain System
functions, when in DISC's opinion CTA is abusing the capabilities provided by
the system to the extent that other DISC users are significantly impacted.
1.5 System Availability. The Data described herein will be available
for CTA's use during the times set forth in Schedule A to this Agreement.
1.6 Improvement. In order to continuously improve the System and
quality of service to CTA, DISC reserves the right to make changes to the
System, including without limitation, changes in programs, computing devices,
offerings, rules of operation, CTA's identification procedures, interfaces,
types of terminal equipment, central computers, peripherals and user
instructions. In the event such improvements materially effect the basic service
to CTA, DISC agrees to notify CTA prior to their implementation.
1.7 Warranty. DISC warrants that the services provided under this
Agreement will be provided as described in the Documentation (as defined below)
and in a workmanlike manner; HOWEVER, DISC DOES NOT MAKE AND EXPRESSLY DISCLAIMS
ANY WARRANTY AS TO THE ACCURACY OF THE DATA. DISC agrees to correct, at its sole
expense, any service that does not conform to this warranty due solely to
errors, malfunctions or omissions on the part of DISC, the System or the
Documentation or otherwise results from DISC's failure to perform its
obligations under this Agreement. DISC shall not be responsible for any
nonconformity caused by changes, misuse or negligence of CTA or by CTA's failure
to comply with DISC's standards and procedures as documented in any processing
documentation, technical specifications and user documentation provided to CTA
in connection with this Agreement, if any (the "Documentation"). Failure by CTA
to give notice to DISC of any nonconformity in any services within thirty (30)
days after performance of such services shall constitute CTA's final acceptance
of the services. If CTA believes that any services provided hereunder are not
performed in accordance with the foregoing warranty, CTA shall give DISC written
notice of such nonconformity in sufficient detail to allow DISC to correct the
nonconformity. DISC shall thereafter have an opportunity, over a reasonable
period of time, but not more than thirty (30) days, to satisfy such warranty
claim. If, at the end of such period, DISC cannot perform the service in
accordance with such warranty, CTA may terminate this Agreement as it relates to
such service.
2. FEES AND CHARGES
2.1 Payment of Fees and Charges. CTA shall pay to DISC the fees and
charges set forth in Schedule B to this Agreement. All charges and fees shall be
due ten (10) days from the date of invoice or upon dates established herein for
specific payments. All fees and charges shall be deemed earned when payable.
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2.2 Taxes. In addition to the fees and charges set forth in Schedule B,
CTA shall pay when due any sales, use, excise, property or other Federal, State,
County, Municipal, or local taxes, tariffs or other assessments (other than any
tax based solely on the net income of DISC) and related interest and penalties
that DISC is at any time obligated to pay or collect in connection with or
arising out of the transactions contemplated by this Agreement. CTA agrees to
indemnify and hold harmless DISC from any and all such taxes, tariffs or other
assessments. If DISC pays any such amounts which CTA is obligated to pay under
this Section 2.2, CTA shall, upon the request of DISC, reimburse DISC in an
amount equal to the amount so paid by DISC and any penalties, interest, costs
and expenses paid or incurred by DISC in connection therewith.
2.3 Late Payments. Any payments due DISC hereunder which are not paid
when due shall bear interest at a rate equal to the lesser of one and one-half
percent 1-1/2%) per month or the highest rate permitted by law. All payments to
be made to DISC hereunder shall be made without any deductions or setoffs.
3. ADDITIONAL CTA RESPONSIBILITIES:
3.1 DISC Procedures. CTA shall adhere to all DISC standards and
procedures, as documented in any of the Documentation, including without
limitation, any guides, user's manuals, and instruction sheets provided by DISC.
3.2 CTA Training. CTA agrees that it shall be responsible for the
training of its own agents and employees in dealing with DISC and the services
provided by DISC hereunder. DISC shall have no responsibility to train or
otherwise supervise CTA employees to carry out the responsibilities of CTA
hereunder.
3.3 CTA Responsibilities. CTA will bear full responsibility and all
costs, fees, or charges for the following items unless specific written
provision has been made for DISC to provide such additional service by addendum
to this Agreement:
(a) All planning, management and use of these services;
(b) All equipment at any site where CTA chooses to use
services provided herein which is necessary to facilitate the delivery of these
services, including, but not limited to, all data communications, connections,
modems, data lines, terminal and printers;
(c) All installation, connection and maintenance equipment.
CTA is solely responsible for limiting access to the System by CTA employees and
for safeguarding all passwords and similar security measures.
3.4 Use of Services and Plant Data. CTA agrees that the services and
Plant Data provided by DISC under the terms of this Agreement will be used only
to provide insurance services to CTA in the ordinary course of its business of
title insurance (as defined in A.R.S. 20-1562). CTA shall not provide Plant Data
to other companies or individuals for purposes of resale or by way of
discounting or to any third parties for any purpose, except that CTA may
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provide Plant Data to its customers as necessary to provide title insurance
services to such customers in the ordinary course of CTA's business of title
insurance.
4. OWNERSHIP AND CONFIDENTIALITY
4.1 DISC Ownership of Data. All data used by DISC to construct and
produce the title plant data files (including without limitation, all data
records produced in title plant format and posted to the title plant data files
from the inception until the termination of services hereunder), is and remains
the property of DISC. Additionally all computer programs, procedures whether
clerical or automated, data storage media, and the Documentation are and remain
the sole and exclusive property of DISC. Unless by specific written agreement
between CTA and DISC, no beneficial interest or ownership rights in the system,
the data described herein, or the Documentation accrue to CTA during the terms
this Agreement.
4.2 Protection of the Proprietary Rights of DISC.
(a) CTA acknowledges and agrees that (i) no title or ownership
of the System, the Plant Data, any software or information relating to the
System ("System Information") or the Documentation is transferred to CTA hereby.
CTA shall not make any claim or representation of ownership, or act as the
owner, of any of the System, Plant Data, System Information or Documentation or
permit or facilitate the performance of any act that is inconsistent with or in
violation of this Agreement.
(b) CTA shall keep confidential and protect the System, Plant
Data, System Information, the Documentation and the terms of this Agreement from
use by or disclosure to any person except those persons permitted to have access
to the System, Plant Data, System Information, the Documentation and the terms
of this Agreement under this Agreement. CTA shall advise all persons with access
to the System, Plant Data, System Information, the Documentation or the terms of
this Agreement of the confidential and proprietary nature of the System, Plant
Data, System Information, the Documentation and the terms of this Agreement, and
of the restrictions imposed by this Agreement. CTA shall limit access to the
System, Plant Data, System Information and Documentation to such limited number
of employees and other persons providing services to CTA as is necessary for
purposes specifically related to a use of the System, Plant Data, System
Information or Documentation permitted by this Agreement. CTA shall limit
disclosure of the terms of this Agreement to CTA's representatives, attorneys,
auditors or consultants who, in the ordinary course of CTA's business, are
required to know the terms of this Agreement in order to advise CTA concerning
the terms of this Agreement or as may be necessary to CTA to comply with
applicable laws and regulations. CTA shall cause such employees and other
persons to protect the confidentiality of the System, Plant Data, System
Information, the Documentation and the terms of this Agreement consistent with
CTA's obligations hereunder.
(c) All copies of the Plant Data, System Information and
Documentation shall remain the exclusive property of DISC. CTA shall reproduce
and include all proprietary, confidentiality, trade secret and other notices on
any copies of the Plant Data, System Information, or Documentation and on any
portion thereof and shall not remove, alter, cover or obfuscate, nor permit to
be removed, altered, covered or obfuscated, any such notice.
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(d) System Information and Documentation shall be stored and
used exclusively on CTA's business premises set forth on Schedule A.
5. DISCLAIMERS AND LIMITATIONS
5.1 DISC DOES NOT MAKE ANY, AND EXPRESSLY DISCLAIMS ALL, WARRANTIES
OTHER THAN THE WARRANTIES EXPRESSLY MADE IN THIS AGREEMENT, WHETHER ORAL OR
WRITTEN, EXPRESS OR IMPLIED, OR ARISING BY USAGE OR TRADE OR COURSE OF DEALING,
INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE. DISC EXPRESSLY DISCLAIMS ANY WARRANTY OR GUARANTEE AS TO
THE ACCURACY OF THE PLANT DATA. THE REMEDIES SET FORTH HEREIN SHALL BE THE SOLE
AND EXCLUSIVE REMEDIES OF CTA. DISC SHALL USE REASONABLE CARE IN THE PERFORMANCE
OF ITS OBLIGATIONS UNDER THIS AGREEMENT.
5.2 DISC SHALL IN NO EVENT BE LIABLE FOR ANY INCIDENTAL, CONSEQUENTIAL,
INDIRECT, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES, WHETHER CLAIMED UNDER
CONTRACT, TORT, INDEMNITY OR ANY OTHER LEGAL THEORY, INCLUDING WITHOUT
LIMITATION, LOSS OF ANTICIPATED PROFITS IN CONNECTION WITH OR ARISING OUT OF
CTA'S USE OF ANY SERVICE OR PLANT DATA PROVIDED FOR IN THIS AGREEMENT.
5.3 CTA AND DISC EXPRESSLY AGREE THAT THE MAXIMUM AGGREGATE LIABILITY
OF DISC FOR ALL CLAIMS UNDER THIS AGREEMENT OR OTHERWISE SHALL BE ONE HUNDRED
PERCENT (100%) OF THE FEE PAID BY CTA TO DISC HEREUNDER FOR THE SPECIFIC SERVICE
OR PRODUCT THAT IS THE SUBJECT OF SUCH LIABILITY.
5.4 THE WARRANTIES MADE IN THIS AGREEMENT EXTEND ONLY TO
CTA.
5.5 ANY ACTION AGAINST DISC PERMITTED UNDER THIS AGREEMENT AND NOT
BROUGHT WITHIN TWELVE MONTHS AFTER THE CAUSE OF ACTION ACCRUES SHALL BE DEEMED
BARRED.
5.6 REFERENCES IN THIS SECTION 5 TO DISC SHALL INCLUDE DISC AND ITS
DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES AND AGENTS. ANY PRODUCTS OR
SERVICES PROVIDED BY DISC TO CTA, IN ADDITION TO THE PRODUCTS AND SERVICES WHICH
DISC HAS SPECIFICALLY AGREED TO PROVIDE AS DESCRIBED HEREIN, SHALL BE PROVIDED
SUBJECT TO THE PROVISIONS OF THIS SECTION 5 UNLESS EXPRESSLY AGREED IN WRITING
THAT THIS SECTION 5 SHALL NOT APPLY TO SUCH PRODUCTS OR SERVICES.
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6. BREACH AND TERMINATION
6.1 Breach. Upon any failure by CTA to perform or comply with any of
its obligations, representations or warranties hereunder, DISC shall have the
right, without waiving, removing, limiting, or restricting any legal or
equitable right or remedy otherwise available to DISC attendant upon such
failure, to cease performance hereunder until such failure is remedied or to
terminate this Agreement.
6.2 Termination. Upon the expiration or termination of this Agreement,
DISC shall have the right to take immediate possession of any System Information
and Documentation and CTA shall (a) immediately discontinue exercising any
rights granted hereunder; (b) immediately deliver to DISC all System Information
and Documentation then in its possession or control, including, without
limitation, all copies and duplicates thereof in whatever form; and (c) certify
in writing under oath that all materials required to be delivered to DISC
hereunder have been delivered to DISC. The expiration or termination of this
Agreement shall be without prejudice to any rights of DISC against CTA and such
expiration or termination shall not relieve CTA of any of its obligations to
DISC existing at the time of expiration or termination.
6.3 Retention of CTA Data. DISC reserves the right to retain files,
data and all other property belonging to CTA until all amounts due to DISC by
CTA under the terms of this Agreement have been paid.
7. MISCELLANEOUS.
7.1 Right to Contract With Others. DISC reserves the exclusive right to
enter into agreement for the same or similar services provided to CTA under the
terms of this Agreement with other parties doing business in the same market as
CTA.
7.2 No Third-Party Beneficiary. Except as herein expressly provided to
the contrary, the provisions of this Agreement are for the benefit of the
parties of the Agreement and not for the benefit of any other person.
7.3 Force Majeure. DISC shall not bc liable for any delay or any
failure in performance hereunder if such delay or failure arises out of causes
beyond the control of DISC. Such causes may include, but are not restricted to,
acts of God or the public enemy, acts or omissions of the CTA, acts of civil or
military authority, fires, strikes, power or equipment failures, delay in
transportation, failure of communication services, governmental regulations,
riots, war, or any similar or dissimilar cause beyond the reasonable control of
DISC.
7.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Notwithstanding the foregoing, CTA may not assign this Agreement
without the prior written consent of DISC.
7.5 Governing Law. This Agreement shall be governed by and construed
under and pursuant to the laws of the State of Arizona, exclusive of the laws
relating to conflict of laws.
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7.6 Integration. This Agreement and the Schedules hereto constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all previous proposals (both oral and written), negotiations,
representations, commitments, writings, agreements, and all other communications
between the parties. This Agreement may not be released, discharged, changed or
modified other than in accordance with its terms except by an instrument in
writing signed by a duly authorized representative of each of the parties
hereto.
7.7 Headings. The headings and captions used in this Agreement arc
intended, and shall for all purposes be deemed to be, for convenience only and
shall have no force or effect whatsoever in the interpretation of this
Agreement.
7.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be deemed originals for all purposes.
7.9 Severability. If any term, clause or provision of this Agreement
shall be judged invalid for any reason whatsoever by a court of competent
jurisdiction, such invalidity shall not affect the validity or operation of any
other term, clause or provision and such invalid term, clause or provision shall
be deemed to have been modified, to the extent necessary to make it valid and
enforceable or, if such term, clause or provision cannot be so modified, it
shall be deemed deleted from this Agreement.
7.10 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be deemed to have been duly
given and made if in writing and served either by personal delivery or facsimile
to the party for whom it is intended or by being deposited postage prepaid,
certified or registered mail, return receipt requested (or such form of mail as
may be substituted therefor by postal authorities), in the United States mail or
with Federal Express or similar courier service, bearing the address shown in
this Agreement for, or such other address as may be designated in writing
hereafter by such party:
If to DISC:
Diversified Information Services Corporation
111 West Monroe, Suite 302
Phoenix, AZ 85003
Attention: Scott A. Reece
If to CTA:
CAPITAL TITLE AGENCY, INC.
1455 N. Scottsdale Road
Scottsdale, AZ 85260
Attention: Don Head
7.11 Arbitration. Except with respect to any controversy or claim, in
whole or in part, arising out of or related to a breach by CTA of Section 4 of
this Agreement, any controversy or claim arising out of or related to this
Agreement or in connection with a breach of this Agreement shall be settled by
arbitration in Phoenix, Arizona under the rules of the American
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Arbitration Association in effect at the time such controversy, claim or breach
is submitted to arbitration. Any such controversy, claim or breach subject to
this Section 7.11 must be submitted to arbitration within one year of the time
such controversy or claim arises. The arbitrator or arbitrators selected to
arbitrate such controversy, claim or breach shall be selected from a panel of
persons having experience with and a knowledge of the title insurance business.
Such arbitrator or arbitrators shall not, in any event, have any authority to
make any ruling, finding or award that does not conform to the terms and
conditions of this Agreement.
7.12 Attorney's Fees. The prevailing party in any arbitration
proceeding or litigation between DISC and CTA arising as a result of any breach
or dispute under this Agreement shall have a right to reasonable attorneys' fees
incurred in connection with such arbitration or litigation from the other party.
7.13 No Waiver. The failure of either party to enforce at any time any
of the provisions of this Agreement, or the failure to require at any time
performance by the other party of any of the provisions of this Agreement, shall
in no way be construed to be a present or future waiver of such provisions, nor
in any way affect the right of either party to enforce each and every such
provision thereafter. The express waiver by either party of any provision,
condition or requirement of this Agreement shall not constitute a waiver of any
future obligation to comply with such provision, condition or requirement.
7.14 Remedies. All rights and remedies conferred under this Agreement
or by any other instrument or law shall be cumulative and may be exercised
singularly or concurrently.
7.15 Survival. Notwithstanding the termination of this Agreement, by
expiration or otherwise, the following provisions shall survive such
termination: 1.7, 2, 3, 4, 5, 6.2, 6.3, and 7.
7.16 Injunctive Relief. CTA acknowledges that because of the
confidential and proprietary nature of the System, Plant Data, System
Information and Documentation, neither termination of this Agreement,
arbitration, nor an action at law would be an adequate remedy for a breach by
CTA of Section 4 of this Agreement. Accordingly, CTA agrees and consents that,
in the event of such breach, DISC will be irreparably harmed and, in addition to
all other remedies which DISC may have, DISC shall be entitled to relief in
equity, including a temporary restraining order, temporary or preliminary
injunction, and permanent mandatory or prohibitory injunction to restrain the
continuation of any such breach or to compel compliance with the provisions of
this Agreement without the necessity of proof of actual damage.
7.17 Indemnification. Except as expressly provided otherwise herein,
CTA shall indemnify and hold harmless DISC, its agents, employees, officers,
directors, stockholders, successors and assigns from and against any and all
liabilities, losses, damages, claims, suits and expenses, including, without
limitation, reasonable attorneys' fees, of whatsoever kind and nature imposed
on, incurred by, or asserted against DISC, its agents, employees, officers,
directors, stockholders, successors and assigns relating to or arising out of
(a) an action, claim or suit against DISC by a third party relating to or
arising out of the possession or use or nonuse of the System, Plant Data, System
Information or Documentation by CTA or (b) any failure on the part of CTA to
perform or comply with the terms of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
CAPITAL TITLE AGENCY, INC. DIVERSIFIED INFORMATION
SERVICES CORPORATION
By /s/Donald R. Head By /s/S. Reese
--------------------------- -------------------
Its Chairman Its President
----------------------- --------------
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SCHEDULE A
This Schedule A covers the services and title plant access to be provided by
DISC to CTA.
DISC has agreed to provide the following:
1) CTA shall have access to the DISC title plant, which includes
geographic and general indices to recorded instruments and filed court
cases covering the period from 1947 through the most current plant date
for Maricopa County, Arizona.
2) CTA shall have access to non-liability tax reports generated from
the DISC database of the Maricopa County Assessor's assessment and
collection records.
3) DISC shall provide initial training and system use documentation to
CTA.
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SCHEDULE B
This Schedule B covers the fee for services referred to in Paragraph 2.1 of this
agreement.
The following fees will be in effect for the duration of this agreement unless
modified by mutual consent or under other provisions in this agreement:
1) Over the three year term of this agreement, fees for access to the
title plant shall be as follows:
-Title plant access -- $4500.00 per month
2) There will be no per order title plant access fee.
3) Non-liability tax inquiries will be billed at a fee of $2.00 per
order.
4) DISC shall have the right to impose an annual cost of living
adjustment based on the CPI for Phoenix from May to May. Notice of said
increase shall be given no less than thirty days prior to the
anniversary of the Agreement.
Fees to start upon the opening of CTA's first office in Maricopa County, Arizona
[Initialed by parties]
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EXHIBIT 10.5
OFFICE LEASE (FULL SERVICE)
In consideration of the rents and covenants hereinafter set forth, the
Landlord named in Section B of Part I hereby leases to the Tenant named in
Section C of Part I, and Tenant hereby hires from Landlord, the demised
premises demised in Section D of Part I of this Lease (hereinafter referred to
as the "Premises"), upon the conditions set forth below, and it is agreed that
each of the terms, covenants, provisions and agreements hereinafter specified
shall be a condition.
PART I - FUNDAMENTAL LEASE PROVISIONS
Section
A. Date of Execution (for reference purposes only): June 7, 1996
B. Landlord: 4808 CORPORATION., a Nevada corporation.
C. Tenant: Capital Title Agency, Inc., an Arizona corporation
D. Premises (Part II, Section 1): Suite 200 consisting of approximately
10,125 rentable square feet located in the office building (the
"Building") located in the City of Phoenix, County of Maricopa, State of
Arizona, with an address of 4808 North 22nd Street.
E. Lease Term (Part II, Section 2): Three years, commencing July 1, 1996
and ending June 30, 1999
F. Base Rent (Part II,, Section 3): The rate shall be per the schedule
below, per square foot plus applicable rental tax. The first (1st)
and twenty-fifth (25th) months shall be prepaid with execution and
receipt of this Lease.
