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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 21, 1996
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SEARCH CAPITAL GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 0-9539 41-1356819
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
700 N. PEARL STREET
SUITE 400
DALLAS, TEXAS 75201-7490
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (214) 965-6000
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On November 22, 1996, Registrant announced that it had dropped its lawsuit
against two of its directors, Messrs. Craig Hall and Larry E. Levey, and Hall
Financial Group, Inc. and Hall Phoenix/Inwood, Ltd., companies controlled by
Mr. Hall.
Pursuant to the settlement agreement entered into on November 21, 1996,
Registrant has paid Hall Phoenix/Inwood, Ltd. $4,000,000 in cash and $5,000,000
in a subordinated debenture to acquire all of the common and preferred stock
and warrants of Registrant owned by Hall Phoenix/Inwood, Ltd. and to settle all
claims against Registrant. The parties also agreed to dismiss all litigation
and mutually release each other, and Messrs. Hall and Levey, Hall Financial
Group, Inc. and Hall Phoenix/Inwood, Ltd. agreed that, for a period of five
years, they will refrain from taking substantially any actions with respect to
Registrant. In addition, Messrs. Hall and Levey resigned from Registrant's
Board of Directors.
Effective November 22, 1996, Registrant effected a one-for-eight "reverse"
split of its issued and outstanding shares of common and preferred stock.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
Exhibit No. Description
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10.1 Compromise and Settlement Agreement by and among Craig Hall,
Larry Levey, Hall Financial Group, Inc., Phoenix/Inwood Corp.
and Hall Phoenix/Inwood, Ltd. and Registrant effective as of
November 21, 1996
10.2 Mutual Release Agreement effective as of November 21, 1996 by
and among Registrant, George C. Evans, Craig Hall, Larry Levey,
Hall Financial Group, Inc., Phoenix/Inwood Corp. and Hall
Phoenix/Inwood, Ltd.
10.3 Standstill Agreement effective as of November 21, 1996 by
and among Registrant, Craig Hall, Larry Levey, Hall Financial
Group, Inc., Phoenix/Inwood Corp. and Hall Phoenix/Inwood, Ltd.
10.4 Subordinated Note dated November 21, 1996 in the principal amount
of $5,000,000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEARCH CAPITAL GROUP, INC.
By: /s/ ROBERT D. IDZI
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Robert D. Idzi
Senior Executive Vice President
Dated: December 2, 1996
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EXHIBIT INDEX
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Exhibit No. Description
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10.1 Compromise and Settlement Agreement by and among Craig Hall,
Larry Levey, Hall Financial Group, Inc., Phoenix/Inwood Corp.
and Hall Phoenix/Inwood, Ltd. and Registrant effective as of
November 21, 1996
10.2 Mutual Release Agreement effective as of November 21, 1996 by
and among Registrant, George C. Evans, Craig Hall, Larry Levey,
Hall Financial Group, Inc., Phoenix/Inwood Corp. and Hall
Phoenix/Inwood, Ltd.
10.3 Standstill Agreement effective as of November 21, 1996 by
and among Registrant, Craig Hall, Larry Levey, Hall Financial
Group, Inc., Phoenix/Inwood Corp. and Hall Phoenix/Inwood, Ltd.
10.4 Subordinated Note dated November 21, 1996 in the principal amount
of $5,000,000.
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EXHIBIT 10.1
COMPROMISE AND SETTLEMENT AGREEMENT
This Compromise and Settlement Agreement ("Agreement") is entered into
by and among Craig Hall ("Hall"), Larry Levey ("Levey"), Hall Financial Group,
Inc. ("HFG"), Phoenix/Inwood Corp. ("PIC"), and Hall Phoenix/Inwood, Ltd.
("Phoenix") (collectively the "Hall Parties") and Search Capital Group, Inc.
("Search") effective as of this 21st day of November, 1996.
RECITALS
A. Search is a publicly held Delaware corporation.
B. Hall and Levey are directors of Search. Phoenix is a shareholder
of Search holding 4,138,379 common shares, 2,032,812 shares of 9%/7%
Convertible Preferred Stock, and 3,676,178 warrants. Hall and Levey each hold
100,000 director warrants.
C. Hall and Levey have expressed concerns about the operations of
Search particularly in the areas of management, overhead, and acquisitions.
D. Hall and Levey filed a suit on October 16, 1996 styled Craig Hall
and Larry Levey v. Search Capital Group, Inc., Civil Action No. 15264 in the
Court of Chancery of the State of Delaware seeking to inspect the shareholder
list and certain books and records of Search ("Delaware Lawsuit").
E. On October 24, 1996, Search filed a suit styled Search Capital
Group, Inc. vs. Hall Financial Group, Inc., Phoenix/Inwood Corp., Hall
Phoenix/Inwood, Ltd., Craig Hall, and Larry Levey, Cause No. 96-11254 in the
162nd Judicial District Court of Dallas County, Texas ("Texas Lawsuit"). The
Texas Lawsuit alleges fraud and breach of fiduciary duty among other things.
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F. The Hall Parties have denied the allegations asserted by Search
in the Texas Lawsuit and have counterclaimed against Search for indemnity,
attorneys fees, and costs and sought sanctions for the filing of a frivolous
and meritless action.
G. The Hall Parties have asserted that they have additional claims
against Search and certain of its directors which they have not yet brought in
a lawsuit. Such additional claims include rescission, mismanagement,
abdication of authority, self dealing, and fraud in the inducement and Search
has denied all such claims on behalf of itself and the named directors.
AGREEMENTS AND COVENANTS
For and in consideration of the foregoing recitals, the terms, obligations and
mutual promises and covenants set forth below, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
all parties to this Agreement, the parties hereto, desiring to avoid protracted
litigation, and to provide an efficient and effective procedure for the
complete and final disposition of the claims of each of the parties hereto,
hereby agree to settle and compromise all such claims between them, whether or
not asserted in the Delaware Lawsuit or the Texas Lawsuit, as follows:
1.PAYMENT AMOUNT: Search agrees to pay to the Hall Parties the sum of
$9,000,000 ("Payment Amount") at Closing in exchange for all securities of
Search and/or any affiliate of Search owned jointly or severally by the Hall
Parties and the settlement of claims. The Payment Amount will be payable by
Search to Phoenix $4,000,000 by cashiers check on a national bank in Dallas,
Texas or wire transfer and $5,000,000 by the execution of the
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Subordinated Note in the form of Exhibit "1". Payments by Search to Phoenix
pursuant to said Note shall be deemed payments by Search to the Hall Parties as
required by this Settlement Agreement.