<TABLE>
<CAPTION>
<S> <C> <C>
Year Rate/S.F. Rate/Month
---- --------- ----------
1 $18.00 15,187.50
2 $18.50 15,609.38
3 $19.00 16,031.25
</TABLE>
G. Use of Premises (Part II, Section 2.3): General office space, or any
lawful purpose.
H. Address for Notices to Landlord (Part II, Section 18.16):
4808 Corporation
2222 E. Camelback Road, Suite 200
Phoenix, Arizona 85016
I. Operating Cost Expense Stop (Part II, Section 5.6): Base year 1997.
J. Tenant's Proportionate Share: 50%.
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K. Deposit (Part II, Section 5.6): $16,031.25 to be paid upon execution
of this lease
L. Exhibits: The following exhibits are attached hereto and made a part
hereof with the same force and effect as if specifically set forth herein.
a. Buildings Rules and Regulations.
b. Work to be performed in and about the Premises.
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PART I GENERAL LEASE PROVISIONS
1. PREMISES.
Landlord hereby leases to Tenant and Tenant hereby rents from Landlord
those certain Premises, described in Part I, Section D above, and as shown on
Exhibit A attached hereto, and described as a portion of the real property and
improvements thereon (the "Premises"). Except as may be otherwise expressly
set forth herein, Landlord shall have no liability or obligation to make any
alterations, improvements or repairs to or replacements of any kind to the
Premises or the Building or any portion of either of them.
2. TERM; USE.
2.1 Term. The term of this Lease shall be as set forth in Part I,
Section E above, unless sooner terminated pursuant to this Lease. Upon
occupancy of the Temporary Premises, all other terms and conditions of this
Lease shall be in full force and effect.
2.2 Delay In Commencement Tenant agrees that in the event of the
inability of Landlord for any reason to deliver possession of the Premises to
Tenant as of the Commencement Date set forth above, Landlord shall not be
liable for any damage thereby nor shall such inability affect the validity of
this Lease or the obligations of Tenant hereunder, but in such case Tenant
shall not be obligated to pay rent or other charges until possession of the
Premises is tendered to Tenant; provided that if the delay in delivery of
possession exceeds thirty (30) days, then the Expiration Date and the term of
the Lease shall be extended by the same period of time as is equal to the
period of time computed from the scheduled Commencement Date to the date
possession of the Premises is tendered. In the event Landlord shall not have
delivered possession of the Premises within sixty (60) days from the scheduled
Commencement Date, then Tenant at its option to be exercised within fifteen
(15) days after the end of said sixty (60) days period may terminate this Lease
by written notice to Landlord and upon Landlord's return of any monies
previously deposited by Tenant the parties shall have no further rights or
liabilities toward each other. A failure by Tenant for any reason to give such
written notice of termination within the time period set forth above shall be
conclusively deemed as a waiver by Tenant of such option to terminate. If
Tenant vacates the Temporary Premises and occupies the Premises prior to
Commencement Date, such occupancy shall be subject to all provisions hereof,
such occupancy shall not advance the Expiration Date.
2.3 Use. The Premises shall be used and occupied by Tenant only
for the purposes described in Part I, Section G above for none other and shall
be further subject to all applicable zoning and other use regulations and
governmental restrictions.
3. RENT.
In consideration for the leasing aforesaid, Tenant covenants and agrees
to pay to Landlord, in advance, monthly, when and where provided or required by
Landlord, and without deduction, abatement or offset whatsoever and without any
notice or demand, in lawful money of the United States of America, the Base
Rents for the Premises as are set forth in Part I, Section F of this Lease
above, plus applicable taxes, additional rent and other charges. On the first
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day of each month of the Lease term, Tenant shall pay Base Rent as provided in
Part I, Section F of this Lease above, plus applicable taxes, additional rent
and other charges. The term "rent" or "rents," as used herein, shall mean and
be deemed to include all Base Rent and all other sums, fees and charges
required to be paid by Tenant under this Lease. If the Commencement Date is
not on the first day of a month, or if the Expiration Date is not the last day
of a month, a prorated installment of Base Rent shall be paid at the then
current rate for the fractional month during which the Lease commences and/or
terminates.
4. SECURITY DEPOSIT.
Concurrently with Tenant's execution of this Lease, Tenant shall
deposit with Landlord's Agent the amount of the Security Deposit set forth in
Part I, Section K above. An equivalent sum (hereinafter deemed the Security
Deposit) shall be held by Landlord until and unless applied by Landlord to or
for Rent or as otherwise permitted or provided for herein. Such sum shall be a
security deposit for the faithful performance by Tenant of all of the terms,
covenants, and conditions of this Lease to be kept and performed by Tenant
during the term hereof. If Tenant defaults with respect to any provisions of
this Lease, including but not limited to the provisions relating to the payment
of rent or any of the other monetary sums due hereunder, Landlord may (but
shall not be required to) use, apply or retain all or any part of this security
deposit for the payment of all or part of the rent or any other monetary sums
due hereunder or for the payment of any other amount which Landlord may spend
or become obligated to spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default. If any portion of said deposit is so used or applied, Tenant
shall, within ten (10) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the security deposit to its
original amount and Tenant's failure to do so shall be a breach of this Lease.
Landlord shall not be required to keep the security deposit separate from its
general funds, and Tenant shall not be entitled to interest on such deposit.
If Tenant shall fully and faithfully perform every provision of this Lease to
be performed by it, the security deposit or any remaining balance thereof shall
be applied by Landlord to the rent due for the first month and then the last
month of the Lease term. In the event of termination of Landlord's interest in
this Lease, Landlord shall transfer said deposit to Landlord's successor in
interest, whereupon Tenant agrees to and does hereby release Landlord from all
liability for the return of such deposit or the accounting therefor and Tenant
agrees to look solely to Landlord's successor in interest for same.
5. TAXES AND MULTIPLE TENANCY.
5.1 Payment of Tax Increase. Tenant shall pay, in addition to rent
and as additional rent, the amount, if any, by which real property taxes
applicable or payable with respect to the Premises and the Building for each
year increase over the year during which the Commencement Date shall occur.
Such payment shall be made by Tenant within thirty (30) days after receipt of
Landlord's written statement(s) setting forth the amount of such increase and
the computation thereof. At Landlord's option, Tenant shall make such payments
on a semi-annual or a monthly basis along with Tenant's payments of its share
of Operating Costs. Tenant's liability for increased taxes for the last
partial year shall be prorated such that Tenant's liability shall be limited to
that portion of the year During which the Lease term has not expired.
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5.2 Definition of "Real Property Tax". As used herein, the term
"Real Property Tax" shall include any form of assessment, license fee, levy,
bond, improvement bond, real property tax, transaction privilege tax, sales
tax, or other tax, whether general, special, ordinary or extraordinary (other
than inheritance or estate taxes), imposed by any authority having the direct
or indirect power to tax, including any city, county, state or federal
government, or any school, agricultural, air, soil, subsoil, water, ground
water, land use, constriction, asbestos, and any hazardous or toxic materials
or substances, etc. (collectively "Environmental Laws"), statute, zoning
ordinance or restriction, ordinance or governmental rule or regulation or
requirements of duly constituted public authorities now in force or which may
hereafter be enacted or promulgated. Tenant shall at its sole cost and expense
promptly comply with all laws, Environmental Laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force and with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted relating to or
affecting the condition, use or occupancy of the Premises. The judgment of any
court of competent jurisdiction or the admission of Tenant in any action
against Tenant, whether Landlord be a party thereto or not, that Tenant has
violated any law, Environmental Law, statute, ordinance or governmental rule,
regulation or requirement, shall be conclusive of that fact as between Landlord
and Tenant.
5.3 Without limiting its obligations under this Section, Tenant
covenants and agrees to comply with all laws, rules, regulations and guidelines
now or hereafter made applicable to the Premises respecting the disposal of
waste, trash, garbage and other matter (liquid or solid), generated by Tenant,
the disposal of which is not otherwise the express obligation of Landlord under
this Lease, including, but not limited to, laws, rules, regulations and
guidelines respecting recycling and other forms of reclamation (all of which
are herein collectively referred to as 'Waste Management Requirements").
Tenant covenants and agrees to comply with all rules and regulations
established by Landlord to enable Landlord from time to time to comply with
Waste Management Requirements applicable to Landlord (i) as owner of the
Premises or the Building and (ii) in performing Landlord's obligations under
this Lease, if any. Tenant covenants and agrees to indemnify, defend, protect
and hold Landlord harmless (in accordance with Section 11 hereof) from and
against all liability (including costs, expenses and attorneys' fees) that
Landlord may sustain by reason of Tenant's breach of its obligations under this
subparagraph.
5.4 Tenant's obligations under this Section shall survive the
termination of this Lease.
6. UTILITIES.
6.1 Utilities. Provided that Tenant shall not commit a default
under this Lease, Landlord agrees to furnish to the Premises during normal
business hours (for the purposes hereof defined as Monday through Friday from
7:00 a.m. to 6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m. but excluding
therefrom public holidays) water, sewer and electricity service suitable for
general office uses of the Premises and such heating and air conditioning as
required in Landlord's judgment for the comfortable use and occupation of the
Premises (or as dictated by governmental regulation), subject to Landlord's
right to reimbursement of Operating Costs pursuant to Section 5 hereof and
further subject to the following:
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(a) Landlord shall not be liable for, and Tenant shall not be
entitled to, any abatement or reduction of rental by reason of Landlord's
failure to furnish any of the foregoing, whether such failure is caused by
accident, breakage, repairs, strikes, lockouts or other labor disturbances or
labor disputes of any character, or any other cause beyond the reasonable
control of Landlord. Landlord shall not be liable under any circumstances for
loss caused by death of or injury to persons or damage to property occurring
through or in connection with Landlord's failure to furnish any of the
foregoing, except to the extent such death, injury or damage is caused by
Landlord's gross negligence.
(b) Tenant shall not, without the prior written consent of
Landlord, use any apparatus or device in the Premises which will in any way
increase the amount of electricity or water usually furnished or supplied for
use of the Premises as general office space, including, but not limited to,
electronic data processing machines, punch card machines and machines using
current in excess of 110 volts and 5 amps per machine; nor connect with
electric current or water supply, except through existing electricity, outlets
or water pipes in the Premises, any apparatus or device, for the purpose of
using electrical current or water. If Tenant shall require electrical outlets,
electricity, water pipes, water or HVAC service in excess of those usually
furnished or supplied for use of the Premises as general office space during
normal business hours, Tenant shall submit a written request for Landlord's
consent to install such facilities at Tenant's expense, which consent may be
given or withheld in Landlord's sole discretion. If Landlord shall from time
to time reasonably determine that the use of electricity or any other utility
or service in the Premises is in excess of that usually furnished or supplied
for general office space used during normal business hours, Landlord may
separately charge Tenant for the cost of such use as determined by Landlord.
(c) If Tenant shall desire the use of the Premises during hours and
or on days other than those set forth above, Tenant shall give Landlord no less
than twenty four (24) hours prior written notice of the need for additional
heating or air conditioning service and Tenant shall be responsible for all
utility and service costs incurred as a result of the additional use of the
Premises as determined by Landlord.
(d) Tenant shall be fully responsible for any and all costs
incurred for installation, relocation, repair, maintenance and upkeep of
telephone service and equipment and any computer service and equipment,
including all labor costs charged by the telephone company or others in
connection with such telephone or computer service or work.
(e) Tenant agrees not to connect to, alter or obstruct access to
any utilities or equipment provided by Landlord.
6.2 Janitorial Service. Provided that Tenant shall not commit a
default under this Lease. Landlord agrees to provide janitorial service to the
Premises five nights per week, and to keep in a clean and well lighted
condition all common stairs, entries and restroom facilities in the Building.
7. MAINTENANCE AND REPAIRS, ALTERATIONS AND ADDITIONS.
7.1 Landlord's Obligations. Subject to the provisions of Section
13 and to the performance by Tenant of its obligations under this Lease and
except for damage caused by any negligent or intentional act or omission of
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Tenant and tenant's agents, employees or invitees, Landlord, at Landlord's
expense, shall keep in good order, condition and repair the foundations,
exterior walls and the exterior roof of the Premises and the common areas (as
designated from time to time by Landlord) surrounding the Premises. Landlord
shall have no obligation to make repairs under this Section 8.1 until a
reasonable time after receipt of written notice of the need for such repairs.
Tenant expressly waives the benefits of any statute now or hereafter in effect
which would otherwise afford Tenant the right to make repairs at Landlord's
expense or to terminate this Lease because of Landlord s failure to keep the
Premises in good order, condition and repair.
7.2 Tenant's Obligations.
(a) Subject to the provisions of Section 13 and 8.1, Tenant, at
Tenant's expense, shall maintain, replace and keep in good order, condition and
repair the Premises and every part thereof, regardless of whether the damaged
portion of the Premises or the means of repairing the same are accessible to
Tenant, including without limitation thereto, electricity, and lighting
facilities and equipment and all floors, windows, doors, ceilings and fixtures
within on, or about the Premises, lighting, drainage or other improvement
district thereof, as against any legal or equitable interest of Landlord in the
Premises, the Building or in the real property of which the Premises or
Building are a part, or any tax imposed in substitution, partially or totally,
or any tax previously included within the definition of Real Property Tax, or
any additional tax the nature of which was previously included within the
definition of Real Property Tax. Real Property Tax shall also include any tax
imposed by reason of this Lease or any other lease, sale or conveyance of the
Premises or the Building.
7.3 Joint Assessment. Tenant's liability shall be an equitable
proportion of the Real Property Taxes for all of the land and improvements
included within the tax parcel assessed, such proportion to be determined by
Landlord from any of the following factors: (a) the respective valuations
assigned in the assessor's work sheets; (b) comparisons to or the adoption of
the same percentage as adopted for tenant's proportionate share of Operating
Costs, as hereinafter set forth; or (c) such other information as may be
reasonably available. Landlord's reasonable determination thereof shall be
conclusive.
7.4 Personal Property Taxes.
(a) Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, furniture, equipment and
all other personal property of Tenant contained in, on or about the Premises or
elsewhere. When possible, Tenant shall cause said trade fixtures, furnishings,
furniture, equipment and all other personal property to be assessed and billed
separately from the real property of Landlord.
(b) If any of tenant's said personal property shall be assessed
with Landlord's real property, Tenant shall pay Landlord the taxes attributable
to Tenant within ten (10) days after having been given a written statement
setting forth the taxes attributable to Tenant. Landlord's reasonable
determination thereof shall be conclusive.
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7.5 Transaction Privilege. Tax. Tenant shall pay, as additional
rent and concurrently with and in addition to rent, all transaction privilege,
sales, rental or other similar tax imposed or assessed by any governmental
authority pursuant to any present or future law, statute, ordinance or
regulation now or hereafter in existence and measured by or imposed upon or
with respect to rents or other sums paid by Tenant or received by Landlord
under this Lease.
7.6 Operating Expenses. Tenant agrees that it will abide by, keep
and observe all rules and regulations which Landlord may make from time to time
for the management, safety, care, and cleanliness of the Building or building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
Tenant agrees to pay, as additional rent for the Lease term, its pro rata share
of Landlord's costs (the "Operating Costs") in excess of the Operating Cost
Expense Stop set forth in Section 1, Part I of this Lease for operating,
managing, maintaining, repairing and replacing the Building, including without
limitation such portions of the Premises and such portions of the buildings and
the Building which are designated by Landlord from time to time as common areas
or which are used or shared by Tenant and other occupants of the Building or
which are not provided for occupancy by any tenant or occupant, including but
not limited to all parking areas, roadways, walkways, driveways, stairways,
covered areas, delivery areas, landscaped areas, maintenance areas, roofs,
structural portions of the Building, equipment closets, restrooms, elevators,
lobbies, HVAC units, and all other facilities and services provided from time
to time for the convenience and use of Tenant and all other tenants, occupants
and visitors. Such costs shall also include all costs for Utilities (as
defined below), cleaning, lighting, garbage and refuse disposal, sweeping,
parking area maintenance, repaving and restriping, landscaping, policing,
supplies, tools, wages, salaries and benefits, payroll taxes, unemployment
insurance costs, disability insurance, insurance premiums and expenses, Real
Property Taxes, all costs and attorneys' fees incurred in contesting any Real
Property Taxes, improvements required by governmental laws, ordinances and
regulations, reasonable charges for depreciation of equipment and improvements,
and expenses and fees paid to contractors, subcontractors and managers relating
to the operation, maintenance, repair and replacement of the Building. In
addition, such costs shall include any increases in the ground lease rental
obligations pertaining to the Building which Landlord is required to pay. The
proportionate share of such costs which Tenant is obligated to pay shall be
based upon the ratio that the floor area in the Premises bears to the total
floor area in the Building as they exist from time to time. Tenant's
proportionate share of such costs shall be determined by Landlord from time to
time. At the beginning of each Lease Year, Landlord will supply Tenant with an
estimate of such costs which are payable by Tenant on a monthly basis, in
addition to the rent provided for hereunder and Tenant shall pay such estimated
common area costs, plus taxes, monthly with Monthly Rent. Landlord will
provide Tenant with a statement for the actual costs at the end of each year.
Any costs paid by Tenant in excess of those actually incurred will be credited
to payments next coming due from Tenant. Any excess expenses actually incurred
by Landlord and not previously paid by Tenant shall be immediately due and
payable. There shall be added to actual Operating Costs for any period during
which the Building is less than 95% occupied those additional Operating Costs
which Landlord determines it would have incurred had the Building been 95%
occupied during such period and such additional Operating Costs shall be
included for purposes of calculating Tenant's pro rata share. The violation of
any rules and regulations, or the failure to pay such pro rata share of such
costs shall be deemed a breach of this Lease by Tenant.
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8. SUITABILITY; COMPLIANCE WITH LAW.
8.1 Suitability. Tenant, by execution of this Lease, shall be
deemed to have accepted the Premises in the condition existing as of the date
of execution of this Lease subject only to the substantial completion of any
tenant improvements which Landlord may agree to construct or install, and in
any event this Lease shall be subject to all applicable zoning ordinances, to
any municipal, county and state laws, ordinances and regulations governing and
regulating the use of the Premises and any covenants, conditions and
restrictions now or hereafter of record which cover or affect the Premises.
Tenant acknowledges that neither Landlord nor Landlord's agent has made or
hereby makes any representation or warranty, whether expressed or implied, as
to the suitability of the Premises for the conduct of Tenant's business, the
zoning of the Premises or laws, ordinances or regulations affecting the
Premises.
8.2 Compliance With Law.
(a) Tenant shall not do or permit anything to be done in or about
the Premises which will increase the existing rate of Insurance upon the
Premises (unless Landlord shall first consent thereto in writing and Tenant
shall agree to pay and thereafter pay any increased premium as a result of such
use or acts) or cause the cancellation of any Insurance policy covering said
Premises or any building of which the Premises may be a part, nor shall Tenant
sell or permit to be kept, used or sold in or about said Premises any articles,
items or materials which may be prohibited by a standard form policy of fire
insurance.
(b) Tenants shall not do or permit anything to be done in or about
the Premises which will in any way obstruct or interfere with the rights of
other tenants or occupants of the Building or the building of which the
Premises may be a part or injure or annoy them or use or allow the Premises to
be used for any unlawful, annoying or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises. Tenant
shall not commit or suffer to be committed any waste in or upon or damage,
disfigurement or injury to the Premises.
(c) Tenant shall not use the Premises or permit anything to be done
in, on or about the Premises which wilt in any way violate or conflict with any
law (including, without limitation, all federal, state and local laws
regulating, protecting, concerning or preserving the environment including
without limitation ambient
(d) Upon the expiration or earlier termination of this Lease,
Tenant shall surrender the Premises in the same condition as received, broom
clean and free of damage or debris, ordinary wear and tear and damage by fire,
earthquake, act of God or the elements alone excepted. Tenant, at its sole
cost and expense, agrees to repair any damage to the Premises caused by or in
connection with the removal of any articles of personal property, business or
trade fixtures, machinery, equipment, cabinetwork, furniture, movable
partitions, or permanent improvements or additions, including without
limitation thereto, repairing the floor and patching and painting walls where
required by Landlord to Landlord's reasonable satisfaction. Tenant shall
indemnify the Landlord against any loss or liability resulting from delay by
Tenant in so surrendering the Premises, including without limitation, any
claims made by any succeeding tenant founded on such delay.
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8.3 Landlord's Rights.