2.GUARANTY BY SEARCH AFFILIATES. The "Search Affiliates" (as defined in the
Standstill Agreement), which have signed this Agreement as reflected in the
signature section below, unconditionally and irrevocably guarantee the due and
punctual payment and performance of the obligations of Search under the
Subordinated Note, this Agreement, and the documents executed at Closing by
Search. Upon any failure of Search to pay or perform any of the foregoing
obligations, such Search Affiliates shall forthwith on demand pay or perform
the obligations not so paid or performed at the place and in the manner
specified in this Agreement, the Subordinated Note, and the other documents.
The Search Affiliates acknowledge that their guarantee is a guarantee of
payment and performance, and not merely of collection. All guaranty
obligations under this Agreement are continuing, unconditional, and absolute,
and without limiting the generality of the foregoing, shall not be released,
discharged, impaired, or otherwise affected by:
A. any extension, renewal, settlement, compromise, waiver, or
release in respect of any obligation of Search under this
agreement or any other document, whether by operation of law or
otherwise;
B. any modification or amendment of or supplement to this Agreement
or any of the documents executed at Closing;
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C. any change in the corporate existence, structure or ownership of
Search, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting Search or any Search Affiliate or
any of their respective assets, or any resulting release or
discharge of any obligation of Search or any Search Affiliate;
D. the existence of any claim, setoff or other right which Search or
any Search Affiliate may have at any time against any of the Hall
Parties, whether in connection with this agreement, with the
Subordinated Note, with any other document, or with the
transactions contemplated by this agreement, or any unrelated
transaction, except that nothing in this subsection shall prevent
the assertion of such claim by separate suit or compulsory
counterclaim;
E. any invalidity, irregularity, or unenforceability of any
provision of this agreement or any document executed at Closing;
F. the incapacity, lack of authority, death or disability of any
person;
G. the revocation or repudiation by Search of any obligation under
this agreement or the other documents executed at Closing; or
H. any other act or failure to act, or delay of any kind, by Search
or a Search Affiliate or a Hall Party, or any other circumstance
whatsoever which might, but for the provisions of this paragraph
constitute legal
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or equitable discharge of the obligations of Search or a Search
Affiliate hereunder.
All guaranty obligations shall remain in full force and effect until all
obligations have been paid in full. If at any time any payment or performance
of an obligation is rescinded, or must otherwise be restored or returned upon
the insolvency, bankruptcy or reorganization of Search or a Search Affiliate,
all guaranty obligations under with this Agreement respect to such payment or
performance shall be reinstated as though such payment or performance had been
due but not paid or performed at such time. Each Search Affiliate which is a
signatory to this Agreement irrevocably and unconditionally waives acceptance
of its guaranty under this section, and irrevocably and unconditionally waives
presentment, demand, protest, and all notices, including without limitation
notice of acceleration, notice of intent to accelerate, as well as any
requirement that at any time any action be taken by any person or entity
against Search.
1. TRANSFER OF SECURITIES: The Hall Parties, Hall, Phoenix, Levey, HFG
and/or PIC shall transfer to Search all common shares, preferred shares, and
warrants which they hold in Search at Closing. The Hall Parties, Hall,
Phoenix, Levey, HFG and/or PIC shall deliver to Search at Closing appropriate
certificates representing all of the shares and warrants being transferred with
all necessary endorsements and/or stock powers.
2. RELEASES: The parties agree to execute a full and complete Mutual
Release in the form attached hereto as Exhibit "4" at Closing.
3. BOARD RESIGNATIONS: Hall and Levey agree to tender their resignations
as directors of Search at Closing in the forms
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attached hereto as Exhibit "5-1" and "5-2". Any and all rights, options,
privileges or powers which the Stockholders and/or any affiliate possess,
jointly or severally, directly or indirectly, to elect individuals to the Board
of Directors of Search or any affiliate of Search is hereby terminated and
declared null and void and of no force and effect effectively immediately.
4. PRESS RELEASE: Search and the Hall Parties agree to issue the press
release in the form attached hereto as Exhibit "6" within one hour of the
Closing. The press release will be issued to the same news service
organizations to which Search's press release regarding the Texas Lawsuit was
issued.
5. SHAREHOLDER AND DIRECTOR LETTERS: Search agrees to send by United
States mail to all of the shareholders of Search a letter from George Evans in
the form attached hereto as Exhibit "7" within 24 hours of the Closing.
6. STANDSTILL AGREEMENT: Search and the Hall Parties agree to execute a
Standstill Agreement in the form attached hereto as Exhibit "8" at Closing.
7. CLOSING: Closing shall occur on or before November 21, 1996 at 11:00
a.m. at Locke, Purnell, Rain & Harrell. At Closing, Search shall execute all
of the documents attached as exhibits to this Agreement and deliver to Phoenix
the cash portion of the Purchase Price. At Closing, the Hall Parties shall
execute all of the documents attached as exhibits to this Agreement and deliver
to Search all common stock, preferred stock, and warrants of Search held by the
Hall Parties duly endorsed for transfer to Search.
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8. REPRESENTATIONS BY SEARCH: Search represents and warrants to the Hall
Parties that:
A. Search is duly incorporated, validly existing, and in good
standing under the laws of Delaware.
B. Search has full power and authority to carry on its business as
now conducted and as proposed to be conducted, and to execute and
perform its obligations under this agreement and the Subordinated
Note to which it will be a signatory hereunder.
C. The execution, delivery and performance of this agreement by
Search, and the execution, delivery and performance of the
Subordinated Note, and the other documents to which Search will
be a signatory, have been duly authorized by all requisite
corporate action, will not violate the certificate of
incorporation or bylaws of Search, and do not require any
approval of its stockholders.
D. The execution and delivery of this agreement by Search is for
good and sufficient consideration.
E. Performance by Search under this agreement and under any
documents to which Search will be a signatory will not violate
the certificate of incorporation or bylaws of Search, or require
any approval of stockholders.
F. The person executing this agreement on behalf of Search is duly
authorized so to act.
G. The execution and delivery of this agreement by Search and the
performance by Search of this agreement or other documents to
which it will be a party will not
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(i) violate (a) any provision of law applicable to Search, or any
order, judgment or decree of any court or other agency of
government binding on Search or (b) any material contractual
obligation of Search, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a
default under any material contractual obligation of Search,
other than approvals or consents which have been obtained.