(a) In the event Tenant fails to perform Tenant's obligations under
this Section, Landlord shall give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant shall fail to do
such work and diligently prosecute it to completion, then Landlord shall have
the right but not the obligation to enter upon the Premises and do such acts
and expend such funds at the expense of Tenant as are reasonably required to
perform such work and obligations. Any amount so expended by Landlord shall be
paid by Tenant as additional rent promptly after demand with interest thereon
at fifteen percent (15%) per annum from the date of such work expenditure until
paid in full. Landlord shall have no liability to Tenant for any damage,
inconvenience or interference with the use or occupancy of the Premises by
Tenant as a result of performing any such work and obligations.
(b) Landlord reserves unto itself and shall have the right and
option to: (i) alter, or improve the Premises and the Building, or any portion
of either of them from time to time as Landlord shall deem necessary or
desirable in Landlord's sole discretion; (ii) reasonably designate, limit,
restrict and control all services in or to the Building; (iii) retain and have
at all times and use as Landlord shall deem appropriate, keys to all doors
within and into or out of the Premises and the Building and no locks shall be
changed or altered without Landlord's prior written consent; (iv) restrict or
prohibit vending or dispensing machines of any kind in or about the Building
and the Premises; (v) approve in advance and in writing the weight, size and
location of any heavy equipment, fixtures, furnishings or other materials to be
moved into or out of the Premises and the Building; (vi) grant exclusive uses
or rights to any persons or entities; (vii) close, open, relocate, expand,
reduce, alter or change any portion of the building area, land area or common
areas in the Building as may be necessary or desirable in Landlord's sole
discretion from time to time.
8.4 Alterations and Additions.
(a) Tenant shall not, without Landlord's prior written consent and
then only by contractors, suppliers and mechanics approved in advance and in
writing by Landlord, make any alterations, additions, improvements, or utility
installations in, to, on or about the Premises. As used in this Section 8.4,
the term "utility installations" shall include ducting, power panels,
fluorescent fixtures, space heaters, conduit and wiring. In the event Landlord
shall agree to give such consent, as one of the conditions thereto, Landlord
may require that Tenant agree to remove any such alterations, additions,
improvements or utility installations prior to the expiration of the Lease term
and to restore the Premises to their prior condition. As a further condition
to giving any such consent, Landlord may require Tenant to provide Landlord, at
Tenant's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Landlord against any liability for mechanics' and materialmens' liens and to
insure completion of the work. In the event Landlord shall agree to give
consent to them, all such alterations, additions, improvements and utility
installations shall be done at such times, in such manner and upon such
conditions as Landlord may from time to time designate and they shall be done
in compliance with all applicable laws, Environmental Laws, statutes,
ordinances, rules and regulations of all governments and public authorities.
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(b) Unless Landlord requires their removal, as set forth in Section
8.4(b), all alterations, additions, improvements and utility installations
(whether or not such utility installations constitute trade fixtures of
Tenant), which may be made on the Premises, shall at the expiration or earlier
termination of the Lease become the property of Landlord and remain upon and be
surrendered with the Premises. Notwithstanding the above provisions of this
Section 8.4(b), personal property, business and trade fixtures, cabinetwork,
furniture, movable partitions, machinery and equipment, other than that which
is affixed tc the Premises so that it cannot be removed without material damage
to the Premises, shall remain the property of Tenant and may be removed by
Tenant subject to the provisions of Section 8.2, at any time during the term of
this Lease when Tenant is not in default.
9. ENTRY BY LANDLORD.
Landlord and Landlord's agents and employees shall have the right at
all reasonable times to enter into and upon the Premises to inspect the same or
to maintain or repair, make alterations or additions to the Premises or any
portion thereof or to show the Premises to prospective purchasers, tenants or
lenders without the same constituting an eviction of Tenant and the rent
reserved hereunder shall in no wise abate. Landlord may, at any time, place on
or about the Premises any ordinary '~r sale" signs and Landlord may at any time
during the last ninety (90) days of the term of the Lease place on or about the
Premises any ordinary for lease" signs. Tenant hereby waives any claim for
abatement of rent or for damages for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned thereby.
10. LIENS.
Tenant shall keep the Premises, any building of which the Premises are
a part and the Building free from any liens arising out of alterations,
additions, improvements, utility installations, or work performed, materials
furnished or obligations incurred by Tenant and shall indemnify, hold harmless
and defend Landlord from and against any liens and encumbrances arising out of
any work performed or materials furnished by or at the direction of Tenant. In
the event that Tenant shall not, within twenty (20) days following the
imposition or recording of any such lien, cause such lien to be released of
record by payment or posting of a proper bond, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all expenses incurred by it in connection therewith
including attorneys' fees and costs shall be payable to Landlord by Tenant on
demand with interest thereon at the rate of fifteen percent (15%) per annum
from the date expended until paid in full. Landlord shall have the right, at
any and all times, to post and keep posted on the Premises any notices of
non-responsibility or other notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord and the Premises and
any other party having an interest therein, from mechanics' and materialmens"
liens, and Tenant shall give to Landlord at least ten (10) business days prior
written notice of the expected date of commencement of any work relating to
alterations or additions to the Premises.
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11. INDEMNITY.
11.1 Indemnity. Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all claims, liabilities, damages, causes of
action and actions arising out of or related to: (a) any injury or damage to
any person or property arising from the use or occupancy of the Premises by
Tenant or anyone claiming by or through Tenant; (b) from the conduct of
Tenant's business, or from any activity, work or thing done, permitted or
suffered by Tenant in or about the Premises or elsewhere regardless of any
negligence or alleged negligence which is imputed or charged to Landlord as the
owner of the property on which the Premises are located; (c) any breach or
default in the performance of any obligation on Tenant's part to be performed
under this Lease; (d) any negligence of Tenant or Tenant's agents, contractors,
employees and invitees; (e) any actual or alleged violation of or conflict by
Tenant or its agents, contractors, employees or invitees with any laws,
Environmental Laws, statutes, rules, regulations, or ordinances of any
government or public authority having or asserting jurisdiction over or with
respect to the Premises or the Building; and (f) all costs, attorneys',
consultants and professional or trade fees, expenses and liabilities incurred
in the defense of any such claim, liability, action, cause of action or
proceeding brought thereon or incurred in connection with any actual or alleged
effort to comply with any laws, Environmental Laws, statutes, ordinances, rules
or regulations, including without limitation, any action to remedy any
environmental contamination or to engage in any environmental clean up of the
Premises, the Building, or any surrounding real and personal property affected
or allegedly affected. In the event any action or proceeding is brought
against Landlord by reason of any such claim, damage, liability, action or
cause of action, Tenant, upon notice from Landlord, shall defend same at
tenant's expense by counsel reasonably satisfactory to Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risks of
damage to property or injury to persons in, on or about the Premises arising
from any cause and Tenant hereby waives all claims in respect thereof against
Landlord.
11.2 Exemption of Landlord from Liability. Tenant agrees that
Landlord shall not be liable for injury to Tenant's business or loss of income
therefrom or for damage which may be sustained by the person, goods, wares,
merchandise or property of Tenant, its employees, invitees, customers, agents
or contractors or any other person in, on or about the Premises or common areas
of the Building, caused by or resulting from fire, steam, electricity, gas,
water or rain, which may leak or flow from or into any part of the Premises, or
from the breakage, leakage, obstruction or other defects of the pipes,
sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures
of the same, whether the said damage or injury results from conditions arising
upon the Premises or upon other portions or common areas of the Building, or
from other sources or places and regardless of whether the cause of such damage
or injury or the means of repairing the same is inaccessible to Tenant.
Landlord shall not be liable for any damages arising from any act or neglect of
any other tenant or occupant, if any, of the building of which the Premises are
a part or the Building. Tenant further agrees that Landlord shall not be
liable for loss or damage to property by theft or by the wrongful acts of third
parties. Tenant shall give prompt notice to Landlord or Landlord's agent in
case of any fire or accident to, defect in, or wrongful act of third parties in
or about the Premises, the building of which the Premises is a part or the
Building.
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12. INSURANCE.
12.1 Liability Insurance. Tenant shall, at Tenant's expense,
procure and maintain for the mutual benefit of Landlord and Tenant at all times
during the term of this Lease a policy of comprehensive public liability and
property damage insurance insuring Tenant and Landlord, as an additional
insured, against any liability or damage arising out of the ownership, use,
occupancy, or maintenance, of the Premises and appurtenant areas and also
insuring Tenant, the tenant improvements and Tenant's property in, on or about
the Premises against fire and all risks covered under extended coverage
endorsements or policies for casualty insurance and insuring same for the full
replacement cost thereof. Such liability insurance shall at all times be in an
amount of not less than $1,000,000 combined single limit for injury to or death
of any one person in any one occurrence for bodily injury including death and
for property damage. The limits of such insurance shall not limit the
liability of Tenant hereunder. All insurance required hereunder shall be with
companies rated AA: Class XI or better in "Best's Insurance Guide." Tenant
shall deliver to Landlord certificates of insurance evidencing the existence
and amounts of such insurance. In the event Tenant fails to procure and
maintain such insurance, Landlord may (but shall not be required) procure same
at Tenant's expense after ten (10) days prior written notice. No such policy
shall be cancelable or subject to reduction of coverage or other modification
except after thirty (30) days prior written notice to Landlord by the insurer.
All such policies shall be written as primary policies, not contributing with
and not in excess of coverage which the Landlord may carry. Tenant shall,
within twenty (20) days prior to the expiration of such policies, furnish
Landlord with renewals or binders or Landlord may order such insurance and
charge the cost to Tenant, which amount shall be payable by Tenant, as
additional rent, upon demand, together with interest thereon at the rate of
fifteen percent (15%) per annum from the date of expenditure until paid.
Tenant shall have the right to provide such insurance coverage pursuant to
blanket policies obtained by Tenant provided such blanket policies expressly
afford coverage to the Premises and to Landlord as required by this Lease.
12.2 Property Insurance.
(a) Landlord shall keep the Building insured for the benefit of
Landlord in an amount equivalent to ninety percent of the full replacement
value thereof (excluding foundations, grading, land value and excavation costs)
against loss or damage by fire, vandalism, malicious mischief, such other
perils as are included within the classification of all risk coverage and, in
addition thereto, Landlord may also insure the Building against such other
risks of a similar or dissimilar nature as Landlord shall, in its sole
discretion, deem necessary or appropriate. Notwithstanding the foregoing
provisions in this Section, however, for so long as Landlord shall maintain a
net worth, as determined by Landlord, of four times the full replacement value
of the Building (excluding foundations, grading, land value and excavation
costs), then Landlord, at its option, may self insure for the coverage required
herein.
(b) If the Premises being leased herein are part of a larger
property, then Tenant shall not be responsible for paying any increase in the
property insurance caused by the acts or omissions of any other tenant of the
building of which the Premises are a part or the Building.
12.3 Waiver of Subrogation. Landlord and Tenant each hereby waive
any and all rights of recovery against the other of them or against the
officers, employees, agents and representatives of the other of them, on
account of loss or damage occasioned to such waiving party of its property or
the property of others under its control caused by fire or any of the extended
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coverage risks described above to the extent that (a) such loss or damage is
insured against and (b) the foregoing waiver of subrogation is then permitted
under any insurance policy of the waiving party in force at the time of such
loss or damage. Landlord and Tenant shall, upon obtaining the policies of
insurance required or permitted under this Lease, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
13. DAMAGE OR DESTRUCTION.
13.1 Partial Damage - Insured. Subject to the provisions of
Paragraphs 13.3 and 13.4, if the Premises are damaged and such damage was
caused by a casualty covered under an insurance policy maintained by Landlord,
Landlord shall repair such damage as soon as reasonably possible to the extent
of insurance policy proceeds actually received by Landlord and this Lease shall
continue in full force and effect but Landlord shall not repair or replace
tenant's fixtures, equipment or tenant improvements.
13.2 Partial Damage - Uninsured. Subject to the provisions of
Paragraphs 13.3 and 13.4, if at any time during the term hereof the Premises
are damaged, except by a negligent or willful act of Tenant (in which event
Tenant shall make the repairs, at its expense) and such damage was caused by a
casualty not covered under an insurance policy maintained by Landlord, Landlord
may at Landlord's option either (i) repair such damage as soon as reasonably
possible at Landlord's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Tenant within thirty (30)
days after the date of the occurrence of such damage of Landlord's intention to
cancel and terminate this Lease as of the date of the occurrence of such
damage. In the event Landlord elects to give such notice of Landlord's
intention to cancel and terminate this Lease as of the date of the occurrence
of such damage, Tenant shall have the right within ten (10) days after the
receipt of such notice to give written notice to Landlord of Tenant's intention
to repair such damage at Tenant's expense, without reimbursement from Landlord,
in which event this Lease shall continue in full force and effect, and Tenant
shall proceed to make such repairs as soon as reasonably possible. If Tenant
does not give such notice within such 10 day period this Lease shall be
canceled and terminated as of the date of the occurrence of such damage.
13.3 Total Destruction. If at any time during the term hereof the
Premises are totally destroyed from any cause whether or not covered by
insurance maintained by Landlord (including any total destruction required by
any authorized public authority), this Lease shall automatically terminate as
of the date of such total destruction.
13.4 Damage Near End of Term. If the Premises are partially
destroyed or damaged during the last six (6) months of the term or any extended
term of this Lease, Landlord may at Landlord's option cancel and terminate this
Lease as of the date of the occurrence of such damage by giving written notice
to Tenant of Landlord's election to do so within thirty (30) days after the
date of the occurrence of such damage.
13.5 Abatement of Rent; Tenant's Remedies.
(a) If the Premises are partially destroyed or damaged and Landlord
or Tenant repairs or restores them pursuant to the provisions of this Section
13, the rent payable hereunder for the period during which such damage, repair
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or restoration continues shall be abated in proportion to the degree to which
the Premises are untenantable or are not used by Tenant. Except for abatement
of rent, if any, Tenant shall have no claim against Landlord for any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) If Landlord shall be obligated to repair or restore the
Premises under the provisions of this Section 13 and shall not commence such
repair or restoration within sixty (60) days after such obligation shall
accrue, Tenant may at Tenant's option cancel and terminate this Lease by giving
Landlord written notice of Tenant's election to do so at any time Prior to the
commencement of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.
13.6 Termination - Advance Payments. Upon termination of this Lease
pursuant to this Section 13 an equitable adjustment shall be made concerning
any advance rent and any other advance payments made by Tenant to Landlord.
Landlord shall, in addition, return to Tenant so much of Tenant's Security
deposit as has not theretofore been applied by Landlord. Tenant waives the
provisions of A.R.S. Section 33-343 or any other or similar statutes or laws
now or hereafter in existence which relate to the termination of a lease when
the leased premises are destroyed and agrees that such event shall be governed
by the terms of this Lease.
14. CONDEMNATION
(a) If the Premises or any portion thereof are taken under the
power of eminent domain, or sold by Landlord under the threat of the exercise
of said power (all of which is herein referred to as "condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemnation
authority takes title or possession, whichever occurs first. If more than ten
percent (10%) of the floor area of the Premises, or more than twenty percent
(20%) of the floor area of the buildings which form and comprise the Building,
or more than fifty percent (50%) of the land area of the Building that is not
covered with buildings, is taken by condemnation, either Landlord or Tenant may
terminate this Lease, as of the date the condemning authority takes possession
or title (whichever occurs first), by notice in writing of such election given
within twenty (20) days after Landlord shall have notified Tenant of the
taking, or in the absence of such notice, then within twenty (20) days after
the condemning authority shall have taken possession or title (whichever occurs
first). However, Tenant shall not have the right to terminate this Lease under
this Section in the event Landlord, within a reasonable time, supplies Tenant
with replacement Premises and facilities comparable to the portion of the
Premises condemned, and in such event this Lease shall apply with equal effect
to such replacement Premises and facilities.
(b) If this Lease is not terminated by either Landlord or Tenant
then it shall remain in full force and effect as to the portion of the Premises
remaining, provided the rent shall be reduced in the proportion that the floor
area of the portion of the Premises taken bears to the total floor area of the
Premises. In the event this Lease is not so terminated then Landlord agrees,
at Landlord's sole cost up to the extent of any award proceeds or severance
damages actually received by Landlord, to restore the Premises to a complete
unit of reasonably similar quality and character (taking into account the
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condemnation) as existed immediately prior to the condemnation as soon as
reasonably possible. All awards and severance damages for the taking of any
part of the Premises or any payment made under the threat of the exercise of
power of eminent domain shall be the property of Landlord, whether made as
compensation for diminution of value of a leasehold or for the taking of the
fee or as severance damages; provided, however, that Tenant shall be entitled
to any award for loss or damage to Tenant's trade fixtures and removable
personal property. In the event that this Lease is not terminated by reason of
such condemnation, Landlord shall, to the extent of any award or severance
damages actually received by Landlord, repair any damage to the Premises caused
by such condemnation except to the extent that Tenant has been reimbursed
therefor by the condemning authority. Tenant shall pay any amount in excess of
such severance damages required to complete such repair.
15. ASSIGNMENT & SUBLETTING.
15.1 Landlord's Consent Required. Tenant shall not assign,
transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest
therein whether by operation of law or otherwise, and shall not sublet the
Premises or any part thereof or permit the use or occupancy of all or any part
of the Premises by anyone other than Tenant, without the prior written consent
of Landlord and any attempt to do any of the above without such consent being
first had and obtained shall be wholly void and shall constitute a breach of
this Lease. A transfer of control of Tenant, whether by transfer of stock,
merger, consolidation, transfer of partnership or sole proprietorship interest
or otherwise, shall be deemed an assignment under this Section and subject to
the provisions hereof.
15.2 No Release of Tenant No consent by Landlord to any assignment
or subletting by Tenant shall relieve Tenant of any obligation to be performed
by Tenant under this Lease, whether occurring before or after such consent,
assignment or subletting. A consent by Landlord to any assignment or
subletting shall not relieve Tenant from the obligation to obtain Landlord's
express written consent to any other assignment or subletting. The acceptance
of rent by Landlord from any other person shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any assignment,
subletting or other transfer. Consent to one assignment, subletting or other
transfer shall not be deemed to constitute consent to any subsequent
assignment, subletting or other transfer.
15.3 Consent Not Withheld. Provided that Tenant is relieved of any
liability under this lease, and that Tenant is not in default, Landlord consent
shall not be unreasonably withheld.
15.4 Attorneys Fees. In the event Landlord shall consent to a
sublease or assignment under this Section 15, Tenant shall pay Landlord's
reasonable attorneys' fees not to exceed $1,000.00 incurred in connection with
giving such consent.
16. SUBORDINATION.
16.1 Subordination. At Landlord's option, this Lease shall be
subject and subordinate to all ground or underlying leases which now exist or
may hereafter be executed affecting the Premises or the Building or both, and
to the lien of any mortgages or deeds of trust now or hereafter placed on or
against the Premises, the Building or both or on or against Landlord's interest
or estate therein, or on or against any ground or underlying lease, without the
necessity of the execution and delivery of any further instruments on the part
of Tenant to effectuate such subordination. If any mortgagee, trustee or
ground lessor shall elect to have this Lease prior to the lien of its mortgage,
deed of trust
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or ground lease, and shall give written notice thereof to Tenant, this Lease
shall be deemed prior to such mortgage, deed of trust or ground lease, whether
this Lease is dated prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of the recording thereof.
16.2 Subordination Agreements. Tenant covenants and agrees to
execute and deliver upon demand without charge therefor, such further
instruments evidencing such subordination of this Lease to such ground or
underlying leases and to the lien of any such mortgages or deeds of trust as
may be required by Landlord. Tenant hereby appoints Landlord as Tenant's
attorney-in-fact, irrevocably, to execute and deliver any such agreements,
instruments, releases or other documents in the event Tenant fails to do so
within fifteen (15) days after written request therefor.
16.3 Quiet Enjoyment Landlord covenants and agrees with Tenant that
upon Tenant paying rent and other monetary sums due under this Lease and
performing Tenant's covenants and conditions hereunder, Tenant shall and may
peaceably and quietly have, hold and enjoy the Premises for the term, subject,
however, to the terms of the Lease and of any of the aforesaid ground leases,
mortgages or deeds of trust described above.
16.4 Attornment. In the event any proceedings are brought for
default under any ground or underlying lease or in the event of foreclosure or
the exercise of a power of sale under any mortgage or deed of trust made or
given and covering the Premises or the Building, then at the option of the
Landlord, the mortgagee, the beneficiary, ground lessor, or purchaser, Tenant
shall attorn to the mortgagee, beneficiary, ground lessor or purchaser
(collectively ""purchase" upon any such foreclosure or sale and recognize such
purchaser as the Landlord under this Lease. Tenant agrees, within fifteen (15)
days after demand, to execute and deliver such agreements, instruments or other
documents as may be required by Landlord or a purchaser to evidence and set
forth the terms of such attornment.
17. DEFAULT; REMEDIES.
17.1 Default. The occurrence of any one or more of the following
shall constitute a default and breach of this Lease by Tenant:
(a) Any failure by Tenant to pay the rent required to be paid
hereunder, where such failure continues for five (5) days after such sums are
due;
(b) Any failure by Tenant to pay any monetary sums required to be
paid hereunder other than rent where such failure continues for three (3) days
after written notice thereof by Landlord to Tenant;
(c) The abandonment or vacation of the Premises by Tenant;
(d) A failure by Tenant to observe or perform any other provision
of this Lease to be observed or performed by Tenant, where such failure
continues for twenty (20) days after written notice thereof by Landlord to
Tenant, provided, however, that if the nature of such default is such that the
same cannot reasonably be cured within such twenty (20) day period, Tenant
shall not be deemed to be in default if Tenant shall within such period
commence the cure and thereafter diligently prosecute the same to completion;
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(e) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt or of a petition for reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty (60) days);
the appointment of a trustee or receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged within thirty (30) days;
(f) Any discovery by Landlord that any financial statement or other
financial information given to Landlord by or relating to Tenant, any assignee
or subleases of Tenant, any successor in interest of Tenant, any principal or
equity interest holder of Tenant or any guarantor of Tenant's obligations
hereunder, or any of them, was or is materially false or misleading or
materially misrepresented any item, information or condition therein; or
(g) If Landlord shall consider Tenant's financial condition and/or
ability to pay and perform its obligations under this Lease to be insecure or
doubtful as determined upon reasonable evidence including; without limitation,
an anticipatory breach or repudiation of this Lease, the failure to pay or
perform other contractual obligations, the existence of substantial litigation
against Tenant, or the failure to provide Landlord with relevant financial
information upon reasonable request.
17.2 REMEDIES. In the event of any such default or breach by
Tenant, Landlord may at any time thereafter, with or without notice and demand
and without limiting Landlord in the exercise of any rights or remedies
otherwise available at law or in equity which Landlord may have by reason of
such default or breach do any one or more of the following:
(a) Enter upon the Premises with or without process of law and take
possession of the same and of all trade fixtures, furnishings, equipment and
other personal property of Tenant, including the right to change door locks (or
other means of prohibiting Tenant from having occupancy of the Premises) and
suspend utilities and services and expel or remove Tenant and all other parties
occupying the Premises, using such force as may reasonably be necessary to do
so without being liable to Tenant for any loss or damage occasioned thereby.
Personal property may be removed by Landlord from the Premises and stored in
such place as Landlord shall designate for the account of and at the expense
and risk of Tenant and Landlord shall in no event be liable for any damage or
loss thereto. Landlord may, at its option, and after giving Tenant prior
notice thereof, sell said personal property at public or private sale for such
price and upon such terms as Landlord may determine, applying the proceeds of
such sale against the balance owing by Tenant to Landlord under this Lease,
including the expense of such removal and sale.
(b) Lock the doors to the Premises and exclude Tenant and all other
persons therefrom (except those authorized by Landlord in its sole discretion).
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(c) Institute suit against Tenant to collect each installment of
rent or other sum as it becomes due or to enforce any other obligation under
this Lease.
(d) With or without terminating the Lease, terminate Tenant's right
to possession of the Premises by any lawful means, in which case Tenant shall
immediately surrender possession of the Premises to Landlord and Landlord shall
have the right to reenter the Premises and removal all persons and property
therefrom using all force reasonably necessary for this purpose without being
guilty in any manner of trespass or conversion, any claim by reason of such
reentry being expressly waived. In such event Landlord shall be entitled to
recover from Tenant all damages incurred by Landlord by reason of tenant's
default including, but not limited to, the cost of recovering possession of the
Premises; expenses of reletting, including necessary renovation and alteration
of the Premises, the removal of special improvements made for Tenant, any
commissions paid in relation to any reletting, reasonable attorney's fees,
advertising expenses, the costs of protecting and caring for the Premises while
vacant, and cost of removing and storing Tenant's property; any real estate
commission actually paid; the worth at the time of the award of all unpaid
rent, additional rent and other sums payable under the Lease that are or become
due and payable prior to the time of such award (plus all interest and late
charges payable with respect thereto); the worth at the time of award of the
amount by which the unpaid rent, additional rent and other sums pay-able under
the Lease for the balance of the term after the time of such award exceeds the
amount of such rental loss for the same period that Tenant proves could be or
could have been reasonably avoided; and that portion of any leasing commission
paid by Landlord based upon or pursuant to this Lease applicable to the
unexpired term of this Lease. All of the foregoing amounts shall be and become
immediately due and payable from Tenant to Landlord upon a default, at
Landlord's election which may be exercised with or without the giving of
notice.
(e) Maintain Tenant's right to possession in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including, without limitation,
the right to recover the rent as it becomes due hereunder and any other damages
incurred by Landlord from time to time. Notwithstanding that Landlord shall
have maintained tenant's right to possession or shall not have terminated the
Lease for a default, Landlord may at any time thereafter, upon notice to
Tenant, terminate the Lease and/or Tenant's right to possession for such prior
default.
(f) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state wherein the Premises are
located. Unpaid installments of rent and other unpaid monetary obligations of
Tenant under the terms of this Lease shall bear interest from the date due at
the rate of five percentage points over the announced prime rate (as it may be
announced from time to time) of the then-largest bank in Arizona as determined
by Landlord.
(g) No re-entry or taking of possession by Landlord and/or
acceptance of keys to the Premises by Landlord shall be construed as an
election on Landlord's part to terminate or accept a surrender of this Lease
unless a written notice of such intention is then or thereafter served on
Tenant.
(h) No failure by Landlord to insist upon the strict performance of
any covenant, agreement, term or condition of this Lease or to exercise any
right or remedy consequent upon a breach thereof, and no acceptance of full or
partial rent during the continuance of any such breach, shall constitute a
waiver of any such breach or of such covenant, agreement, term or condition.
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No covenant, agreement, term or condition of this Lease to be performed or
complied with by Tenant, and no breach thereof, shall be waived, altered,
modified or terminated except by written instrument executed by Landlord. No
waiver of any breach shall affect or alter this Lease, but each and every
covenant, agreement, term and condition of this Lease shall continue in full
force and effect with respect to any other then existing or subsequent breach
thereof.
(i) If Tenant causes a breach of any of the covenants, agreements,
terms or conditions contained in this Lease, Landlord shall be entitled to
obtain and retain all sums held by Tenant, by any trustee or in any account
provided for herein, to enjoin such breach and to invoke any right and remedy
allowed at law or in equity or by statute or otherwise as though reentry,
summary proceedings and other remedies were not provided for in this Lease.
(j) Tenant understands that if the Premises have been built or
improved to suit Tenant's needs and/or if Landlord has granted any rental
concessions, credits or "free rent" to Tenant, and if Tenant shall thereafter
default or cause a breach under this Lease, then such concessions or "free
rent" shall thereupon be automatically revoked and void the same as if never
granted. Tenant further agrees that in the event of a default, Landlord will
incur damages which are beyond normally encountered leasehold damages and
Landlord shall be entitled to collect and recover all special damages incurred
by reason of Tenant's default including, without limitation, all costs of such
buildout or improvements done for Tenant, the full amount of any rental
concessions, credits or "free rent" previously granted the same as if they (it)
had not been granted, plus any other special damages incurred by Landlord.
(k) All rights and remedies of Landlord herein enumerated shall be
cumulative and none shall exclude any other right or remedy allowed by law.
All rights and remedies of Landlord, whether enumerated herein or allowed by
law, may be pursued singly, cumulatively, or consecutively and pursuit of one
such right or remedy shall not, except to the extent required by law, be deemed
an election of remedies or a waiver of any other remedies.
17.3 Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within five (5) days after
such amount shall be due, Tenant shall pay to Landlord a late charge equal to
five percent (5%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Landlord
will incur by reason of late payment by Tenant. Acceptance of such late charge
by Landlord shall in no event constitute a waiver of Tenant's default with
respect to such overdue amount, nor prevent Landlord from exercising any of the
other rights and remedies granted hereunder.
17.4 Default by Landlord. Landlord shall be in default if Landlord
fails to perform obligations required of Landlord within a reasonable time, ten
days written notice to Landlord and to the holders of any mortgage or deed of
trust covering the Premises whose name and address shall have theretofore been
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furnished to Tenant, specifying that Landlord has failed to perform such
obligation; provided, however, that if the nature of Landlord's obligation is
such that more than sixty (60) days are required to cure default, then Landlord
shall not be in default if Landlord commences performance within thirty days
and thereafter diligently prosecutes the same to completion. Tenant agrees
that although no holder of any mortgage or deed of trust shall be obligated to
cure a default by Landlord, such holder(s) may do so and Tenant shall accept
such cure the same as if by Landlord. In no event may Tenant terminate this
Lease except as and when expressly provided herein, but Tenant shall have the
right to cure any such default in the event Landlord has not taken action to
cure within 30 days of receipt of written notice from tenant a default has
occurred, or completely cured within 180 days of said notice, or as otherwise
set forth herein.
If, after giving Landlord notice during the prescribed period, Landlord
has not commenced to cure any default, or if within 180 days Landlord has not
cured the default, then Tenant may, after giving notice to Landlord of its
intent, cause the default by Landlord to be cured. Tenant shall offset against
rents and other sums due to Landlord, any expense Tenant incurs to cure said
default.
18. MISCELLANEOUS.
18.1 Estoppel Certificate.
(a) Tenant shall at any time upon not less than ten (10) days'
prior written notice from Landlord execute, acknowledge and deliver to Landlord
a statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and
the date to which the rent and other charges are paid in advance, if any, (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults
on the part of Landlord hereunder and that Landlord has satisfactorily
completed any improvements or repairs to be performed by Landlord, or
specifying such defaults or failures to complete improvements or repairs if any
are claimed; and (iii) such other certifications as shall be reasonably
requested. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrance of the Premises.
(b) At Landlord's option, Tenant's failure to deliver such
statement within such time shall be a default under this Lease, or shall be
binding and conclusive upon Tenant, as evidenced by the signing of such
statement by Landlord on behalf of Tenant: (i) that this Lease is in full force
and effect, without modification except as may be represented by Landlord, (ii)
that there are no uncured defaults in Landlord's performance, (iii) that not
more than one month's rent has been paid in advance, and (iv) that Landlord has
satisfactorily completed any improvements to or repairs of the Premises to be
performed by Landlord and that Tenant has accepted possession thereof.
(c) If Landlord desires to finance or refinance the Premises or
Building, or any part thereof, Tenant hereby agrees to deliver to any lender
designated by Landlord such financial statements of Tenant as may be reasonably
required by such lender. Such statements shall include the past three years'
financial statements of Tenant. All such financial statements shall be
received by Landlord in confidence and shall be used only for the purposes
herein set forth.
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18.2 Landlord's Interest and Liability.
(a) The term "Landlord" as used herein shall mean only the owner at
the time in question of the landlord's interest in this Lease and in the event
of any sale or conveyance by Landlord of the landlord's interest in this Lease,
the Premises or the Building other than a transfer for security purposes only,
the then Landlord shall be relieved from and after the date of transfer of all
obligations and liabilities accruing thereafter on the part of the landlord,
provided that any security deposit or other funds in the hands of Landlord at
the time of transfer and in which Tenant has an interest, shall be delivered to
the successor of Land-lord. This Lease shall not be affected by any such sale
or transfer and Tenant agrees to attorn to the purchaser or transferee.
(b) Any claim, demand, damage, action or cause of action which
Tenant may have against Landlord for default in performance of any of the
obligations herein contained to be kept and performed by Landlord shall be
deemed waived unless such claim is asserted by written notice thereof to
Landlord within sixty (60) days of commencement of the alleged default or of
accrual of the cause of action and unless suit be brought thereon with-in one
(1) year subsequent to the accrual of such cause of action. Furthermore,
Tenant agrees to look solely to Landlord's interest in the Building for the
recovery of any judgment or damages from Landlord, a being agreed that
Landlord, and if Landlord is a partnership, its partners whether general or
limited, and if Landlord is a corporation, its directors, officers and
shareholders, shall never be personally liable for any such judgment or damages
and no other assets of Landlord other than Landlord's interest in the Building
shall be liable for or subject to levy or execution in satisfaction of any such
judgment or damages.
18.3 Captions; Attachments; Defined Terms.
(a) The captions of the paragraphs and Sections of this Lease are
for convenience only and shall not be deemed to be relevant in resolving any
question of interpretation or construction of any section of this Lease.
(b) Exhibits attached hereto, and addendum and schedules initialed
by the parties, are deemed by attachment to constitute part of this Lease and
are incorporated herein.
(c) The words "Landlord" and "Tenant" as used herein, shall include
the plural as well as the singular. Words used in neuter gender include the
masculine and feminine and words in the masculine or feminine gender include
the neuter. If there be more than one Landlord or Tenant, the obligations
hereunder imposed upon Landlord or Tenant shall be joint or several. If the
Tenants are husband and wife, the obligations shall extend individually to
their sole and separate property as well as to their community property. The
term "Landlord" shall mean only the owner or owners at the time in question of
the fee title or a lessee's interest in a ground tease of the Premises. The
obligations contained in this Lease to be performed by the Landlord shall be
binding on Landlord's successors and assigns only during their respective
periods of ownership.
18.4 Entire Agreement This instrument along with any exhibits and
attachments hereto constitutes the entire Agreement between Landlord and Tenant
relative to the Premises and this Agreement and the exhibits and attachments
may be altered, amended or revoked only by an instrument in writing signed by
both Landlord and Tenant. Landlord and Tenant agree hereby that all prior or
contemporaneous oral agreements between and among themselves and their agents
or representatives relative to the leasing of the Premises are merged into this
Agreement or are revoked by this Agreement.
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18.5 Severability. If any term or provision of this Lease shall, to
any extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
18.6 Costs of Suit
(a) If Tenant or Landlord shall bring any action for any relief
against the other, declaratory or otherwise, arising out of this Lease,
including any suit by Landlord for the recovery of rent or possession of the
Premises, then except as otherwise provided by law, the losing party shall pay
the successful party a reasonable sum for attorneys' fees which shall be deemed
to have accrued on the commencement of such action and shall be paid whether or
not such action is prosecuted to judgment.
(b) Should Landlord, without fault on Landlord's part, be made a
party to any litigation instituted by Tenant or by any third party against
Tenant, or by or against any person holding under or using the Premises by
license of Tenant, or for the foreclosure of any lien for labor or material
furnished to, or based upon or arising out of an alleged violation of any
Environmental Laws, or by any such other person or other-wise arising out of or
resulting from any act or transaction of Tenant or of any such other person,
Tenant covenants to save and hold Landlord harmless from any judgment rendered
against Landlord or the Premises or any part thereof, and all costs and
expenses, including reasonable attorneys' fees, incurred by Landlord in or in
connection with such litigation.
18.7 Time; Joint and Several Liability. Time is of the essence of
this Lease and each and every provision hereof, except as to the conditions
relating to the delivery of possession of the Premises to Tenant. All the
terms, covenants and conditions contained in this Lease to be performed by
either party, if such party shall consist of more than one person or
organization, shall be deemed to be joint and several, and all rights and
remedies of the parties shall be cumulative and not exclusive of any other
remedy at law or in equity.
18.8 Binding Effect; Choice of Law. The parties hereto agree that
all the provisions hereof are to be construed as both covenants and conditions
as though the words importing such covenants and conditions were used in each
separate paragraph hereof; subject to any provisions hereof restricting
assignment or subletting by Tenant and subject to Section 18.2, all of the
provisions hereof shall bind and inure to the benefit of the parties hereto and
their respective heirs, legal representatives, successors and assigns. The
terms and provisions of this Lease shall be construed according to their normal
and usual meaning and neither the Lease nor any provision hereof shall be
construed strictly for or against either Landlord or Tenant. This Lease shall
be governed by the laws of the State of Arizona.
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<PAGE> 24
18.9 Waiver.
(a) No covenant, term or condition or the breach thereof shall be
deemed waived, except by written consent of the party against whom the waiver
is claimed, and any waiver or the breach of any covenant, term or condition
shall not be deemed to be a waiver of any preceding or succeeding breach of the
same or any other covenant, term or condition. Acceptance by Landlord or any
performance by Tenant shall after the time the same shall have become due shall
not constitute a waiver by Landlord of the breach or default of any covenant,
term or condition unless otherwise expressly agreed to by Landlord in writing.
(b) Landlord and Tenant each hereby waive trial by jury in any
action or proceeding brought by either of them against the other or any matter
or issue whatsoever arising out of or connected with this Lease.
18.10 Surrender of Premises. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a
merger, and shall, at the option of the Landlord, terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord, operate as an
assignment to it of any or all such subleases or subtenancies.
18.11 Holding Over. If Tenant remains in possession of all or any
part of the Premises after the expiration of the term hereof, except with the
express written consent of Landlord or except upon execution of a new lease,
Tenant shall be deemed to be occupying the Premises without claim of right and
Tenant shall pay Landlord and Landlord shall recover from Tenant: (a) all
damages and costs arising out of loss of rental and any liability to third
parties resulting from delay by Tenant in surrendering the Premises as of the
Expiration Date; plus (b) a charge for each day of occupancy equal to triple
the rents payable (on a daily basis) by Tenant during the last month of the
Lease term, in no event shall such holding over without Landlord's written
consent work a renewal or extension of the Lease term.
18.12 Signs and Auctions. Tenant shall not place, erect or install
any sign in, on or about the Premises or the Building or conduct any auction
thereon without Landlord's prior written consent. Landlord reserves the right
to impose such conditions as it shall deem necessary or desirable in its sole
discretion in the event Landlord shall consent to or permit any signage or
auction.
18.13 Survival of Tenant's Obligations; Change of Name. Tenant's
duties and obligations under this Lease shall survive the termination hereof
and shall continue until fully paid and performed. If the name of Tenant or
any successor or assign shall be changed during the Lease term, such party
shall promptly notify Landlord of same and shall provide Landlord with such
documentation and verification thereof as Landlord shall reasonably request.
18.14 interest on Past Due Obligations. Except as expressly herein
otherwise provided, any amount due to Landlord not paid when due shall bear
interest from the date due at five percentage points over the announced prime
rate (as it may be announced from time to time) of the then largest bank in
Arizona as determined by Landlord. Payment of such interest shall not excuse
or cure any default by Tenant under this Lease.
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<PAGE> 25
18.15 Recording; Binding Effect. Tenant shall not record this Lease
or a memorandum of this Lease without Landlord's prior written consent, and any
such recordation shall, at the option of Landlord, constitute a non-curable
default of Tenant hereunder, All terms, conditions, provisions and agreements
of this Lease shall be deemed to be covenants.
18.16 Notices. All notices of any kind required or desired to be
given by Landlord or Tenant hereunder shall be in writing and shall be deemed
delivered and served (for legal purposes) when personally delivered or, if
mailed, upon depositing the notice in the United States mail, certified or
registered mail, postage prepaid, addressed to the Landlord or Tenant
respectively at the addresses set forth after their signatures at the end of
this Lease or at the last known addresses of such parties if notice of a change
of address has been given to the other party in the manner provided in this
paragraph for the giving of notices.
18.17 Corporate Authority. If Tenant is a corporation, each
individual executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of said corporation in accordance with a duly adopted resolution of the Board
of Directors of said corporation and in accordance with the Bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms. If Tenant is a corporation Tenant shall, within thirty (30)
days after execution of this Lease, deliver to Landlord a certified copy of a
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
18.18 Outside Storage; No Odors. No storage will be allowed outside
the Premises or on any of the common areas. This includes but is not limited
to supplies, materials, goods, pallets, dunnage, equipment, vehicles, etc. All
trash must be placed in trash receptacles. Tenant shall not cause or permit
any noxious or offensive odors (as determined by Landlord in its sole
discretion) to emanate from the Premises.