H. There are no actions, suits or proceedings pending or, to its
knowledge, threatened against Search wherein an adverse ruling or
decision is reasonably likely to affect materially and adversely
the ability of Search to perform its obligations under this
agreement or the other documents; and there are no unsatisfied
judgments outstanding against Search.
I. No consent, approval, authorization or other action of or by, or
registration, designation, declaration, filing or qualification
with, any court, administrative agency or other governmental
entity which has not been obtained is necessary as a condition
to, or in connection with, the execution, delivery or performance
by, or the enforceability against Search, or the validity of this
agreement or the other documents to which Search is a party, or
the consummation of the transactions contemplated by this
agreement or the other documents.
J. This Agreement and the other documents attached hereto constitute
legal, valid and binding agreements
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of Search, enforceable against it in accordance with their terms.
K. The Payment Amount represents fair and adequate value and
consideration for the shares and warrants being transferred by
the Hall Parties to Search and the additional consideration being
received by Search under this Agreement.
L. No claims, demands, controversies, actions, causes of action,
liability, damages, injuries, losses or other rights which are
mentioned in the Release Agreement or in this Settlement
Agreement have been assigned, conveyed, or in any other manner
transferred to any other person or entity.
9. REPRESENTATIONS BY HALL PARTIES:
A. HFG represents and warrants to Search that HFG is a corporation
incorporated and in good standing under the laws of Delaware, and
that HFG's execution and delivery of this agreement and the
performance of its terms and conditions has been duly authorized
by all requisite corporate action.
B. PIC represents and warrants to Search that PIC is a corporation
incorporated and in good standing under the laws of Texas, and
that PIC's execution and delivery of this agreement and the
performance of its terms and conditions has been duly authorized
by all requisite corporate action.
C. Phoenix represents and warrants to Search that it is a Texas
limited partnership and that Phoenix's execution and delivery of
this agreement and the
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performance of its terms and conditions has been duly authorized
by all requisite partnership action.
D. The execution and delivery of this Settlement Agreement, and all
other agreements or documents contemplated herein, by the Hall
Parties is for good and sufficient consideration.
E. Performance by each of the Hall Parties under this agreement and
under any documents to which any of the Hall Parties will be a
signatory will not violate the articles of incorporation, bylaws,
certificate of limited partnership, and/or limited partnership
agreement, as the case may be, of any of the Hall Parties, or
require any approval of stockholders and/or general or limited
partners, and is within the authorized purposes of HFG, PIC and
Phoenix.
F. The persons executing this agreement on behalf of the various
Hall Parties are each duly authorized so to act.
G. This Agreement and the other documents attached hereto constitute
legal, valid and binding agreements of the Hall Parties,
enforceable against each of them in accordance with their
respective terms.
H. The Hall Parties are receiving the Note for their own account as
principals and not with a view to or for resale,
fractionalization, division, or distribution thereof, or the
grant of any participation therein, and none of the Hall Parties
have any present intent of distributing or selling to any other
person or entity any portion of the Note or granting any
participation
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therein, except for a transfer to any other of the Hall Parties
or an affiliate of any of the Hall Parties.
I. The Hall Parties and their advisors, if any, together have such
knowledge, sophistication, experience, net worth and such other
resources that they are capable of evaluating the merits and
risks of the financial terms of this Settlement Agreement and the
merits and risks of holding a subordinated note of Search and of
making an informed investment decision.
J. In addition, the Hall Parties have access to all public
information available regarding Search, and the operations and
financial condition of Search and/or the documents Search has
filed with the SEC, including but not limited to Search's 10-K
for 1996 and its 10- Qs filed during 1996.
K. No claims, demands, controversies, actions, causes of action,
liability, damages, injuries, losses or other rights which are
mentioned in the Release Agreement or in this Settlement
Agreement have been assigned, conveyed, or in any other manner
transferred to any other person or entity.
10. D & O COVERAGE: Search agrees to irrevocably restore to Hall and Levey
their D&O coverage as directors of Search and their indemnity from Search for
actions as directors of Search for the period Hall and Levey served as
directors of Search.
11. INDEMNITY. SEARCH AND THE SEARCH AFFILIATES SHALL JOINTLY AND SEVERALLY
INDEMNIFY THE HALL PARTIES THEIR OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES,
ATTORNEYS AND AGENTS, AND HOLD THEM HARMLESS, FROM AND AGAINST LIABILITY, LOSS
AND COST OF
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DEFENSE UPON ALL CLAIMS THAT DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (I)
THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION OR
ENFORCEMENT OF THIS AGREEMENT AND ANY OTHER DOCUMENT OR INSTRUMENT EXECUTED BY
SEARCH OR THE HALL PARTIES UNDER OR IN CONNECTION WITH THIS AGREEMENT AND (II)
ANY TRANSACTION CONTEMPLATED UNDER THIS AGREEMENT; EXCLUDING ANY CLAIM
ATTRIBUTABLE TO GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED
PERSON.
12. DISMISSAL OF LAWSUITS: The parties agree to file joint motions and
cause the respective courts of the Delaware Lawsuit and the Texas Lawsuit to
enter orders dismissing such lawsuits without prejudice.
13. NO ADMISSIONS: By signing this Agreement, all parties acknowledge the
sufficiency of the consideration. This Agreement represents the compromise of
disputed claims between all parties. The use of this Agreement by any party in
any action or proceeding shall be limited to the uses permitted by Federal Rule
of Evidence 408 and Texas Rule of Evidence 408. This Agreement may be used by
any party hereto to establish the defense of release.
14. NO RELIANCE. All parties represent that before executing this
Agreement, they have become fully informed of the terms, contents, conditions,
and effects of this Agreement; that in making this settlement, all parties have
had the benefit of the advice of counsel of their choosing; and that no promise
or representation of any kind has been made by any party hereto except as
expressly stated in this Agreement. All parties agree that they have relied
solely upon their own judgment, and the advice and counsel of their attorneys,
in making this settlement;
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and all parties understand that this is a full, complete, and final resolution
and release of all claims hereby released.
15. ENTIRE AGREEMENT: This agreement, including all of the exhibits
attached hereto, contains the entire understanding between the parties hereto
concerning the subject matter contained herein. There are no representations,
agreements, arrangements, or understandings, oral or written, between the
parties hereto, relating to the subject matter of this Agreement which are not
fully expressed herein.