18.19 Hazardous Materials. Without limiting the generality of the
Arizona Revised Statutes Section 36-3501 et. seq. Tenant shall be solely
responsible for and shall defend, indemnify, and hold Landlord and its agents
harmless from and against all claims, costs, damages and liabilities, including
attorneys' fees and costs, arising out of or in connection with its storage,
use and disposal of Hazardous Materials (as defined below). Notwithstanding
the above, Tenant covenants not to introduce any hazardous or toxic materials,
hazardous substances, petroleum products, toxic or hazardous chemicals, solid,
liquid or gaseous wastes, pollutants, contaminants, disease-causing agents,
asbestos or other toxic matter (collectively "hazardous materials") within the
meaning or coverage of all federal, state and local laws, rules, regulations
and ordinances as may now or hereafter be in effect ("applicable laws"), in, on
or about the Premises or the Building except only as directly necessary for the
use and operation of photocopy machines and other business machines normally
25
<PAGE> 26
used in general office type businesses in the area in which the Premises are
located (collectively "Normal Business Machine Chemicals"). Tenant further
covenants to: (a) give Landlord prior written notice from time to time and as
requested by Landlord of all Normal Business Machine Chemicals used, stored or
transported onto or off of the Premises or Building by Tenant; and (b) not to
bring any Normal Business Machine Chemicals onto the Premises or Building
without (1 ) first obtaining Landlord's written consent which may be given or
withheld in Landlord's sole discretion and (2) complying with all applicable,
federal, state and local laws or ordinances pertaining to the generation,
transportation, storage or use of such Normal Business Machine Chemicals
including but not limited to obtaining proper permits. Tenant covenants not to
dispose of any hazardous materials (including without limitation Normal
Business Machine Chemicals) on, in under or about the Premises or Building. If
Tenant's generation, transportation, storage or use of Hazardous Materials
(including, without limitation Normal Business Machine Chemicals) in, on or
about the Premises or Building results in (A) contamination of the Premises,
Building, any soil or surface or ground water or (B) loss, injury or damage to
person(s) or property, then Tenant agrees to respond in accordance with the
following. Tenant agrees (i) to notify Landlord immediately of any
contamination, claim of contamination, loss, injury or damage, (ii) after
consultation with and approval by Landlord (which approval may be given or
withheld in Landlord's sole discretion), to clean up any contamination in full
compliance with all applicable laws, statutes, regulations and standards, and
(iii) to indemnify, defend and hold Landlord harmless from and against all
claims, suits, actions, causes of action, costs and fees, including attorneys'
fees, arising from or connected with any such contamination, claim of
contamination, loss, injury or damage. This provision shall survive
termination of this Lease.
18.20 Rules and Regulations; Compliance with "ADA" and "FHA"'.
(a) Tenant covenants and agrees to comply with all rules and
regulations now existing or hereafter established, adopted or amended by
Landlord from time to time covering, governing or relating to the Building and
the use and occupancy thereof by tenants and/or occupants thereof. Landlord
shall have the right and option during the Lease term to establish, adopt or
amend any rules and regulations, and in the event Landlord shall hereafter
establish, adopt or amend any such rules and regulations, Landlord shall give
Tenant at least twenty (20) days prior written notice of them and the date upon
which they (or the amendments thereto) shall become effective and from and
after such effective date the rules and regulations shall be and become binding
on Tenant, shall be and become a part of this Lease and the violation thereof
by Tenant shall be a default under this Lease within the meaning of Section
17.1(d) above.
(b) Tenant agrees to take all proper and necessary action to cause
the Premises to be kept, maintained, used and occupied in compliance with the
Fair Housing Act of 1968 (as amended) (the "FHA") and the Americans with
Disabilities Act of 1990 (as the same may be amended) (the "ADA").
18.21 Indemnity. Tenant hereby agrees to indemnify, defend and save
Landlord harmless from and against any and all claims, losses, damages,
liabilities, liens, mechanic's liens, actions, suits and causes of action
arising from or out of or arising in connection with any breach or default on
the part of Tenant in connection with or related to the Tenant Improvements and
from all costs, reasonable counsel fees and expenses incurred by Landlord in
defending any claim, action, suit or proceeding arising out of any of the
foregoing. In the event any such claim, demand, suit, action or proceeding
shall be filed arising out of or in connection with any of the Tenant
Improvement work, then upon notice from Landlord, Tenant agrees to defend
Landlord by counsel reasonably acceptable to Landlord and to pay or cause to be
discharged any judgment, order, judgment lien or decree issued, entered,
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<PAGE> 27
recorded or filed in connection therewith. Additionally, Tenant agrees to keep
the Premises and the Building free and clear of any mechanic's liens or claims
of mechanic's lien or other encumbrances arising out of or in connection with
the Tenant Improvement work or any materials or labor supplied in connection
therewith. In the event any such liens or claims of lien or encumbrances shall
be flied, recorded or asserted, Tenant shall promptly cause any of the same to
be discharged within thirty (30) days from the date of filing, recording or
assertion, all at Tenant's sole cost and expense.
19. PARKING.
(a) Provided that Tenant shall not be in default under the terms
and provisions of the Lease and provided further that Tenant shall comply with
and abide by Landlord's parking rules and regulations from time to time in
effect, Tenant shall have during the initial Lease term a license to park up to
ten (10) designated standard sized passenger automobiles on a covered, reserved
basis (the "Covered Reserved Spaces"), plus a license to use up to seventeen
(17) uncovered, reserved parking from time to time available at the Building.
Six (6) designated visitor spaces, as well as all other Uncovered, Unreserved
Spaces are to be used by Tenant for its customers, clients and invitees and
Tenant agrees that it shall not permit employees or others to park in such
spaces. Unreserved shall mean on a first come first served basis in common
with other tenants of and invitees to the Building (the "Uncovered Unreserved
Spaces") in parking spaces provided by Landlord from time to time for the
Building. Each such automobile shall, at Landlord's option to be exercised
from time to time, bear a permanently affixed and visible identification
sticker to be provided by Landlord. Tenant shall not and shall not permit its
employees, agents, servants, customers, contractors, or invitees (collectively
Tenant and Its invitees to park any vehicles in locations other than those
specifically designated by Landlord as being for Tenant's use. This license is
for self-service parking only and does not include additional rights or
services. In the event any tax, surcharge or regulatory fee is at any time
imposed by any governmental authority upon or with respect to parking or
vehicles parking in the parking spaces referred to herein Tenant shall pay such
tax, surcharge or regulatory fee as additional rent under the Lease, such
payments to be made in advance and from time to time as required by Landlord
(except that they shall be paid monthly with Monthly Rent if permitted by the
governmental authority).
(b) Neither Landlord nor its operators, agents, servants or
employees shall be liable for: (i) loss or damage to any vehicle or other
personal property parked or located upon or within such parking spaces or any
parking areas whether pursuant to this license or otherwise and whether caused
by fire, theft, explosion, strikes, riots or any other cause whatsoever; and
(ii) injury to or death of any person in, about or around such parking spaces
or any parking areas or any vehicles parking therein or in proximity thereto
whether caused by firm, theft, assault, explosion, riot or any other Cause
whatsoever and Tenant hereby waives any claim for or in respect to the above
and Tenant further hereby agrees to indemnify, defend and hold harmless
Landlord from and against all claims or liabilities arising out of loss or
damage to property or injury to or death of persons, or both, relating to any
of the foregoing. Tenant shall not assign any of its rights hereunder and in
the event an attempted assignment is made, it shall be void. Landlord or its
agents shall have the right from time to time at Tenant's sole expense to
police all parking spaces for the Building to assure that Tenant and its
invitees are parking only in the areas designated by Landlord from time to time
for Tenant's use. Landlord shall have the right to tow away, at the expense of
the vehicle owner, any cars of Tenant and its invitees that do not park in
spaces designated for Tenant. Landlord shall also have the right to pursue
other rights and remedies available at law or in equity.
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20. SIGNAGE.
Tenant shall be granted the right up to 50% of the signage available on
the building and its monument. All signage shall be at Tenant's expense and
subject to Landlord's approval and obtainment by Tenant of a City of Phoenix
Sign Permit. Upon expiration or early termination of the Lease Tenant agrees
to remove any signage it installed and return the building to its original
condition.
21. BROKERAGE COMMISSION.
Landlord and Tenant agree that Colliers lliff Thorn (broker) is the
sole broker involved in this transaction and that a dual agency does exist.
The parties and their successors and assigns, each jointly and severally
approve this dual agency, and waive any dual agency or related claims against
Broker.
Landlord shall pay Colliers lliff Thorn a brokerage commission of five
percent (5%) of the gross lease consideration (total commission of $28,096.88).
Landlord further agrees to pay Broker per this schedule for any expansions that
occur in during the first year of the Lease Term or any renewal upon which may
be exercised. The Lease shall direct that Tenant's initial payments and
security deposit shall be assigned to Broker and made payable to Broker until
such time as the commission is paid in full, after which time the lease
payments shall be reassigned to the Owner. Broker shall have no obligation to
Tenant for this deposit. All Security Deposit obligations shall be Landlord's
sole liability.
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IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease as
of the date and year first above written.
LANDLORD TENANT:
4808 CORPORATION CAPITAL TITLE AGENCY, INC.
a Nevada corporation an Arizona corporation
By: /s/ By: /s/Donald R. Head
------------------------- -------------------------------
Its: Secretary-Treasurer Its: CEO
----------------------- -------------------------------
Landlord's Address: Tenant's Address:
2222 E. Camelback Road 4808 N. 22nd Street
Suite 200 Suite 200
Phoenix, Arizona 85016 Phoenix, Arizona 85016
(602) 954-2600
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EXHIBIT A
RULES AND REGULATIONS
1. No sidewalks, entrance, passages, courts, elevators,
vestibules, windows, doors, passageways, stairways, corridors or halls shall be
obstructed, covered or encumbered by Tenant or used for any purpose other than
ingress and egress to and from the Premises or the Complex and if the Premises
is situated on the ground floor of the Complex, Tenant shall further, at
Tenant's own expense, keep the sidewalks and curb directly in front of the
Premises clean and free from rubbish.
2. No awning or other projection shall be attached to the outside
walls or windows of the Complex. No curtains, blinds, shades, drapes or
screens shall be attached to or hung in, or used in connection with any window
or door of the Premises, without the prior written consent of Landlord. Such
awnings, projections, curtains, blinds, shades, drapes, screens and other
fixtures must be of a quality, type, design, color, materials and general
appearance approved by Landlord, and shall be attached in the manner approved
by Landlord. All electricity, fixtures hung in offices or spaces along the
perimeter of the Premises must be fluorescent, of a quality, type, bulb color,
size and general appearance approved by Landlord.
3. No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by Tenant on any part of the outside
or inside of the Premises or of the Complex, without the prior written consent
of Landlord which consent cannot be unreasonably withheld. In the event of the
violation of the foregoing by Tenant, Landlord may remove same without any
liability, and may charge the expense incurred by such removal to Tenant.
Interior signs on doors and directory tablet shall be inscribed, painted or
affixed for Tenant by Landlord at the expense of Tenant, and shall be of a
quality, quantity, type, design, color, size, style, composition, materials,
location and general appearance acceptable to Landlord.
4. No show cases or other articles shall be put in front of or
affixed to any part of the exterior of the Complex.
5. Water and restroom and other plumbing fixtures shall not be
used for any purposes other than those for which they are constructed, and no
sweepings, rubbish, rags or other substances shall be thrown therein.
6. Tenant shall not mark, paint, drill into or in any way deface
any part of the Premises or Complex. No boring, cutting or stringing of wires
shall be permitted, except with the prior written consent of Landlord, and as
Landlord may direct.
7. No animal or bird of any kind (except necessary seeing-eye
dogs) shall be brought into or kept in or about the Premises or Complex.
8. Tenant shall not make, or permit any unseemly or disturbing
noises or disturb or interfere with occupants of the building or those having
business with them. Tenant shall not throw anything out of the doors, windows
or skylights or down the passageways.
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9. Neither Tenant nor any of Tenant's agents, servants, employees,
contractors, visitors or licensees shall at any time bring or keep upon the
Premises any inflammable, combustible or explosive fluid, chemical or
substance.
10. No additional locks, bolts or mail slots of any kind shall be
placed upon any of the doors or windows by Tenant, nor shall any change be made
in existing locks or the mechanism thereof.
11. All removals, or the carrying in or out of any safes, freight,
furniture, fixtures, bulky matter or heavy equipment of any description must
take place during the hours which Landlord or its agent may determine from time
to time. Landlord reserves the right to prescribe the weight and position of
all safes, which must be placed upon thick plank strips to distribute the
weight. The moving of safes, freight, furniture, fixtures, bulky matter or
heavy equipment of any kind must be made upon previous notice to the Landlord
and in a manner and at times prescribed by him, and the persons employed by
Tenant for such work are subject to Landlord's prior approval.
12. Tenant shall not occupy or permit any portion of the Premises
to be occupied as an office that is not generally consistent with the character
and nature of all other tenants in the Complex, or is a use which conflicts
with any so-called "exclusive" then in favor of, or is for any use the same as
that stated in any percentage lease to, another Tenant of the Complex or a use
which would be in violation of law.
13. Landlord shall have the right to prohibit any advertising or
business conducted by Tenant referring to the Complex which, in Landlord's
opinion, tends to impair the reputation of the Complex or its desirability as a
first class building for offices and upon notice from Landlord, Tenant shall
refrain from or discontinue such advertising.
14. Tenant shall not use the name of the Complex for any purpose
other than as the address of the business to be conducted by Tenant in the
Premises, nor shall Tenant use any picture of the Complex in its advertising,
stationery or in any other manner without prior written permission of Landlord.
Landlord expressly reserves the right at any time to change said name without
in any manner being liable to Tenant therefor.
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EXHIBIT B
Work to Be Performed In or About the Premises
Landlord agrees to perform the following work in the Premises prior to
Tenant's occupancy.
1) Repaint the Premises in the existing or similar color.
2) Recarpet the Premises with Landlord's standard carpet, color
and pattern to be agreed on by Landlord and Tenant.
3) Landlord further agrees to complete construction and
installation of an elevator on or before September 30, 1996.
4) Landlord shall remove the wood panel on the front face of the
Premises, and on the walls facing the conference rooms, and
replace the wood with a painted building standard drywall
finish. [all interior]
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<PAGE> 1
PROMISSORY NOTE EXHIBIT 10.6
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
$150,000.00 01-05-1996 01-05-2001
- ----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any
particular loan or item.
- ----------------------------------------------------------------------------------------------------------------------
Borrower: PWCC, INC. Lender: Bank One, Arizona, NA
136 N MONTEZUMA STREET NORTHERN BUS BKG
PRESCOTT, AZ 86301 2150 S COUNTRY CLUB
MESA, AZ 85210
Principal Amount: $150,000.00 Interest Rate: 10.000% Date of Note: January 5, 1996
</TABLE>
PROMISE TO PAY. PWCC, INC. ("Borrower") promises to pay to Bank One, Arizona,
NA ("Lender"), or order, in lawful money of the United States of America,
the principal amount of One Hundred Fifty Thousand & 00/100 Dollars
($150,000.00), together with interest at the rate of 10.000% per annum on the
unpaid principal balance from January 5, 1996, until paid in full.
PAYMENT. Borrower will pay this loan in 60 payments of $3,187.05 each.
Borrower's first payment is due February 5, 1996, and all subsequent payments
are due on the same day of each month after that. Borrower's final payment will
be due on January 5, 2001, and will be for all principal and all accrued
interest not yet paid. Payments include principal and interest. Interest on
this Note is computed on a 365/365 simple interest basis; that is, by applying
the ratio of the annual interest rate over the number of days in a year, times
the outstanding principal balance, times the actual number of days the principal
balance is outstanding. Borrower will pay Lender at Lender's address shown
above or at such other place as Lender may designate in writing. Payments shall
be applied to accrued interest prior to application to reduce principal. Lender
shall have the right to apply payments to all other amounts due (including, but
not limited to, late charges and collection costs) prior to application to
interest or principal; Lender may determine the sequencing of application of
payments, and from time to time may change such sequencing without notice.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject
to refund upon early payment (whether voluntary or as a result of default),
except as otherwise required by law. Except for the foregoing, Borrower may
pay without penalty all or a portion of the amount owed earlier than it is
due. Early payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments under the
payment schedule. Rather, they will reduce the principal balance due and may
result in Borrower's making fewer payments.
LATE CHARGE. If a payment is 11 days or more late, Borrower will be charged
5.000% of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens:
(a) Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to perform promptly at
the time and strictly in the manner provided in this Note. (c) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect. (d) Borrower
becomes insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (e) Any creditor tries to take any of Borrower's property on
or in which Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (f) Any of the events described in
this default section occurs with respect to any guarantor of this Note. (g)
Lender in good faith deems itself insecure.
<PAGE> 2
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance of this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and legal expenses whether or not there
is a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services. If
not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Arizona. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Maricopa County, the State of Arizona. This Note shall be governed by
and construed in accordance with the laws of the Sate of Arizona.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers
to Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA, Keogh,
and trust accounts. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such account.
COLLATERAL. This Note is secured by a Deed of Trust dated January 5, 1996, to
a trustee in favor of Lender on real property located in YAVAPAI County, State
of Arizona, all the terms and conditions of which are hereby incorporated and
made a part of this Note.
FINAL EXPRESSION OF THE AGREEMENT. This Note together with the related loan
documents represents the final agreement between the parties, which may not be
contradicted by evidence of any alleged oral agreement.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly stated
in writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew, extend or modify this loan, from time to
time, or release any party or guarantor, or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
PWCC, INC.
By: /s/ Donald R. Head By: /s/ Theo F. Lamb
------------------------------ ---------------------------------
DONALD R. HEAD, President THEO F. LAMB, Secretary/Treasurer
Fixed Rate. Installment. LASERPRO(tm) Var. 3.13a(c) 1996 CFI Bankers
Service Group, Inc. All rights reserved. [AZ-D20F 3.13 P3.13 Generated by the
Customer Service System, LN]
<PAGE> 1
EXHIBIT 10.7
ASSUMTION AGREEMENT
For and in consideration of the following promises, Capital Title
Agency Inc., agrees with PWCC Inc. to assume and pay the obligations contained
in the promissory note attached hereto and made a part hereof as Exhibit A.
PWCC Inc. has deposited the $150,000 evidenced by Exhibit A in the
accounts of Capital Title Agency Inc. and accepts this assumption.
January 5, 1996
Capital Title Agency Inc.
By /s/ Donald R. Head
-----------------------------
Donald R. Head, President
PWCC Inc.
By /s/ Donald R. Head
-----------------------------
Donald R. Head, President
<PAGE> 1
EXHIBIT 10.8
CAPITAL TITLE GROUP, INC.
EMPLOYMENT AGREEMENT
NAME OF EMPLOYEE (HEREIN "EMPLOYEE"): DONALD R. HEAD
DATE: JUNE 1, 1996
INITIAL TERMINATION DATE: MAY 31, 2001
ANNUAL SALARY: $96,000 1ST YEAR
$150,000 2ND YEAR
PLUS 6% OF THE
PROFIT BEFORE TAX
POSITION(S): CHAIRMAN OF THE
BOARD; AND CHIEF
EXECUTIVE OFFICER
THIS AGREEMENT is entered into between Capital Title Group, Inc., a
Delaware corporation ("Employer"), and Employee for the following purposes and
upon the following conditions:
1. EMPLOYMENT. Employer hereby employs Employee as provided herein, and
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth. On the effective date, this Agreement supersedes all
prior agreements between Employer and Employee.
2. TERM. Subject to the provisions for termination as hereinafter
provided, the term of this Agreement shall begin on the date hereof and shall
terminate on the Initial Termination Date as provided above, unless extended to
a New Termination Date as provided herein, and subject to early termination as
provided below. This Agreement shall automatically be extended, on each
anniversary of the date hereof ("Anniversary") to a New Termination Date, which
date shall be ten (10) years after the date of such Anniversary, unless not less
than sixty (60) days prior to any such Anniversary, either (a) written notice of
termination is delivered to Employee by the Board, or (b) written notice of
resignation is given to the Board by Employee. In the event notice of
termination is delivered to Employee by the Board in accordance with the
preceding clause (a), this Agreement shall terminate on the New Termination Date
to which it was extended on the last preceding Anniversary or, if such notice is
given prior to the first Anniversary, on the Initial Termination Date.
3. EARLY TERMINATION. Except as provided in Paragraph 2, Employer may
not terminate this Agreement without cause. This Agreement may be terminated at
any time with
<PAGE> 2
cause, if: (i) Employee is convicted of the willful and intentional commission
of a crime (excluding traffic violations); (ii) if Employee is absent from work
due to health or other reasons for more than 180 consecutive days; or (iii) in
the reasonable judgment of the Board of Directors, Employee has materially
failed to perform his duties hereunder. In the event of any such termination,
Employee shall continue to render his services and shall be paid his regular
compensation up to the effective date of termination as set by resolution of the
Board of Directors, which shall not have retroactive effect.
4. COMPENSATION.
(a) For the first year of this Agreement, Employer shall pay Employee
an annual salary in the amount of $96,000.00, and in the second and each
succeeding year $150,000.00, payable in equal semi-monthly installments at the
Company's regular payroll periods. Notwithstanding any other provision in this
Agreement, in the event of any resignation or other termination of this
Agreement for any reason during a sixty (60) month period following a "Change in
Control of Employer" as defined herein, unless the operation of this paragraph
shall expressly and voluntarily be waived by the Employee in a written
instrument signed by the Employee specifically for that purpose, the
compensation required to be paid by Employer or Employee under this Agreement
shall continue to be paid as though this Agreement had not terminated until the
most recently established New Termination Date; provided, however, the foregoing
provision shall not apply to early termination of this Agreement upon the death
(which shall be governed by Paragraph 12), disability (which shall be governed
by clause (ii) of Paragraph 3), termination following a conviction for the
wilful and intentional commission of a crime (which shall be governed by clause
(i) of Paragraph 3) and upon retirement at or after the Employee's normal
retirement date. Any compensation required to be paid under this Paragraph
following the resignation of Employee or other termination of this Agreement as
hereinabove provided within sixty (60) months following any Change in Control of
Employer, shall be paid, in the sole discretion of Employee, either (i) in equal
semi-monthly installments as provided in this Paragraph as though no change in
the status of Employee under this Agreement had occurred, or (ii) in one lump
sum in an amount equal to the aggregate of all payments required to be made
hereunder.
(b) Additional compensation shall be paid to Employee annually in an
amount equal to six percent (6%) of the Employer's pre-tax net profit on all
company operations, calculated according to generally acceptable accounting
principles applicable to title insurance agencies consistently applied, prorated
in the first year of employment for the period remaining in the Employer's
fiscal year if less than twelve (12) months, such compensation to be determined
and paid within three (3) months following the end of each succeeding fiscal
year. Pretax profits for purposes of this Agreement shall be net taxable income
attributable to operations as disclosed by Employer's federal income tax returns
and related internal records, but exclusive of bonuses, dividends or other
remuneration to stockholders, directors or executive committees. Copies of the
Employer's federal tax returns shall be furnished to Employee when received by
the Employer's accounting firm in final form. At the Employer's option,
estimated compensation may be paid in successive fiscal years with appropriate
adjustments spread over twelve (12) month periods in the event of any under or
over estimated payments made pursuant to this paragraph.
2
<PAGE> 3
(c) "Change in Control of Employer" shall be deemed to have occurred
when any of the following events shall occur:
(i) any person, excluding existing shareholders as of the date of
this Agreement, shall acquire, directly or indirectly,
beneficial ownership of equity securities of Employer
representing in excess of twenty percent (20%) of the
outstanding shares of any class of equity securities of
Employer (for purposes hereof, "beneficial ownership" shall
have the meaning prescribed in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934); or
(ii) any person who has acquired, directly or indirectly,
beneficial ownership of equity securities of Employer (as
defined in the preceding clause) representing in excess of
twenty percent (20%) of the outstanding shares of any class of
equity securities of Employer shall seek to nominate or seek
to cause to be elected to the Board of Directors, any person
who has not been nominated for election to the Board by a
majority of the then incumbent directors of Employer.
5. DUTIES. Employee is engaged in the Position(s) listed above to
discharge the normal duties associated with said Position(s), and shall be
vested with such authority as provided in the Bylaws, as specifically directed
by the Board of Directors of Employer or officers having authority over Employee
under the Bylaws ("Senior Officers"), or pursuant to the general operating
policies adopted by the Board of Directors of Employer. If elected to do so by
the shareholders, Employee will serve on the Board of Directors during the term
of this Agreement, and will serve in such capacity without further compensation
beyond that specified above, unless otherwise determined by the Board of
Directors. He will keep the Board of Directors and Senior Officers fully
informed, will on a regular schedule (at least quarterly) present detailed
financial information and business plans to the Board for approval and adoption,
and thereafter conscientiously pursue their accomplishment.
6. EXTENT OF SERVICE. Employee agrees to devote all of his time,
attention, and energies to the business of Employer; provided, however, that
Employee may pursue passive investment activities not competing with, or in
conflict with his duties to, Employer.
7. WORKING FACILITIES AND STAFF. Employer shall pay for an office,
administrative staff, telecommunications and computer equipment and such other
facilities, equipment and services, suitable to Employee's position and adequate
for the performance of his duties.
8. BUSINESS EXPENSES. Employee is authorized to incur reasonable
expenses for promoting the business of Employer, including expenses for
entertainment, travel, and similar items. Employer will reimburse Employee for
all such expenses upon presentation by Employee of an itemized account of such
expenditures. Such expenditures shall be within approved budget items for such
expense. In the event of any subsequent disallowance by the Internal Revenue
Service of such reimbursed expenses as deductions on Employer's income tax
returns, such disallowed expense shall be treated as an advance of future sums
to be paid by Employer to Employee under this Agreement, except in those
instances where such expenses are specifically authorized or directed by
Employer prior to Employee's expenditure therefor, which expenses shall not be
chargeable to Employee.
3
<PAGE> 4
9. AUTOMOBILE EXPENSE ALLOWANCE. Employer shall pay Employee, in
addition to his regular salary, an automobile expense allowance in the amount of
$800 per month, payable semi-monthly.
10. MEDICAL EXPENSES. During the term of this Agreement, Employer shall
provide a group health plan for the coverage of the medical expenses of Employee
and his immediate family dependents, with such plan to provide for the payment
of medical expenses in amounts and under terms as are reasonable and customary
for plans for businesses such as Employer.
11. VACATIONS. Employee shall be entitled in each year of this
Agreement to a vacation of three weeks during which time his compensation shall
be paid in full. Employee may direct that unused vacation time be carried over
from the year to which it relates to a following year and be accumulated for
Employee's use in such year or subsequent years, or that he be paid for any
unused vacation time at the end of any year. In addition, Employee shall be
entitled to normally established paid holidays and other employee benefit
programs, including, but not limited to, sick leave.
12. DEATH DURING EMPLOYMENT. If Employee dies during the term of this
employment, Employer shall pay to the estate of Employee the compensation,
including any bonus, which would otherwise be payable to Employee up to the end
of the month in which his death occurs and will continue to make payments of
such compensation to his estate for a period of three (3) years after Employee's
death.
13. RETURN OF BOOKS AND PAPERS. Upon the termination of Employee's
employment with Employer for any reason, Employee shall deliver promptly to
Employer all manuals and memoranda; all cost, pricing and other financial data;
all customer information; all other written or printed materials which are the
property of the Company (and any copies of them); and all other materials which
may contain confidential information relating to the business of Employer, which
Employee may then have in his possession whether prepared by Employee or not.
14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered mail to
his residence in the case of Employee, or to its principal office in the case of
Employer.
15. WAIVER OF BREACH. The waiver by Employer of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.
16. ASSIGNMENT. The rights and obligations of Employer under this
Agreement shall inure to the benefit of, and shall be binding upon, the
successor and assigns of Employer.
17. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
18. PARAGRAPH HEADINGS. Paragraph headings have been chosen and used
for convenience in referring to the various sections and paragraphs of the
Agreement and are not
4
<PAGE> 5
to be accorded by meaning or significance beyond such use in any interpretation
of any provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 1st
day of June, 1996.
CAPITAL TITLE GROUP, INC.
By: /s/Andrew A. Johns
------------------------------------
President
EMPLOYER
/s/Donald R. Head
---------------------------------------
DONALD R. HEAD
EMPLOYEE
5
<PAGE> 1
EXHIBIT 10.9
CAPITAL TITLE GROUP, INC
EMPLOYMENT AGREEMENT
Name of Employee (herein "Employee"): ANDREW A. JOHNS
Date: June 1, 1996
Initial Termination Date: May 31, 2001
Annual Salary: $ 72,000 1st year
$114,000 2nd year
plus 4% of the profit
before tax
Position(s): President
THIS AGREEMENT is entered into between Capital Title Group, Inc., a
Delaware corporation ("Employer"), and Employee for the following purposes and
upon the following conditions:
1. EMPLOYMENT. Employer hereby employs Employee as provided herein, and
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth. On the effective date, this Agreement supersedes all
prior agreements between Employer and Employee.
2. TERM. Subject to the provisions for termination as hereinafter
provided, the term of this Agreement shall begin on the date hereof and shall
terminate on the Initial Termination Date as provided above, unless extended to
a New Termination Date as provided herein, and subject to early termination as
provided below. This Agreement shall automatically be extended, on each
anniversary of the date hereof ("Anniversary") to a New Termination Date, which
date shall be ten (10) years after the date of such Anniversary, unless not less
than sixty (60) days prior to any such Anniversary, either (a) written notice of
termination is delivered to Employee by the Board, or (b) written notice of
resignation is given to the Board by Employee. In the event notice of
termination is delivered to Employee by the Board in accordance with the
preceding clause (a), this Agreement shall terminate on the New Termination Date
to which it was extended on the last preceding Anniversary or, if such notice is
given prior to the first Anniversary, on the Initial Termination Date.
<PAGE> 2
3. EARLY TERMINATION. Except as provided in Paragraph 2, Employer may
not terminate this Agreement without cause. This Agreement may be terminated at
any time with cause, if: (i) Employee is convicted of the willful and
intentional commission of a crime (excluding traffic violations); (ii) if
Employee is absent from work due to health or other reasons for more than 180
consecutive days; or (iii) in the reasonable judgment of the Board of Directors,
Employee has materially failed to perform his duties hereunder. In the event of
any such termination, Employee shall continue to render his services and shall
be paid his regular compensation up to the effective date of termination as set
by resolution of the Board of Directors, which shall not have retroactive
effect.
4. COMPENSATION.
(a) For the first year of this Agreement, Employer shall pay Employee
an annual salary in the amount of $72,000.00, and in the second and each
succeeding year $114,000.00, payable in equal semi-monthly installments at the
Company's regular payroll periods. Notwithstanding any other provision in this
Agreement, in the event of any resignation or other termination of this
Agreement for any reason during a sixty (60) month, period following a "Change
in Control of Employer" as defined herein, unless the operation of this
paragraph shall expressly and voluntarily be waived by the Employee in a written
instrument signed by the Employee specifically for that purpose, the
compensation required to be paid by Employer or Employee under this Agreement
shall continue be paid as though this Agreement had not terminated until the
most recently established New Termination Date; provided, however, the foregoing
provision shall not apply to early termination of this Agreement upon the death
(which shall be governed by Paragraph 12), disability (which shall be governed
by clause (ii) of Paragraph 3), termination following a conviction for the
wilful and intentional commission of a crime (which shall be governed by clause
(i) of Paragraph 3) and upon retirement at or after the Employee's normal
retirement date. Any compensation required to be paid under this Paragraph
following the resignation of Employee or other termination of this Agreement as
hereinabove provided within sixty (60) months following any Change in Control of
Employer, shall be paid, in the sole discretion of Employee, either (i) in equal
semi-monthly installments as provided in this Paragraph as though no change in
the status of Employee under this Agreement had occurred, or (ii) in one lump
sum in an amount equal to the aggregate of all payments required to be made
hereunder.
(b) Additional compensation shall be paid to Employee annually in an
amount equal to four percent (4%) of the Employer's pre-tax net profit on all
company operations, calculated according to generally acceptable accounting
principles applicable to title insurance agencies consistently applied, prorated
in the first year of employment for the period remaining in the Employer's
fiscal year if less than twelve (12) months, such compensation to be determined
and paid within three (3) months following the end of each succeeding fiscal
year. Pretax profits for purposes of this Agreement shall be net taxable income
attributable to operations as disclosed by Employer's federal income tax returns
and related internal records, but exclusive of bonuses, dividends or other
remuneration to stockholders, directors or executive committees. Copies of the
Employer's federal tax returns shall be furnished to Employee when received by
the
2
<PAGE> 3
Employer's accounting firm in final form. At the Employer's option, estimated
compensation may be paid in successive fiscal years with appropriate adjustments
spread over twelve (12) month periods in the event of any under or over
estimated payments made pursuant to this paragraph.
(c) "Change in Control of Employer" shall be deemed to have occurred
when any of the following events shall occur:
(i) any person, excluding existing shareholders as of the date of
this Agreement, shall acquire, directly or indirectly,
beneficial ownership of equity securities of Employer
representing in excess of twenty percent (20%) of the
outstanding shares of any class of equity securities of
Employer (for purposes hereof, "beneficial ownership" shall
have the meaning prescribed in Rule 13d-3 promulgated under
the Securities Exchange Act of 1934); or
(ii) any person who has acquired, directly or indirectly,
beneficial ownership of equity securities of Employer (as
defined in the preceding clause) representing in excess of
twenty percent (20%) of the outstanding shares of any class of
equity securities of Employer shall seek to nominate or seek
to cause to be elected to the Board of Directors, any person
who has not been nominated for election to the Board by a
majority of the then incumbent directors of Employer.
5. DUTIES. Employee is engaged in the Position(s) listed above to
discharge the normal duties associated with said Position(s), and shall be
vested with such authority as provided in the Bylaws, as specifically directed
by the Board of Directors of Employer or officers having authority over Employee
under the Bylaws ("Senior Officers"), or pursuant to the general operating
policies adopted by the Board of Directors of Employer. If elected to do so by
the shareholders, Employee will serve on the Board of Directors during the term
of this Agreement, and will serve in such capacity without further compensation
beyond that specified above, unless otherwise determined by the Board of
Directors. He will keep the Board of Directors and Senior Officers fully
informed, will on a regular schedule (at least quarterly) present detailed
financial information and business plans to the Board for approval and adoption,
and thereafter conscientiously pursue their accomplishment.
6. EXTENT OF SERVICE. Employee agrees to devote all of his time,
attention, and energies to the business of Employer; provided, however, that
Employee may pursue passive investment activities not competing with, or in
conflict with his duties to, Employer.
7. WORKING FACILITIES AND STAFF. Employer shall pay for an office,
administrative staff, telecommunications and computer equipment and such other
facilities, equipment and services, suitable to Employee's position and adequate
for the performance of his duties.
8. BUSINESS EXPENSES. Employee is authorized to incur reasonable
expenses for promoting the business of Employer, including expenses for
entertainment, travel, and similar
3
<PAGE> 4
items. Employer will reimburse Employee for all such expenses upon presentation
by Employee of an itemized account of such expenditures. Such expenditures shall
be within approved budget items for such expense. In the event of any subsequent
disallowance by the Internal Revenue Service of such reimbursed expenses as
deductions on Employer's income tax returns, such disallowed expense shall be
treated as an advance of future sums to be paid by Employer to Employee under
this Agreement, except in those instances where such expenses are specifically
authorized or directed by Employer prior to Employee's expenditure therefor,
which expenses shall not be chargeable to Employee.
9. AUTOMOBILE EXPENSE ALLOWANCE. Employer shall pay Employee, in
addition to his regular salary, an automobile expense allowance in the amount of
$800 per month, payable semi-monthly.
10. MEDICAL EXPENSES. During the term of this Agreement, Employer shall
provide a group health plan for the coverage of the medical expenses of Employee
and his immediate family dependents, with such plan to provide for the payment
of medical expenses in amounts and under terms as are reasonable and customary
for plans for businesses such as Employer.
11. VACATIONS. Employee shall be entitled in each year of this
Agreement to a vacation of three weeks during which time his compensation shall
be paid in full. Employee may direct that unused vacation time be carried over
from the year to which it relates to a following year and be accumulated for
Employee's use in such year or subsequent years, or that he be paid for any
unused vacation time at the end of any year. In addition, Employee shall be
entitled to normally established paid holidays and other employee benefit
programs, including, but not limited to, sick leave.
12. DEATH DURING EMPLOYMENT. If Employee dies during the term of this
employment, Employer shall pay to the estate of Employee the compensation,
including any bonus, which would otherwise be payable to Employee up to the end
of the month in which his death occurs, and will continue to make payments of
such compensation to his estate for a period of three (3) years after Employee's
death.
13. RETURN OF BOOKS AND PAPERS. Upon the termination of Employee's
employment with Employer for any reason, Employee shall deliver promptly to
Employer all manuals and memoranda; all cost, pricing and other financial data;
all customer information; all other written or printed materials which are the
property of the Company (and any copies of them); and all other materials which
may contain confidential information relating to the business of Employer, which
Employee may then have in his possession whether prepared by Employee or not.
14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if sent by registered mail to
his residence in the case of Employee, or to its principal office in the case of
Employer.
4
<PAGE> 5
15. WAIVER OF BREACH. The waiver by Employer of a breach of any
provision of this Agreement by Employee shall not operate or be construed as a
waiver of any subsequent breach by Employee.
16. ASSIGNMENT. The rights and obligations of Employer under this
Agreement shall inure to the benefit of, and shall be binding upon, the
successor and assigns of Employer.
17. ENTIRE AGREEMENT. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
18. PARAGRAPH HEADINGS. Paragraph headings have been chosen and used
for convenience in referring to the various sections and paragraphs of the
Agreement and are not to be accorded by meaning or significance beyond such use
in any interpretation of any provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 1st
day of June, 1996.
CAPITAL TITLE GROUP, INC.
By: /s/ Donald R. Head
---------------------------------------------
CEO
EMPLOYER
/s/Andrew A. Johns
---------------------------------------------
ANDREW A. JOHNS
EMPLOYEE
5
<PAGE> 1
EXHIBIT 10.10
CAPITAL TITLE AGENCY, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 17 day of May, 1996, by and between
CAPITAL TITLE AGENCY, INC., an Arizona corporation ("Company"), and JAMES A.
CLIFFORD, ("Employee").
WITNESSETH:
WHEREAS, Employee has broad-based experience in the title insurance
agency industry, and Company desires to employ him and to assure itself of
continued availability of his services for the Company's benefit, and Employee
is willing to accept such employment and to perform such services, all in
accordance with the terms herein contained.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Employee, and
Employee agrees to be hired by the Company, to become its President, in charge
of general business operations and development for Maricopa County, to work
under the direct supervision and authority of Andrew Johns, and to perform such
duties according to the policies and directives as communicated to Employee from
time to time during the period of such employment. As President, Employee's
duties shall be limited to Company operations in Maricopa County, including but
not limited to planning, organizing and administering the daily sales, escrow
closings and title operations, hiring and firing employees and all reasonable
and incidental management activities relating to the Company's business in such
County.
2. EXTENT OF SERVICES. During the employment period, except for illness
and for reasonable vacations, Employee shall devote his full-time attention,
skill and efforts to the duties under this "Agreement."
3. TERM. The employment period shall be for a term of three (3) years
commencing not more than thirty (30) days following notification by the Company
that the contingencies of paragraph 16 have been met.
4. COMPENSATION. For performing the services required to be performed
by this Agreement during the employment period, Employee shall be compensated by
the Company as follows:
A. A fixed salary at the rate of One Hundred Twenty Thousand
Dollars ($120,000) per year, payable twice monthly in
accordance with normal Company policy.
B. Additional compensation equal to five percent (5%) of the
Company's pre-tax net profit on operations in Maricopa County
calculated according to generally acceptable accounting
principles applicable to title insurance agencies consistently
<PAGE> 2
applied, prorated in the first year of employment for the
period remaining in the Company's fiscal year if less than
twelve (12) months, such compensation to be determined and
paid within three months following the end of each succeeding
fiscal year. Pre-tax profits for purposes of this Agreement
shall be net taxable income attributable to operations in
Maricopa County as disclosed by the Company's federal income
tax returns and related internal records allocating income and
expenses separately as to the respective counties in which the
Company shall be conducting its Arizona business, but
exclusive of bonuses, dividends or other remuneration to
stockholders, directors or executive committees. Copies of the
Company's federal tax returns and records of results in each
county of operation shall be furnished to Employee when
received by the Company's accounting firm in final form. At
the Company's option, estimated compensation may be paid in
successive fiscal years with appropriate adjustments spread
over twelve (12) month periods in the event of any under or
over estimated payments made pursuant to this paragraph.