16. DATE OF PERFORMANCE: If this Agreement provides that any time period
expires or date for performance specified in this Agreement or any agreement or
document described herein falls on a nonbusiness day (i.e., a Saturday, Sunday,
federal legal holiday or state legal holiday in the State of Texas), such time
period or performance deadline will be extended to the next business day.
Except as may be otherwise set forth herein, any performance will be timely
made if completed no later than 12:00 midnight, (Dallas, Texas, time) on the
date the performance is due.
17. BINDING AGREEMENT WITH NO MODIFICATION EXCEPT IN WRITING: This
Settlement Agreement shall be binding and inure to the benefit of the parties
hereto, and their respective successors and assigns. No party shall have the
right to assign or modify this Settlement Agreement without the prior written
approval of the other parties hereto.
18. NO WAIVER EXCEPT IN WRITING: No waiver of this Settlement Agreement
shall be valid unless set forth in writing and executed by the party against
whom such waiver is to be enforced; and no evidence of any waiver shall be
offered or received in evidence
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in any proceeding, arbitration, or litigation arising out of or affecting this
Settlement Agreement unless such waiver is in writing and signed as set forth
above.
19. GOVERNING LAW AND VENUE: This Settlement Agreement shall be construed
according to the laws of the United States and the State of Texas. This
Settlement Agreement is performable in Dallas County, Texas.
20. CAPTIONS: The headings or captions in this Settlement Agreement are for
convenience or reference only and do not control or affect the meaning or
construction of any of the provisions hereof.
21. COUNTERPARTS: The parties hereto agree that this Settlement Agreement
may be executed in a number of identical counterparts, each of which shall be
deemed an original document for all purposes.
22. NOTICES: All notices must be in writing. Notices may be given by U.S.
Certified Mail, postage prepaid, addressed to the intended recipient at the
address set forth herein, or to such other notice address as that party
designates by notice to the other party, and any notice so given shall be
deemed given one business day after its deposit with the U.S. Postal Service.
A business day is any day other than a Saturday, Sunday, or legal holiday in
Texas. A notice given by other means shall be effective only when actually
received by the addressee.
If to Phoenix:
Hall Phoenix/Inwood, Ltd.
Attn: Craig Hall
750 N. St. Paul
Suite 200
Dallas, TX 75201-3247
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If to Borrower:
Search Capital Group, Inc. ("Search")
Attn: Ellis Regenbogen
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
Notice given by counsel to a party hereto shall be deemed notice given by such
party.
IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
to be effective for all purposes as of the Effective Date.
Executed to be effective as of the date above written.
/s/ Craig Hall
------------------------------------
CRAIG HALL
PHOENIX/INWOOD CORP.
By: /s/ Larry Levey
--------------------------------
Printed Name: Larry Levey
Title: Vice President
HALL PHOENIX/INWOOD, LTD.
By: PHOENIX/INWOOD CORP.,
GENERAL PARTNER
By: /s/ Larry Levey
--------------------------------
Printed Name: Larry Levey
Title: Vice President
HALL FINANCIAL GROUP, INC.
By: /s/ Larry Levey
--------------------------------
Printed Name: Larry Levey
Title: Vice President
/s/ Larry Levey
------------------------------------
LARRY LEVEY
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SEARCH CAPITAL GROUP, INC.
By: /s/ Robert D. Idzi
---------------------------------
Printed Name: Robert D. Idzi
Title: Senior EVP & CFO
"SEARCH AFFILIATES"
SEARCH FUNDING CORP. AUTOMOBILE CREDIT ACCEPTANCE CORP.
By: /s/ Robert D. Idzi By: /s/ Robert D. Idzi
------------------------- -------------------------
Printed Name: Robert D. Idzi Printed Name: Robert D. Idzi
Title: Senior EVP & CFO Title: Senior EVP & CFO
<PAGE> 17
SUBORDINATED NOTE
$5,000,000.00 November 21, 1996
1. Agreement to Pay. FOR VALUE RECEIVED, SEARCH CAPITAL GROUP, INC., a
Delaware corporation, (herein called the "Borrower"), promises to pay to the
order of HALL PHOENIX/INWOOD, LTD. (herein called "Phoenix"), in the manner
provided herein, the principal sum of FIVE MILLION DOLLARS ($5,000,000.00),
together with interest remaining from time to time unpaid at the rate provided
for in Section 2 hereof. This Promissory Note (hereinafter the "Note") is given
at closing under and in compliance with that certain Compromise and Settlement
Agreement dated November 21, 1996, by and between Borrower, Craig Hall, Larry
Levey, Hall Financial Group, Inc., Phoenix/Inwood Corp. and Phoenix
("Settlement Agreement"). All terms used in this Note shall have the meanings
given to them in the Settlement Agreement if they are defined in the Settlement
Agreement and not in this Note.
2. Interest Rate. Outstanding principal balance hereof prior to maturity
shall bear interest from the date hereof until paid at the rate of 14% per
annum for the first six months after the date of this Note, at the rate of 15%
per annum for the next six months, at the rate of 16% per annum for the next
six months, and at the rate of 17% per annum thereafter (herein called the
"Interest Rate"), in each case calculated daily on the basis of a 360-day year
for each day all or any part of the principal balance hereof shall remain
outstanding. All past due principal and/or interest or installment thereof
shall bear interest at the highest rate for which the undersigned may legally
contract under applicable law or, if no such rate is designated under
applicable law, at the rate of 18% per annum calculated on the basis of a 365
day year (herein called the "Default Interest Rate").
3. Payments. This Note shall be payable in monthly installments of
interest only commencing on the 1st day of December, 1996 and continuing
thereafter on the 1st day of each month until the Maturity Date (as hereinafter
defined). The Maturity Date shall be the earlier of (i) four yea after the
execution of this Note or (ii) the date of closing by Borrower and/or
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Borrower's Affiliates on the sale or sales of any equity securities for cash or
issue subordinated debt whether on a pari passu basis or not with this Note for
cash or any combination thereof for cash, any or all of which must aggregate
$20,000,000.00 or more ("Maturity Date"). On the Maturity Date, the unpaid
principal balance hereof and all accrued but unpaid interest hereon shall
become due and payable. In the event Borrower and/or Borrower's Affiliates
shall sell equity securities for cash or issue subordinated debt which is on a
pari passu basis with this Note for cash or any combination thereof for cash
which aggregates less than $20,000,000.00, Borrower shall make a principal
payment on this Note at the time of closing on such sale in an amount equal to
the percentage that the amount of the sale is to $20,000,000.00 multiplied by
the then principal amount amount of this Note (i.e. a $10,000,000.00 sale would
require a principal payment equal to 50% of the then principal amount of the
Note). The sale of any equity securities or issuance of any subordinated debt
that is junior to this Note in a transaction to acquire (1) assets of another
entity or (2) stocks or securities of another entity and which equity
securities or subordinated debt is issued to the acquired company, its owners
and/or its creditors shall not be an event that accelerates the maturity of all
or any part of this Note to a date on or before four (4) years after the
execution of said Note. For example, the U.S. Lending transaction, of which
holder has knowledge, is a transaction the consummation of which shall not
accelerate the maturity of this Note provided any subordinated debt issued is
junior to this Note.
4. Method and Place of Payment. Payments upon this Note shall be made in
lawful money of the United States of America which shall be legal tender for
public and private debt at the time of payment, and shall be made at 750 N. St.
Paul Street, Suite 200, Dallas, Texas 75201-3247 or suc other place as the
holder of this Note may from time to time in writing appoint.
5. Subordination. The payment of principal and interest on this Note is
subordinated in right of payment to the prior payment of all "Senior
Indebtedness" of the Borrower, whether outstanding on this date or thereafter.
"Senior Indebtedness" is defined as the principal of, and premium and interest
on, indebtedness of the Borrower for money borrowed on a secured basis from
persons, firms, or corporations that regularly engage in the business of
lending money. In
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the event of any insolvency, bankruptcy, receivership, liquidation, any other
marshalling of the assets and liabilities of the Borrower, or any other event
of default under the documents governing the Senior Indebtedness, the holders
of the Senior Indebtedness will be entitled to receive payment in full of all
principal and interest on all Senior Indebtedness before the holder of the Note
is entitled to receive any payment on account of principal or interest. 6.
6. Default and Acceleration. The outstanding principal balance of this
Note together with accrued and unpaid interest thereon, shall, at the option of
the holder of this Note and without demand, notice or legal process of any kind
become at once due and payable at the place last designated by holder as the
place for payment hereof, upon the occurrence of an Event of Default. An "Event
of Default" shall occur under this agreement if:
A. Borrower fails timely to pay an amount payable to holder under this
Note and fails to pay within five (5) days of holder's giving written
notice of such default to Borrower; provided, however, that holder
shall not be required to give notice more than three (3) times during
the term of this Note and interest shall accrue at the Default
Interest Rate until such payment is made; or
B. Borrower breaches any other obligation under this agreement or under
any of the Settlement Documents, and fails to cure the breach within
30 days of holder's giving a written notice of such default
to Borrower.
C. Any judgment or judgments aggregating in excess of $1,000,000.00 in
excess of applicable insurance coverage which remains unpaid for more
than thirty (30) days or for which no bond is posted within the
applicable time, or any injunction or attachment is obtained against
Borrower which remains unstayed for a period of thirty (30) days or
is enforced;
D. Borrower is dissolved, or fails to maintain its corporate existence
in good standing, or the usual business of Borrower ceases or is
suspended;
<PAGE> 20
E. Borrower becomes insolvent, makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a
general meeting of its creditors or principal creditors;
F. Any petition or application for any relief under the bankruptcy laws
of the United States now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or
hereafter in effect (whether at law or in equity) is filed by or
against Borrower and Borrower fails to dismiss said petition or
application within sixty (60) days of the filing thereof;
G. The indictment of Borrower under any criminal statute, or the
commencement of criminal proceedings against Borrower, pursuant to
which statute or proceedings the penalties or remedies sought or
available include forfeiture of any of the property having an
aggregate value in excess of $100,000 of Borrower;
H. Any event of default under any financing, security or other
agreement, document or instrument to which Borrower is a party which
Borrower does not timely cure;
I. Borrower's tangible net worth not including subordinated debt falls
below $12,000,000.00 if the U.S. Lending transaction has not been
consummated but $15,000,000.00 if the U.S. Lending transaction has
been consummated;
J. Borrower fails to make a dividend payment on the preferred stock of
Borrower.
K. Borrower merges with another entity or transfers substantially all of
its assets to another entity and (i) Borrower is not the surviving
entity, (ii) the management of Borrower is not the management for the
surviving entity, or (iii) Borrower's appointees and/or designees do
not constitute a majority of the Board of Directors of the surviving
entity.
L. Except as set forth in Section 3 of this Note, Borrower and/or
Borrower's Affiliates sells or issues subordinated debt to any person
or entity unless such subordinated debt is subordinate to this Note.
<PAGE> 21
7. Prepayment. This Note may be prepaid in part or in full at any time
without penalty upon 5 days notice. Partial prepayments shall be applied first
to accrued but unpaid interest and then to principal.
8. No Usury. It is the intent of Borrower and holder to comply with the
laws of the State of Texas with regard to the rate of interest charged
hereunder and, accordingly, notwithstanding any provision to the contrary in
the Note no such provision including without limitation any provision of this
Note providing for payment of interest or other charges shall require the
payment or permit the collection of any amount (herein called the "Excess
Interest") in excess of the maximum amount of interest permitted by law to be
contracted for, charged or collected for the use, detention, or forbearance in
the collection, of all or any portion of the indebtedness evidenced by this
Note; provided that if Excess Interest is provided for, or is adjudicated as
being provided for, in this Note or if Excess Interest is otherwise charged or
collected, then in such event:
(a) The provisions of this Section shall control and govern;
(b) Borrower shall not be obligated to pay any Excess Interest;
(c) Any Excess Interest that holder may have received hereunder
shall, at the option of holder, be (i) applied as a credit against the
then outstanding principal balance due under this Note, or accrued and
unpaid interest thereof, not to exceed the maximum amount permitted by
law, or both, (ii) refunded to the payor thereof, or (iii) any combination
of the foregoing;
(d) The applicable interest rate or rates shall be automatically
subject to reduction to the maximum lawful rate allowed to be contracted
for in writing under the applicable usury laws of the State of Texas as of
the date of disbursement of the indebtedness evidenced hereby; and this
Note and any writing otherwise constituting a charge of Excess Interest
shall be deemed to have been, and shall be, reformed and modified to
reflect such reduction in such interest rate or rates; and
<PAGE> 22
(e) Neither Borrower nor any other person shall have any action or
remedy against holder for any damages whatsoever or any defense to
enforcement of the Note arising out of the payment or collection of any
Excess Interest.