C. For purposes of subparagraph "B," Company operations shall
include revenues derived from subsidiaries or related title
business generated on Maricopa County real estate
transactions.
D. Reimbursement for all necessary and pre-approved travel and
entertainment expenses incurred by Employee on behalf of the
Company, not to exceed Two Thousand Dollars ($2,000) per
month, which expenses shall be incurred by the Employee and
reimbursed by the Company in accordance with normal Company
practices and budget or other restrictions that may be imposed
by the Board of Directors.
5. SUPPLEMENTAL BENEFITS. During the term of this agreement, Employee
shall receive health insurance, vacation and other Employee benefits pursuant to
the terms and as set forth in the Company's Employee Handbook initially
published on October 1, 1993, as amended, receipt of a copy of which is hereby
acknowledged by Employee.
6. DISABILITY AND INCAPACITY. If Employee shall be unable to perform
his duties by reason of disability or impairment of health for at least ninety
(90) consecutive calendar days, Company shall have the right to terminate this
Agreement by giving written notice to that effect, provided that at the time
such notice is given such disability or impairment is still continuing.
7. DEATH. In the event of Employee's death while employed by Company,
this Agreement shall terminate at the end of the calendar month in which
Employee's death occurs, and his legal representative shall be entitled to
receive the compensation due through the last day of the calendar month in which
his death shall have occurred, and any other amounts which may have accrued to
Employee for periods prior to such date.
8. COMPENSATION ON TERMINATION.
A. Prior to the end of the employment period of this Agreement,
if the Company shall terminate employment of the Employee
without "just cause" as hereinafter
2
<PAGE> 3
defined, or if the Employee shall terminate his employment for
"good reason" as hereinafter defined, then the Company shall
pay to the Employee his aggregate compensation, and such other
amounts as shall be necessary to continue any supplemental
Employee benefits and prerequisites of office which were
provided the Employee prior to such termination. In the event
such benefits or prerequisites of office are not continuable,
the Employee shall be paid their cash equivalent. All payments
hereunder shall be payable during the remaining term of this
Agreement as if it had not been terminated. Notwithstanding
the foregoing, Employee shall have a duty to mitigate his
damages in the event of any such termination without good
cause and, to the extent his reasonable efforts generate or
could have generated replacement income during the remaining
term of this Agreement, such income shall be credited to
Company against the obligation to pay additional salary and
benefits pursuant to this paragraph. Company may withhold
payments for such period that Employee refuses to render all
reasonable or necessary cooperation to enable Company (1) to
determine the extent of any replacement income that may have
been paid or may be payable to Employee during which time
Company may be obligated to continue paying compensation after
termination pursuant to this paragraph, and (2) to determine
whether Company has from time to time exerted reasonable
efforts to obtain replacement income.
B. In the event of Employee's death or termination due to
disability, or if the Company shall terminate the employment
of the Employee for "just cause", or if the Employee shall
terminate his employment without "good reason", then the
Company shall pay the Employee his salary to the effective
date of such termination, and any accrued vacation not used,
but no added compensation as otherwise provided under
paragraph 4.B shall be deemed earned in any of such events.
C. As used herein, "just cause" shall mean (i) a material breach
by the Employee of this Agreement, (ii) incapacity of the
Employee by reason of health or incompetence to perform his
duties for ninety (90) consecutive calendar days, or (iii)
dishonesty, theft, embezzlement or conviction of a felony. As
used herein, "good reason" shall mean a material breach by the
Company of this Agreement including but not limited to a
material change in Employee's duties as President (Maricopa
County Operations) of the Company.
9. ASSIGNMENT. The rights and obligations of the Company hereunder
shall inure to the benefit of, and be binding upon, the Company and any other
corporation or entity into which the Company shall be merged, or to which
substantially all of the assets of the Company shall be transferred and such
other corporation or entity shall thereupon be deemed the "Company" hereunder.
The rights and obligations of the Employee hereunder shall not be assignable
except as to compensation earned but not paid when due.
3
<PAGE> 4
10. PROPRIETARY PROTECTION.
A. NON-COMPETITION. At all times while employed by Company, and
for a period of one (1) year after the date on which the
Employee ceases to be actively employed by the Company, the
Employee shall not compete in any way with the business of the
Company anywhere within Maricopa County, Arizona, whether
directly or indirectly, as an employee, agent, independent
contractor, owner, or otherwise. In addition, during such one
(1) year period, the Employee shall not directly or indirectly
enter into or in any manner take part in any other business or
entity that competes with the Company.
B. CONFIDENTIALITY. At all times while employed by Company, and
continuing after termination of such relationship without
limitation as to time, the Employee shall not directly or
indirectly use or disclose to others any confidential or
proprietary information or trade secrets of the Company. For
the purpose of this Agreement, confidential or proprietary
information includes all information regarding the Company,
whether disclosed by Company or originated by Employee while
employed by the Company, including, without limitation,
Company's policies and procedures, Company's suppliers and
supply information, Company's customer lists and customer
information (whether the customer is a past, present or
prospective customer), pricing, sales and marketing
information, financial and technical information,
manufacturing processes, inventions and know-how. Employee
acknowledges that all trade secrets, inventions, know-how, and
all other information described in this paragraph developed by
Employee during the course of employment belongs to Company.
C. NON-PIRACY OF EMPLOYEES. Employee recognizes that Company's
other Employees are a valuable resource of the Company.
Accordingly, Employee agrees that for a period of one (1) year
after the date on which the Employee ceases to be actively
employed by the Company, Employee will not, alone or in
conjunction with others, solicit, induce, or recruit any
Employee of the Company to leave the Company's employment.
Employee shall never, at any time, attempt to induce another
Employee of Company to violate a contract of employment for a
specified term of years.
D. CUSTOMER ANTI-PIRACY. Employee agrees that for a period of six
(6) months after the date on which Employee ceases to be
actively employed by the Company, Employee will not directly
or indirectly in any capacity whatsoever, either as an
Employee, officer, director, stockholder, proprietor, partner,
joint venturer, consultant, or otherwise, (a) induce any
customer (past or present) to patronize any company that is in
competition with the Company's business; (b) canvass, solicit,
or accept any similar business from any past or present
customer of the Company; or (c) request or advise any past or
present customer of the Company to withdraw, curtail, or
cancel its business with the Company.
E. EMPLOYEE ACKNOWLEDGEMENT OF FAIRNESS. Employee acknowledges
and agrees that Employee's services to the Company are of a
special character with unique
4
<PAGE> 5
value to the Company, and that the restrictive covenants set
forth in this Agreement are reasonable, fair and valid in
scope or activity, duration, territory, and in all other
respects.
F. SEVERABILITY AND REFORMATION. If any court of competent
jurisdiction determines that any of the restrictive covenants
in this Agreement, or any part thereof, is or are invalid or
unenforceable, the remainder of the restrictive covenants
shall not thereby be affected and shall be given full effect,
without regard to invalid portions. If any of the provisions
of this paragraph should ever be deemed to exceed the
temporal, geographic, or occupational limitations permitted by
applicable laws, those provisions shall be and are hereby
reformed to the maximum temporal, geographic, or occupational
limitations permitted by law. In any litigation concerning
this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees incurred.
G. BREACH OF OBLIGATIONS BY EMPLOYEE. In the event of a breach or
threatened breach by the Employee of the obligations set forth
in subparagraphs A through D above, the Company shall be
entitled to apply to any appropriate court for an injunction
restraining the Employee; provided, however, that this
paragraph shall not be construed as prohibiting the Company
from pursuing any other available remedies for such breach or
threatened breach including, but not limited to, the recovery
of damages from the Employee.
H. BREACH BY THE COMPANY. In the event the Company terminates
Employee without just cause, subparagraph "A" shall not be
enforceable, however, in any event, all other subparagraphs of
this section shall remain fully enforceable.
11. OPTION TO PURCHASE STOCK OF PUBLIC COMPANY.
(a) Contingent upon completion of the merger and funding of net
less than $500,000 through the private placement offering
described in paragraph 17, Company shall cause the Public
Company to grant an option in favor of Employee, subject to
the conditions set forth below, to purchase shares of the
common stock of such Public Company.
(b) All shares purchased pursuant to such option shall be for
investment and shall contain such restrictions and/or
limitations on resale or other disposition as contained in the
share certificates issued pursuant to the private-placement
offering described in paragraph 17.
(c) The purchase price for the shares to be purchased shall be
equal to the price received by the Public Company pursuant to
the private-placement offering; provided, however, that in no
event shall the option price be greater than any option
granted to Donald R. Head and Andrew Johns. Company estimates
that shares may be sold through the private-placement offering
at One Dollar ($1.00) per share, although market conditions at
the time of sale may result in prices higher or lower as the
Public Company shall deem to be in its best interests.
5
<PAGE> 6
(d) The number of shares granted to Employee shall be an amount
equal to sixty-six percent (66%) of the number of option
shares granted to Donald R. Head.
(e) All other terms of such option shall be not less favorable
than the option granted to Donald R. Head.
12. AGREEMENT. The entire agreement of the parties is herein written
fully and supersedes any prior agreement between the parties hereto, and the
parties hereto are not bound by any agreements, understandings, conditions or
inducements otherwise than are expressly set forth and stipulated hereunder.
13. NOTICES. All notices required to be sent pursuant to the terms of
this Agreement shall be sent by first class mail, postage prepaid, to the
parties hereto at the following addresses, or such other addresses as they may
hereafter designate in writing:
COMPANY:
CAPITAL TITLE AGENCY, INC.
Attention: Donald R. Head
138 North Montezuma
Prescott, Arizona 86301
EMPLOYEE:
JAMES A. CLIFFORD
10148 Pershing Avenue
Scottsdale, Arizona 85260
14. ATTORNEY FEES. In the event of any controversy, claim or dispute
between the parties affecting or relating to the subject matter of performance
of this Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party all of its reasonable attorney fees.
15. GOVERNING LAW. This Agreement shall be construed both to as
validity and performance, and enforced in accordance with and governed by the
laws of the State of Arizona.
16. CONTINGENCY. This Agreement shall not become legally binding on
either party until such time that the Company has (a) completed a reverse merger
into a Public Company, (b) received a minimum of $500,000 in operating capital
through a private-placement offering of its stock, and (c) completed both such
requirements by not later than the 1st day of July, 1996.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
as of the day above written.
COMPANY: EMPLOYEE:
CAPITAL TITLE AGENCY, INC. /s/James A. Clifford
--------------------------
JAMES A. CLIFFORD
By /s/Donald R. Head
-------------------------------
Its Chairman
------------------------------
7
<PAGE> 1
EXHIBIT 10.11
CAPITAL TITLE AGENCY, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 22nd day of July, 1996, by and
between CAPITAL TITLE AGENCY, INC. an Arizona Corporation ("Company"), and JAMES
P. STAMAS, ("Employee").
WITNESSETH:
WHEREAS, Employee has broad-based experience in the title insurance
agency industry, and Company desires to employ him and to assure itself of
continued availability of his services for the Company's benefit, and Employee
is willing to accept such employment and to perform such services, all in
accordance with the term herein contained.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties agree as
follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Employee, and
Employee agrees to be hired by the Company, to become its Executive Vice
President/General Counsel for general business operations for Maricopa County,
Arizona, to work under the direct supervision and directives of James A.
Clifford and Nick Velimirovich, and to perform such duties according to the
policies and directives as communicated to employee from time to time during the
period of such employment. As Executive Vice President/General Counsel
Employee's duties shall be limited to Company operations in Maricopa County,
unless otherwise directed, and shall be as follows:
Third ranking officer of the Company's operations in Maricopa County, reporting
to and being supervised by Jim Clifford and Nick Velimirovich and such other
representatives as may be designated by the Board of Directors from time to
time. Primary responsibility shall be to serve as General Legal Counsel and to
discharge the usual and customary duties relating thereto and such incidental
duties as assigned by higher ranking representatives of the Company from time to
time, including, but not necessarily limited to:
(a) Supervisor in charge of the Legal Department.
(b) Interim Supervisor (Chief Title Officer) of the Title Department
with responsibility for technical and motivational training of Title Department
employees.
(c) Training suitable replacements for Chief Title Officer position.
(d) Supervisor of the Trust Department, including Builder's Services
Division and Builder's Services representatives.
<PAGE> 2
2. EXTENT OF SERVICES. During the employment period, except for illness
and for reasonable vacations, Employee shall devote his full-time attention,
skill and efforts to the duties under this "Agreement".
3. TERM. The employment period shall be for a term of three (3) years
following the date of this agreement.
4. COMPENSATION. For performing the services required to be performed
by this Agreement during the employment period, Employee shall be compensated by
the Company as follows:
A. A fixed salary at the rate of Seventy-Five Thousand Dollars
($75,000) per year, payable twice monthly in accordance with normal company
policy.
B. Reimbursement for all necessary and pre-approved travel and
entertainment expenses incurred by Employee on behalf of the Company, not to
exceed Seven Hundred Fifty Dollars ($750) per month, which expenses shall be
incurred by the Employee and reimbursed by the Company in accordance with normal
Company practices and budget, or other restrictions that may be imposed by The
company or its Board of Directors.
C. Employer is aware that for a period of nine (9) months following the
date of Employee's written resignation from United Title Agency of Arizona,
Inc., Employee has agreed to not directly or indirectly influence or advise any
other person to employ or solicit for employment or leave the service of United
Title Agency of Arizona, Inc. Employer acknowledges that employee is not being
compensated for or encouraged to breach the covenants any previous employment
agreement(s).
5. SUPPLEMENTAL BENEFITS. During the term of this agreement, employee
shall receive health insurance, vacation and other Employee benefits pursuant to
the terms and as set forth in the Company's Employee Handbook initially
published on October 1, 1993, as amended, receipt of a copy of which is hereby
acknowledged by Employee.
6. DISABILITY AND INCAPACITY. If Employee shall be unable to perform
his duties by reason of disability or impairment of health for at least ninety
(90) consecutive calendar days, Company shall have the right to terminate this
Agreement by giving written notice to that effect, providing that at such time
such notice is given such disability or impairment is still continuing.
7. DEATH. In the event of Employee's death while employed by Company,
this Agreement shall terminate at the end of the Calendar month in which
Employee's death occurs, and his legal representative shall be entitled to
receive the compensation due through the last day of the calendar month in which
his death shall have occurred, and any other amounts which may have accrued to
Employee for periods prior to such date.
2
<PAGE> 3
8. COMPENSATION ON TERMINATION
A. Prior to the end of the employment period of this Agreement, if the
Company shall terminate employment of the employee without "just cause" as
hereinafter defined, or if Employee shall terminate his employment for "good
reason" as hereinafter defined, then the Company shall pay to the Employee his
aggregate compensation, and other such amounts as shall be necessary to continue
any supplemental Employee benefits and prerequisites of office which are
provided the Employee prior to such termination. In the event such benefits or
prerequisites of office are not continuable, the Employee shall be paid their
cash equivalent. All payments hereunder shall be payable during the remaining
term of this Agreement as if it had not been terminated. Notwithstanding the
foregoing, Employee shall have a duty to mitigate his damages in the event his
reasonable efforts generate or could have generated replacement income during
the remaining term of this Agreement, such income shall be credited to the
Company against the obligation to pay additional salary and benefits pursuant to
this paragraph. Company may withhold payments for such period that Employee
refuses to render all reasonable or necessary cooperation to enable Company (1)
to determine the extent of any replacement income that may have been paid or may
be payable to Employee during which time Company may be obligated to continue
paying compensation after termination pursuant to this paragraph, and (2) to
determine whether Company has from time to time exerted reasonable efforts to
obtain replacement income.
B. In the event of employee's death or termination due to disability,
or if the Company shall terminate the employment of the Employee for "just
cause", or if the Employee shall terminate his employment without "good reason",
then the Company shall pay the Employee his salary to the effective date of his
termination, and any accrued vacation not used, but no added compensation as
otherwise provided under paragraph 4.B shall be deemed earned in any such
events.
C. As used herein, "just cause" shall mean (i) a material breach by the
Employee of this Agreement, (ii) incapacity of the Employee by reason of health
or incompetence to perform his duties for ninety (90) consecutive calendar days,
or (iii) dishonesty, theft, embezzlement or conviction of a felony. As used
herein, "good reason" shall mean a material breach by the Company of this
Agreement including but not limited to a material change in Employee's duties as
Executive Vice President/General Counsel (Maricopa County operations) of the
Company.
9. ASSIGNMENT. The rights and obligations of the Company hereunder
shall inure to the benefit of, and be binding upon, the Company and any other
corporation or entity into which the Company shall be merged, or to which
substantially all of the assets of the Company shall be transferred and such
other corporation or entity shall thereupon be deemed the "Company" hereunder.
The rights and obligations of the Employee hereunder shal1 not be assignable
except as to compensation earned but not paid when due.
10. PROPRIETARY PROTECTION.
A. NON-COMPETITION. At all times while employed by the Company, and for
a period of one (1) year after the date on which the Employee ceases to be
actively employed by the Company, the Employee shal1 not compete in any way,
directly or indirectly, with the
3
<PAGE> 4
business of the Company anywhere within Maricopa County, Arizona, as an
employee, agent, independent contractor, owner, consultant, or otherwise. In
addition, during such one ( 1) year period, the Employee shall not directly or
indirectly enter in or in any manner take part in any other business or entity
that competes with the Company.
B. CONFIDENTIALITY. At all times while employed by Company, and
continuing after termination of such relationship without limitation as to time,
the Employee shall not directly or indirectly use or disclose to others any
confidential or proprietary information or trade secrets of the Company. For the
purpose of this Agreement, confidential or proprietary information includes all
information regarding the Company, whether disclosed by Company or originated by
Employee while employed by the Company, including, without limitation, Company's
policies and procedures, Company's suppliers and supply information, Company's
customer lists and customer information (whether the customer is a past, present
or prospective customer), pricing, sales and marketing information, financial
and technical information, manufacturing process, inventions and know-how.
Employee acknowledges that all trade secrets, inventions, know-how, and all
other information described in this paragraph developed by Employee during the
course of employment belongs to the Company.
C. NON-PIRACY OF EMPLOYEES. Employee recognizes that Company's other
Employees are a valuable resource of the Company. Accordingly, Employee agrees
that for a period of one ( 1) year after the date on which Employee ceases to be
actively employed by the Company, Employee will not, alone or in conjunction
with others, solicit, induce, or recruit any Employee of the Company to leave
the Company's employment. Employee shall never, at any time, attempt to induce
another Employee of Company to violate a contract of employment for a specified
term of years.
D. CUSTOMER ANTI-PIRACY. Employee agrees that for a period of six (6)
months after the date on which Employee ceases to be actively employed by the
Company, Employee will not directly or indirectly in any capacity whatsoever,
either as an Employee, officer, director, stockholder, proprietor, partner,
joint venturer, consultant, or otherwise, (a) induce any customer (past or
present) to patronize any company that is in competition with the company's
business; (b) canvass, solicit, or accept any similar business from any past or
present customer of the Company; or (c) request or advise any past or present
customer of the Company to withdraw, curtail, or cancel its business with the
Company.
E. EMPLOYEE ACKNOWLEDGMENT OF FAIRNESS. Employee acknowledges and
agrees that Employee's services to the Company are of a special character with
unique value to the Company, and that the restrictive covenants set forth in
this Agreement are reasonable, fair and valid in scope or activity, duration,
territory, and all other respects.
F. SEVERABILITY AND REFORMATION. If any court of competent jurisdiction
determines that any of the restrictive covenants in this Agreement, or any part
thereof, is or are invalid or unenforceable, the remainder of the restrictive
covenants shall not thereby be affected and shall be given full effect, without
regard to invalid portions. If any of the provisions of this paragraph should
ever be deemed to exceed the temporal, geographic, or occupational limitations
permitted by applicable laws, those provisions shall be and are hereby reformed
to the maximum temporal, geographical or occupational limitations permitted by
law.
4
<PAGE> 5
In any litigation concerning this Agreement, the prevailing party shall entitled
to recover reasonable attorney's fees incurred.
G. BREACH OF OBLIGATIONS BY EMPLOYEE. In the event of a breach or
threatened breach by the Employee of the obligations set forth in subparagraphs
A through D above, the Company shall be entitled to apply to any appropriate
court for an injunction restraining the Employee; provided, however, that this
paragraph shall not be construed as prohibiting the Company from pursuing any
other available remedies for such breach or threatened breach including, but not
limited to, the recovery of damages from the Employee.