9. Costs of Enforcement. In the event that this Note is placed in the
hands of an attorney-at-law for collection after maturity, or upon default
specified in Section 6 hereof, or to enforce any of the rights, requirements or
remedies contained herein or in the other loan documents, then and in any such
event the Borrower hereby agreeS to pay within ten (10) days after demand all
reasonable costs of collecting or attempting to collect this Note, or
protecting or enforcing such rights, or evaluating, prosecuting or defending
any such proceedings, including, without limitation, reasonable attorneys' fees
(whether or not suit is brought), in addition to all principal, interest and
other amounts payable hereunder.
10. Time. Time is of the essence in the performance of this Note.
11. Notices. All notices must be in writing. Notices may be given by U.S.
Certified Mail, postage prepaid, addressed to the intended recipient at the
address set forth herein, or to such other notice address as that party
designates by notice to the other party, and any notice so given shall be
deemed given one business day after its deposit with the U.S. Postal Service. A
business day is any day other than a Saturday, Sunday, or legal holiday in
Texas. A notice given by other means shall be effective only when actually
received by the addressee.
If to Phoenix:
Hall Phoenix/Inwood, Ltd.
Attn: Craig Hall
750 N. St. Paul
Suite 200
Dallas, TX 75201-3247
If to Borrower:
Search Capital Group, Inc. ("Search")
Attn: Ellis Regebogen
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
<PAGE> 23
12. Waiver. Borrower and any and all others who may become liable for all
or part of the obligations of Borrower under this Note (all of the foregoing
being collectively "Obligor") agree to be jointly and severally bound hereby
and jointly and severally, and to the fullest extent permitted by law, waive
any and all demand, presentment for payment, notice of non-payment, protest and
notice of protest, notice of dishonor, and all lack of diligence and delays in
the enforcement of the payment hereof.
13. Holder's Actions. The remedies of the holder of this Note as provided
herein shall be cumulative and concurrent, and may be pursued singularly,
successively or together, at the sole discretion of the holder, and may be
exercised as often as occasion therefor shall arise and in connection
therewith:
(a) Failure of the holder, for any period of time or on more than
one occasion, to exercise its option to accelerate the Maturity Date of
this Note shall not constitute a waiver of the right to exercise the same
at any time thereafter or in the event of any subsequent default;
(b) No act or omission or commission of the holder, including
specifically any failure to exercise any right, remedy or recourse, shall
be deemed to be a waiver of or release of the same and any such waiver or
release may be effected only through a written document executed by the
holder and then only to the extent specifically recited therein;
(c) A waiver or release with reference to any event shall not be
construed as a waiver of release of any subsequent event, similar or
dissimilar, or as a bar to any subsequent exercise of the holder's rights
or remedies hereunder; and
(d) Except as otherwise specifically required herein, no notice to
Borrower or any other person of the exercise of any right or remedy
granted to the holder by this Note shall be required.
14. Reports and Notices. Borrower shall give prompt notice to holder of
any default or claim of default by any party whether oral or in writing under
any financing agreement to which Borrower is a party. Borrower shall give
holder notice of any sale of securities or sale of
<PAGE> 24
subordinated debt within five (5) days of such sale or issuance. Such notice
shall include all the information necessary to enable holder to determine
whether the sale or issuance is governed by the provisions of Paragraph 3.
Borrower shall deliver to holder copies of 10Qs and 10Ks within 10 days of
their filing with the Securities and Exchange Commission. On the first day of
each month until the maturity of this Note, Borrower shall provide to holder a
certificate that Borrower is in compliance with Paragraph 6. I of this Note.
15. Severability. The unenforceability or invalidity of any provision or
provisions hereof shall not render any other provision or provisions hereof
unenforceable or invalid.
16. Captions. The captions to the Sections of this Note are for
convenience only and shall not be deemed part of the text of the respective
Sections and shall not vary, by implication or otherwise, any of the provisions
of this Note.
17. Date of Performance: If this Note provides that any time period
expires or date for performance specified in this Note falls on a nonbusiness
day (i.e., a Saturday, Sunday, federal legal holiday or state legal holiday in
the State of Texas), such time period or performance deadline will be extended
to the next business day. Except as may be otherwise set forth herein, any
performance will be timely made if completed no later than 12:00 midnight,
(Dallas, Texas, time) on the date the performance is due.
18. Governing Law. This Note shall be governed by the laws of the State of
Texas and venue shall be in Dallas County, Texas.
IN WITNESS WHEREOF, the undersigned has executed this Note effective as of
the day, month and year set forth above.
SEARCH CAPITAL GROUP, INC.
By:
------------------------------------
Printed Name:
--------------------------
Its:
-----------------------------------
<PAGE> 25
MUTUAL RELEASE AGREEMENT
THIS MUTUAL RELEASE AGREEMENT ("Release Agreement") is made and entered
into effective as of November 21, 1996 by and among SEARCH CAPITAL GROUP, INC.,
a Delaware corporation ("Search"), GEORGE C. EVANS ("Evans"), CRAIG HALL
("Hall"), LARRY LEVEY ("Levey"), HALL FINANCIAL GROUP, INC. ("HFG"), a Delaware
corporation, PHOENIX/INWOOD CORPORATION ("PIC"), a Texas corporation, and HALL
PHOENIX/INWOOD, LTD. ("HPI"), a Texas limited partnership. (Hall, Levey, HFG,
PIC, and HPI are sometimes collectively referred to as the "Stockholders" and
individually as a "Stockholder").
RECITALS
WHEREAS, the Stockholders own, either jointly or severally, the
"Stockholder Search Securities" (as defined below).
WHEREAS, certain disputes have arisen between Search and the Stockholders
and certain lawsuits have been filed regarding such disputes in both Delaware
and Texas.
WHEREAS, Search and the Stockholders have agreed to resolve such disputes
and lawsuits as more fully set forth in that certain Compromise and Settlement
Agreement dated November ___, 1996 ("Settlement Agreement") by and among Search
and the Stockholders.
WHEREAS, pursuant to the Settlement Agreement, Search and the Stockholders
have agreed to enter into this Mutual Release Agreement on the terms and
conditions below.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
covenants, payments of money or other consideration, and agreements set forth
below, the receipt and sufficiency of which is hereby acknowledged and agreed
to, the parties hereto agree as follows:
1. DEFINITIONS Capitalized terms used in this Release Agreement shall have the
meaning set forth in the Settlement Agreement except for the capitalized terms
specifically set forth below:
a. "Effective Date" means the date upon which the Settlement Agreement and
this Release Agreement have been fully signed by all of the parties hereto.
b. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
c. "Search Affiliate" means each "affiliate" or "associate" of Search (as
such terms are defined in Rule 12b-2 under the Exchange Act as of the Effective
Date), whether or not such person or entity is such an Affiliate as of the
Effective Date, and each officer, director, employee, shareholder, consultant,
agent, representative, successor and assign, of either Search or any Search
Affiliate; excluding, however, the Stockholders and any Stockholder Affiliate.
<PAGE> 26
d. "Search Group" means Search, all Search Affiliates, and all officers,
directors, employees, shareholders, consultants, agents, representatives,
successors and assigns, of either Search or any Search Affiliate.
e. "Search Securities" means all common stock, convertible preferred
stock, warrants, and debentures (whether senior or subordinated, secured or
unsecured, convertible or nonconvertible), and any other securities, which have
been issued prior to the Effective Date and/or which are issued during the
Standstill Period, by Search or any member of the Search Group.
f. "Stockholder Affiliate" means each "affiliate" or "associate" of a
Stockholder (as such terms are defined in Rule 12b-2 under the Exchange Act as
of the Effective Date), whether or not such person or entity is such an
Affiliate as of the Effective Date, and each officer, director, employee,
shareholder, consultant, agent, representative, successor and assign, of either
a Stockholder or any Stockholder Affiliate; excluding, however, Search and any
Search Affiliate.
g. "Stockholder Documents" means any and all agreements, contracts or
other arrangements to which a Stockholder and/or a Stockholder Affiliate is a
party along with Search and/or a Search Affiliate.
h. "Stockholder Search Securities" means all Search Securities owned,
possessed, or acquired by all of the Stockholders and/or any Stockholder
Affiliate prior to the Effective Date.
i. "Lawsuits" means Craig Hall and Larry E. Levey v. Search Capital Group,
Inc., C.A. No. 15264, pending in the Court of Chancery of the State of Delaware
in and for New Castle County, and Search Capital Group, Inc. v. Hall Financial
Group, Inc., Phoenix/Inwood Corp., Hall Phoenix/Inwood, Ltd., Craig Hall and
Larry Levey, No. 9611254, pending in the 162nd Judicial District, Dallas
County, Texas.
2. Stockholder Release. For the purposes and considerations set forth in the
Settlement Agreement, the Stockholders and the Stockholder Affiliates, do
hereby compromise, settle and fully release, acquit, and forever discharge, the
Search Group, as well as all persons (whether natural, corporate, or otherwise)
in privity with them, including all of their predecessors and successors,
affiliates, corporate subsidiaries, divisions, any of their present and former
officers, directors, employees, agents, representatives, independent
contractors, attorneys, assigns and insurers, from any and all claims, demands,
damages, actions, causes of action, liability, expense, losses, costs or
attorneys fee of any and every nature, known or unknown, suspected or
unsuspected, fixed or contingent, either in or arising out of the law of
contract or torts, whether arising under statutory law or common law, federal
law or state law, at law or in equity, arising out of any act, omission,
representation, communication, conduct or other matter occurring prior to the
Effective Date of the Settlement Agreement, specifically including, but not
limited
<PAGE> 27
to: any matter arising out of or in any way related to the acts, facts,
transactions, occurrences, representations, or omissions set forth or alleged
in the Lawsuits, or which could have been set forth or alleged in the Lawsuits;
any claims regarding alleged mismanagement of Search and/or any other member of
the Search Group; claims for alleged abdication of authority; claims for
alleged self-dealing; claims for alleged breach of fiduciary duty; claims for
alleged fraud in the inducement; claims for alleged fraud (both statutory and
common law); claims for indemnity; claims for alleged tortious interference;
claims for alleged misrepresentation; claims for alleged failure to disclose;
claims for alleged defamation; claims under Section 220(d) of the Delaware
General Corporation Law; claims under federal securities law (including, but
not limited to, the Exchange Act and/or alleged rights of rescission under the
Securities Act of 1933) or blue sky laws; claims for sanctions; and any and all
claims arising out of the activities and conduct of Search and/or any other
member of the Search Group prior to the Effective Date.
3. Search Group Releases. For the purpose and considerations set forth in the
Settlement Agreement, Search, Evans, and the Search Affiliates, do hereby
compromise, settle and fully release, acquit, and forever discharge, the
Stockholders and Stockholders Affiliates, as well as all persons (whether
natural, corporate, or otherwise) in privity with them, including all of their
predecessors and successors, affiliates, corporate subsidiaries, divisions, any
of their present and former officers, directors, employees, agents,
representatives, independent contractors, attorneys, assigns and insurers, from
any and all claims, demands, damages, actions, causes of action, liability,
expense, losses, costs or attorneys fee of any and every nature, known or
unknown, suspected or unsuspected, fixed or contingent, either in or arising
out of the law of contract or torts, whether arising under statutory law or
common law, federal law or state law, at law or in equity, arising out of any
act, omission, representation, communication, conduct or other matter occurring
prior to the Effective Date of the Settlement Agreement, specifically
including, but not limited to: any matter arising out of or in any way related
to the acts, facts, transactions, occurrences, representations, or omissions
set forth or alleged in the Lawsuits, or which could have been set forth or
alleged in the Lawsuits; claims for alleged greenmail; claims for alleged
breach of fiduciary duty; claims for alleged fraud (both statutory and common
law); claims for indemnity; claims for alleged tortious interference; claims
for wrongful termination; claims for alleged failure to disclose; claims for
alleged defamation; claims for alleged misrepresentation; claims under Section
220(d) of the Delaware General Corporation Law; claims under federal securities
law (including, but not limited to, the Exchange Act and claims related to the
filing of and/or disclosures in the 13D statement(s)) or blue sky laws; claims
for sanctions; and any and all claims arising out of the Stockholders'
activities and conduct with respect to their ownership of securities in and/or
position as members of the board of directors of Search Capital Group, Inc.