H. BREACH BY THE COMPANY. In the event the Company terminates Employee
without just cause, subparagraph "A" shall not be enforceable, however, in any
event, all other subparagraphs of this section shall remain fully enforceable.
11. OPTION TO PURCHASE STOCK OF PUBLIC COMPANY.
(a) Company shall cause the Public Company to grant an option in favor
of employee, subject to the conditions set forth below, to purchase shares of
the common stock of such Public Company.
(b) The purchase price for the shares to be purchased shall be equal to
the price received by the Public Company pursuant to the private-placement
offering; provided, however, that in no event shall the option price be greater
than any option granted to Donald R. Head or Andrew Johns. Company estimates
that shares may be sold through the private-placement offering at One Dollar
($1.00) per share, although market conditions at the time of sale may result in
prices higher or lower as the Public Company shall deem to be in its best
interests.
(c) All other terms of such option shall be not less favorable that the
option granted James A. Clifford and Nick Velimirovich.
(d) The number of shares granted to Employee shall be 20,000 at a
constant option price of $1.00. Employee becomes vested for 50% of the option
shares after two (2) full years of employment with the company. The other 50%
becomes vested after three (3) ful1 years of employment with the company, in
accordance with SEC regulations. In addition, said option must be exercised on
or before 5 years following the date of employment with company.
12. AGREEMENT. The entire Agreement of the parties is herein written
fully and supersedes any prior agreement between the parties hereto, and the
parties hereto are not bound by any agreement, understanding, conditions or
inducement otherwise that are expressly set forth and stipulated hereunder.
13. NOTICES. All notices required to be sent pursuant to the terms of
this Agreement shall be sent by certified mail, postage prepaid, to the parties
hereto at the following addresses, or such other addresses as they may hereafter
designate in writing:
5
<PAGE> 6
COMPANY:
CAPITAL TITLE AGENCY, INC.
4808 NORTH 22ND STREET
PHOENIX, ARIZONA 85016
EMPLOYEE:
JAMES P. STAMAS
5302 EAST SHEENA
SCOTTSDALE, ARIZONA 85254
14. ATTORNEY FEES. In the event of any controversy, claim or dispute
between the parties affecting or relating to the subject matter of performance
of this Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party all of its reasonable attorney fees.
15. GOVERNING LAW. This Agreement shall be construed both to as
validity and performance, and enforced in accordance with and governed by the
laws of the State of Arizona.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement as of the
day written above.
COMPANY: EMPLOYEE:
CAPITAL TITLE AGENCY, INC.
/s/James P. Stamas
---------------------------
By: /s/James A. Clifford JAMES P. STAMAS
---------------------------------
JAMES A. CLIFFORD
its: President
By: /s/Nick Velimirovich
--------------------------------
NICK VELIMIROVICH
its: Chief Executive Officer
By: /s/Donald R. Head
---------------------------------
DONALD R. HEAD
its: Chairman
6
<PAGE> 1
EXHIBIT 10.11
CAPITAL TITLE AGENCY, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of this 17th day of May, 1996, by and between
CAPITAL TITLE AGENCY, INC., an Arizona corporation ("Company"), and NICK
VELIMIROVICH, ("Employee").
WITNESSETH:
WHEREAS, Employee has broad-based experience in the title insurance
agency industry, and Company desires to employ him and to assure itself of
continued availability of his services for the Company's benefit, and Employee
is willing to accept such employment and to perform such services, all in
accordance with the terms herein contained.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, and intending to be legally bound hereby, the parties agree
as follows:
1. Employment. The Company hereby agrees to employ the Employee,
and Employee agrees to be hired by the Company, to become its President, in
charge of general business operations and development for Maricopa County, to
work under the direct supervision and authority of Andrew Johns, and to perform
such duties according to the policies and directives as communicated to
Employee from time to time during the period of such employment. As President,
Employee's duties shall be limited to Company operations in Maricopa County,
including but not limited to planning, organizing and administering the daily
sales, escrow closings and title operations, hiring and firing employees and
all reasonable and incidental management activities relating to the Company's
business in such County.
2. Extent of Services. During the employment period, except for
illness and for reasonable vacations, Employee shall devote his full-time
attention, skill and efforts to the duties under this "Agreement."
3. Term. The employment period shall be for a term of three (3)
years commencing not more than thirty (30) days following notification by the
Company that the contingencies of paragraph 16 have been met.
4. Compensation. For performing the services required to be
performed by this Agreement during the employment period, Employee shall be
compensated by the Company as follows:
A. A fixed salary at the rate of One Hundred Twenty
Thousand Dollars ($120,000) per year, payable twice monthly in
accordance with normal Company policy.
B. Additional compensation equal to five percent (5%) of
the Company's pre-tax net profit on operations in Maricopa County
calculated according to generally acceptable accounting principles
applicable to title insurance agencies consistently applied, prorated
in the first year of employment for the period remaining in the
Company's fiscal year if less than twelve (12) months, such
<PAGE> 2
compensation to be determined and paid within three months following
the end of each succeeding fiscal year. Pre-tax profits for purposes
of this Agreement shall be net taxable income attributable to
operations in Maricopa County as disclosed by the Company's federal
income tax returns and related internal records allocating income and
expenses separately as to the respective counties in which the Company
shall be conducting its Arizona business, but exclusive of bonuses,
dividends or other remuneration to stockholders, directors or
executive committees. Copies of the Company's federal tax returns and
records of results in each county of operation shall be furnished to
Employee when received by the Company's accounting firm in final form.
At the Company's option, estimated compensation may be paid in
successive fiscal years with appropriate adjustments spread over
twelve (12) month periods in the event of any under or over estimated
payments made pursuant to this paragraph.
C. For purposes of subparagraph "B," Company operations
shall include revenues derived from subsidiaries or related title
business generated on Maricopa County real estate transactions.
D. Reimbursement for all necessary and pre-approved travel
and entertainment expenses incurred by Employee on behalf of the
Company, not to exceed Two Thousand Five Hundred Dollars ($2,500) per
month, which expenses shall be incurred by the Employee and reimbursed
by the Company in accordance with normal Company practices and budget
or other restrictions that may be imposed by the Board of Directors.
5. Supplemental Benefits. During the term of this agreement,
Employee shall receive health insurance, vacation and other Employee benefits
pursuant to the terms and as set forth in the Company's Employee Handbook
initially published on October 1, 1993, as amended, receipt of a copy of which
is hereby acknowledged by Employee.
6. Disability and Incapacity. If Employee shall be unable to
perform his duties by reason of disability or impairment of health for at least
ninety (90) consecutive calendar days, Company shall have the right to
terminate this Agreement by giving written notice to that effect, provided that
at the time such notice is given such disability or impairment is still
continuing.
7. Death. In the event of Employee's death while employed by
Company, this Agreement shall terminate at the end of the calendar month in
which Employee's death occurs, and his legal representative shall be entitled
to receive the compensation due through the last day of the calendar month in
which his death shall have occurred, and any other amounts which may have
accrued to Employee for periods prior to such date.
8. Compensation on Termination.
A. Prior to the end of the employment period of this Agreement, if
the Company shall terminate employment of the Employee without "just cause" as
hereinafter defined, or if the Employee shall terminate his employment for
"good reason" as hereinafter defined, then the Company shall pay to the
2
<PAGE> 3
Employee his aggregate compensation, and such other amounts as
shall be necessary to continue any supplemental Employee benefits and
prerequisites of office which were provided the Employee prior to such
termination. In the event such benefits or prerequisites of office are
not continuable, the Employee shall be paid their cash equivalent. All
payments hereunder shall be payable during the remaining term of this
Agreement as if it had not been terminated. Notwithstanding the
foregoing, Employee shall have a duty to mitigate his damages in the
event of any such termination without good cause and, to the extent
his reasonable efforts generate or could have generated replacement
income during the remaining term of this Agreement, such income shall
be credited to Company against the obligation to pay additional salary
and benefits pursuant to this paragraph. Company may withhold payments
for such period that Employee refuses to render all reasonable or
necessary cooperation to enable Company (1) to determine the extent of
any replacement income that may have been paid or may be payable to
Employee during which time Company may be obligated to continue paying
compensation after termination pursuant to this paragraph, and (2) to
determine whether Company has from time to time exerted reasonable
efforts to obtain replacement income.
B. In the event of Employee's death or termination due to
disability, or if the Company shall terminate the employment of the
Employee for "just cause", or if the Employee shall terminate his
employment without "good reason", then the Company shall pay the
Employee his salary to the effective date of such termination, and any
accrued vacation not used, but no added compensation as otherwise
provided under paragraph 4.B shall be deemed earned in any of such
events.
C. As used herein, "just cause" shall mean (i) a material
breach by the Employee of this Agreement, (ii) incapacity of the
Employee by reason of health or incompetence to perform his duties for
ninety (90) consecutive calendar days, or (iii) dishonesty, theft,
embezzlement or conviction of a felony. As used herein, "good reason"
shall mean a material breach by the Company of this Agreement
including but not limited to a material change in Employee's duties as
President (Maricopa County Operations) of the Company.
9. Assignment. The rights and obligations of the Company hereunder
shall inure to the benefit of, and be binding upon, the Company and any other
corporation or entity into which the Company shall be merged, or to which
substantially all of the assets of the Company shall be transferred and such
other corporation or entity shall thereupon be deemed the "Company" hereunder.
The rights and obligations of the Employee hereunder shall not be assignable
except as to compensation earned but not paid when due.
10. Proprietary Protection.
A. Non-Competition. At all times while employed by Company, and
for a period of one (1) year after the date on which the Employee ceases to be
actively employed by the Company, the Employee shall not compete in any way
with the business of the Company anywhere within Maricopa County, Arizona,
3
<PAGE> 4
whether directly or indirectly, as an employee, agent, independent
contractor, owner, or otherwise. In addition, during such one (1)
year period, the Employee shall not directly or indirectly enter into
or in any manner take part in any other business or entity that
competes with the Company.
B. Confidentiality. At all times while employed by
Company, and continuing after termination of such relationship without
limitation as to time, the Employee shall not directly or indirectly
use or disclose to others any confidential or proprietary information
or trade secrets of the Company. For the purpose of this Agreement,
confidential or proprietary information includes all information
regarding the Company, whether disclosed by Company or originated by
Employee while employed by the Company, including, without limitation,
Company's policies and procedures, Company's suppliers and supply
information, Company's customer lists and customer information
(whether the customer is a past, present or prospective customer),
pricing, sales and marketing information, financial and technical
information, manufacturing processes, inventions and know-how.
Employee acknowledges that all trade secrets, inventions, know-how,
and all other information described in this paragraph developed by
Employee during the course of employment belongs to Company.
C. Non-Piracy of Employees. Employee recognizes that
Company's other Employees are a valuable resource of the Company.
Accordingly, Employee agrees that for a period of one (1) year after
the date on which the Employee ceases to be actively employed by the
Company, Employee will not, alone or in conjunction with others,
solicit, induce, or recruit any Employee of the Company to leave the
Company's employment. Employee shall never, at any time, attempt to
induce another Employee of Company to violate a contract of employment
for a specified term of years.
D. Customer Anti-Piracy. Employee agrees that for a period
of six (6) months after the date on which Employee ceases to be
actively employed by the Company, Employee will not directly or
indirectly in any capacity whatsoever, either as an Employee, officer,
director, stockholder, proprietor, partner, joint venturer,
consultant, or otherwise, (a) induce any customer (past or present) to
patronize any company that is in competition with the Company's
business; (b) canvass, solicit, or accept any similar business from
any past or present customer of the Company; or (c) request or advise
any past or present customer of the Company to withdraw, curtail, or
cancel its business with the Company.
E. Employee Acknowledgement of Fairness. Employee
acknowledges and agrees that Employee's services to the Company are of
a special character with unique value to the Company, and that the
restrictive covenants set forth in this Agreement are reasonable, fair
and valid in scope or activity, duration, territory, and in all other
respects.
4
<PAGE> 5
F. Severability and Reformation. If any court of competent
jurisdiction determines that any of the restrictive covenants in this
Agreement, or any part thereof, is or are invalid or unenforceable,
the remainder of the restrictive covenants shall not thereby be
affected and shall be given full effect, without regard to invalid
portions. If any of the provisions of this paragraph should ever be
deemed to exceed the temporal, geographic, or occupational limitations
permitted by applicable laws, those provisions shall be and are hereby
reformed to the maximum temporal, geographic, or occupational
limitations permitted by law. In any litigation concerning this
Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees incurred.
G. Breach of Obligations by Employee. In the event of a
breach or threatened breach by the Employee of the obligations set
forth in subparagraphs A through D above, the Company shall be
entitled to apply to any appropriate court for an injunction
restraining the Employee; provided, however, that this paragraph shall
not be construed as prohibiting the Company from pursuing any other
available remedies for such breach or threatened breach including, but
not limited to, the recovery of damages from the Employee.
H. Breach By The Company. In the event the Company
terminates Employee without just cause, subparagraph "A" shall not be
enforceable, however, in any event, all other subparagraphs of this
section shall remain fully enforceable.
11. Option To Purchase Stock of Public Company.
(a) Contingent upon completion of the merger and funding of
net less than $500,000 through the private placement offering
described in paragraph 17, Company shall cause the Public Company to
grant an option in favor of Employee, subject to the conditions set
forth below, to purchase shares of the common stock of such Public
Company.
(b) All shares purchased pursuant to such option shall be
for investment and shall contain such restrictions and/or limitations
on resale or other disposition as contained in the share certificates
issued pursuant to the private-placement offering described in
paragraph 17.
(c) The purchase price for the shares to be purchased shall
be equal to the price received by the Public Company pursuant to the
private-placement offering; provided, however, that in no event shall
the option price be greater than any option granted to Donald R. Head
and Andrew Johns. Company estimates that shares may be sold through
the private-placement offering at One Dollar ($1.00) per share,
although market conditions at the time of sale may result in prices
higher or lower as the Public Company shall deem to be in its best
interests.
(d) The number of shares granted to Employee shall be an
amount equal to sixty-six percent (66%) of the number of option shares
granted to Donald R. Head.
5
<PAGE> 6
(e) All other terms of such option shall be not less
favorable than the option granted to Donald R. Head.
12. Agreement. The entire agreement of the parties is herein
written fully and supersedes any prior agreement between the parties hereto,
and the parties hereto are not bound by any agreements, understandings,
conditions or inducements otherwise than are expressly set forth and stipulated
hereunder.
13. Notices. All notices required to be sent pursuant to the terms
of this Agreement shall be sent by first class mail, postage prepaid, to the
parties hereto at the following addresses, or such other addresses as they may
hereafter designate in writing:
Company:
CAPITAL TITLE AGENCY, INC.
Attention: Donald R. Head
138 North Montezuma
Prescott, Arizona 86301
Employee:
NICK VELIMIROVICH
10148 Pershing Avenue
Scottsdale, Arizona 85260
14. Attorney Fees. In the event of any controversy, claim or
dispute between the parties affecting or relating to the subject matter of
performance of this Agreement, the prevailing party shall be entitled to
recover from the non-prevailing party all of its reasonable attorney fees.
15. Governing Law. This Agreement shall be construed both to as
validity and performance, and enforced in accordance with and governed by the
laws of the State of Arizona.
16. Contingency. This Agreement shall not become legally binding on
either party until such time that the Company has (a) completed a reverse
merger into a Public Company, (b) received a minimum of $500,000 in operating
capital through a private-placement offering of its stock, and (c) completed
both such requirements by not later than the 1st day of July, 1996.
IN WITNESS WHEREOF, the parties have hereunto executed this Agreement
as of the day above written.
COMPANY: EMPLOYEE:
CAPITAL TITLE AGENCY, INC. /s/ Nick Velimirovich
------------------------
NICK VELIMIROVICH
By /s/ Donald R. Head
-----------------------
Its Chairman
6
<PAGE> 1
Exhibit 11
CAPITAL TITLE GROUP, INC. AND SUBSIDIARY
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION> (Unaudited)
For The Nine Month For the
Periods Ended July 31, Years Ended October 31,
----------------------- -----------------------
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Earnings per share (1)
Common stock equivalents
Options granted and
exercised 290,000 -- -- --
Assumed buyback of (290,000) -- -- --
options (2) --------- --------- --------- ---------
Total weighted average
shares outstanding 3,506,230 1,536,158 1,536,158 1,536,158
--------- --------- --------- ---------
Weighted average shares
outstanding 3,506,230 1,536,158 1,536,158 1,536,158
========= ========= ========= =========
</TABLE>
(1) Earnings per share are based upon the weighted average number of shares
outstanding for each of the respective periods. All weighted average shares
outstanding give retroactive effect to the one for ten (1-10) reverse stock
split in May, 1996.
(2) Buyback of stock options under the treasury stock method is at the assumed
private offering price of $1 per share. Under this method, earnings per
share data is computed as if the options and warrants were exercised at
the beginning of the period (or the time of issuance, if later), and as if
the funds obtained thereby were used to purchase common stock at the
private offering price during the period.
<PAGE> 1
EXHIBIT 16.1
DUANE V. MIDGLEY
Certified Public Accountant
4351 Lynne Lane
Salt Lake City, Utah 84124
----------
(801) 277-3608
September 23, 1996
Mr. Michael Sutton
Chief Accountant
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Dear Mr. Sutton:
I have read the section titled "Changes in and Disagreements
with Accountants" included in the Registration Statement on Form 10-SB to be
filed with the Securities and Exchange Commission by Capital Title Group, Inc.
and am in agreement with the statements contained therein as they relate to me.
Very truly yours,
/s/Duane V. Midgley
----------------------------
Duane V. Midgley
cc: Donald R. Head
Chief Executive Officer
Capital Title Group, Inc.
4808 North 22nd Street
Phoenix, Arizona 85016
<PAGE> 1
EXHIBIT 16.2
SCHVANEVELDT AND COMPANY
Certified Public Accountant
275 E. South Temple, Suite 300
Salt Lake City, Utah 84111
(801) 521-2392
Darrel T. Schvandveldt, C.P.A.
September 23, 1996
Mr. Michael Sutton
Chief Accountant
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Dear Mr. Sutton:
We have read the section titled "Changes in and Disagreements
with Accountants" included in the Registration Statement on Form 10-SB to be
filed with the Securities and Exchange Commission by Capital Title Group, Inc.
and are in agreement with the statements contained therein.
Very truly yours,
cc: Donald R. Head
Chief Executive Officer
Capital Title Group, Inc.
4808 North 22nd Street
Phoenix, Arizona 85016
<PAGE> 1
EXHIBIT 16.3
JOHN E. JONES
Certified Public Accountant
747 Whipple Street
Prescott, AZ 86301
(520) 776-7695
September 23, 1996
Mr. Michael Sutton
Chief Accountant
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Dear Mr. Sutton:
I have read the section titled "Changes in and Disagreements
with Accountants" included in the Registration Statement on Form 10-SB to be
filed with the Securities and Exchange Commission by Capital Title Group, Inc.
and am in agreement with the statements contained therein as they relate to me.
Very truly yours,
/s/John E. Jones
-------------------------
John E. Jones
cc: Donald R. Head
Chief Executive Officer
Capital Title Group, Inc.
4808 North 22nd Street
Phoenix, Arizona 85016
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
Name Jurisdication Ownership
---- ------------- Percentage
----------
Capital Title Agency, Inc. Arizona 100%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> OCT-31-1995 OCT-31-1996
<PERIOD-START> NOV-01-1994 NOV-01-1995
<PERIOD-END> OCT-31-1995 JUL-31-1996
<CASH> 810 115,161
<SECURITIES> 0 0
<RECEIVABLES> 0 25,992
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 810 149,849
<PP&E> 0 946,440
<DEPRECIATION> 0 356,266
<TOTAL-ASSETS> 810 1,066,577
<CURRENT-LIABILITIES> 19,315 303,720
<BONDS> 0 146,524
0 0
0 0
<COMMON> 1,536 9,696
<OTHER-SE> (20,041) 606,637
<TOTAL-LIABILITY-AND-EQUITY> 810 1,066,577
<SALES> 0 0
<TOTAL-REVENUES> 0 414,263
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 18,578 600,136
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 3,294
<INCOME-PRETAX> (18,574) (187,873)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (18,574) (187,873)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (18,574) (187,873)
<EPS-PRIMARY> (.01) (.05)
<EPS-DILUTED> 0 0
</TABLE>