<PAGE> 28
4. No Assignment of Claims. The Stockholders and Search Group expressly
warrant to each other that no claims, demands, controversies, actions, causes
of action, liability, damages, injuries, losses or other rights which are
mentioned in the Release Agreement or in the Settlement Agreement have been
assigned, conveyed, or in any other manner transferred to any other person or
entity.
5. Partial Invalidity. Should any of the parts, terms, clauses or provisions
of this Release Agreement be declared or determined by any court of competent
jurisdiction to be illegal or invalid, the validity of the remaining parts,
terms, clauses and provisions shall not be affected thereby and said invalid or
illegal part, term, clause or provision shall be deemed not to be a part of the
Release Agreement.
6. Choice of Law. Search and the Stockholders agree that this Release
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas.
7. Full Authority. Each party hereto represents, warrants and covenants that
such party has the full power and authority to enter into and execute this
Release Agreement and carry out its terms and conditions, and upon signing this
Release Agreement, that this Release Agreement shall be a binding obligation on
such party, enforceable with the terms and conditions of the Release Agreement
and the terms and conditions of the Settlement Agreement.
8. Review by Counsel. Search and the Stockholders acknowledge that this
Release Agreement has been reviewed by their respective counsel and that they
are voluntarily executing the same as their free act and deed for the purposes
herein stated.
9. No Release. Notwithstanding any other provision herein to the contrary or
apparently to the contrary, nothing in this Release Agreement shall be
construed as releasing any party from such party's obligations as set forth in
the Settlement Agreement.
10. Counterparts. This Release may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
This Release shall become binding when one or more counterparts taken together
shall have been executed and delivered (which deliveries may be by telefax) by
the parties.
11. No Admission of Liability. It is understood and agreed that this Release
Agreement is being executed in connection with the settlement and compromise of
doubtful and disputed claims, and that the payment received by the Stockholders
shall not be construed as an admission of liability on the part of Search nor
any member of the Search Group, by whom liability is expressly denied. All
parties to this Release Agreement expressly deny any liability.
<PAGE> 29
12. Voluntary Acceptance. The parties hereby declare that the terms of this
Release Agreement have been completely read and are fully understood and are
voluntarily accepted for the purpose of making a full and final compromise,
adjustment and settlement of any and all claims, disputed or otherwise, on
account of the alleged injuries and damages above mentioned, and for the
express purpose of precluding forever any further or additional claims of the
parties arising out of their relationships prior to the date of the execution
of this Release Agreement.
13. No Precedent. All parties agree that this Release Agreement shall not be
used as a precedent in any other claim, suit, cause or hearing. Any attempt to
use this release as a precedent for any other case shall be considered a
material breach of the Agreement and shall subject the breaching party to
liability as to the non-breaching party for damages.
14. Arms Length. This Release Agreement was entered into in good faith based
upon arms length negotiation between the parties and their counsel.
IN WITNESS WHEREOF, the parties hereto have executed this Release
Agreement effective as of the date set forth above in the preamble to this
Release Agreement.
PLEASE READ THIS DOCUMENT CAREFULLY; IT RELEASES CLAIMS.
SEARCH CAPITAL GROUP, INC.
By
-----------------------------------------
Title:
--------------------------------------
--------------------------------------------
GEORGE C. EVANS
--------------------------------------------
CRAIG HALL
--------------------------------------------
LARRY LEVEY
HALL FINANCIAL GROUP, INC.
By
-----------------------------------------
Title:
--------------------------------------
PHOENIX/INWOOD CORPORATION
By
-----------------------------------------
Title:
--------------------------------------
<PAGE> 30
HALL PHOENIX/INWOOD, LTD.
By
-----------------------------------------
Title:
--------------------------------------
<PAGE> 31
EXHIBIT 5-1
November 21, 1996
Search Capital Group, Inc.
Attn: Ellis Regenbogen
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
Gentlemen:
I hereby resign from the Board of Directors of Search Capital Group, Inc.
effective as of 11 a.m., November 21, 1996.
Very truly yours,
Craig Hall
<PAGE> 32
EXHIBIT 5-2
November 21, 1996
Search Capital Group, Inc.
Attn: Ellis Regenbogen
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
Gentlemen:
I hereby resign from the Board of Directors of Search Capital Group, Inc.
effective as of 11 a.m., November 21, 1996.
Very truly yours,
Larry Levey
<PAGE> 33
[SEARCH LETTERHEAD]
November 20, 1996
Dear Shareholder:
Search Capital Group, Inc. (as described in the enclosed Press Release)
has completed a settlement agreement of all litigation between Craig Hall and
affiliates and the Company. All parties have resolved their differences and
Craig Hall and I deem the settlement to be in the best interests of the
Company. We are both determined to see the Company move forward in accordance
with its business plan.
Neither of us believe that a lengthy legal battle is in the best interest
of the Company. The Board of Directors of Search Capital acknowledges that Mr.
Hall has made valid business observations and constructive comments. It
expresses its appreciation of both Craig Hall and Larry Levey for their brief
service and its regret for having filed its legal action.
Sincerely,
George C. Evans
Chairman, C.E.O., President
<PAGE> 34
SEARCH CAPITAL GROUP, INC. DROPS LAWSUIT AGAINST
MAJOR SHAREHOLDER CRAIG HALL, ET AL.
Dallas, Texas, November xx, 1996 -- Dallas-based Search Capital Group,
Inc. announced today that the Company has dropped its lawsuit against two of
its Directors, Messrs. Craig Hall and Larry E. Levey, and Hall Financial Group,
Inc. and Hall Phoenix/Inwood, Ltd., companies controlled by Mr. Hall.
On behalf of the Board of Directors of Search Capital Group, Inc., Ellis
Regenbogen, Senior Vice President and General Counsel said, "we regret any
unfavorable publicity or misinformation that may have occurred as a result of
this litigation, and the Board apologizes to Mr. Hall and Mr. Levey, as well as
to their business associates, friends and families for having subjected them to
the suit."
According to the terms of the settlement agreement, Search agrees to pay
Hall Phoenix/Inwood $4 million in cash and $5 million in a subordinated
debenture to purchase all of its common and preferred stock and warrants of
Search and to settle all claims against the Company. The parties also agreed to
dismiss all litigation and mutually release each other. In addition, Messrs.
Hall and Levey have resigned from Search's Board of Directors.
Search Capital Group, Inc. is a specialized financial services company
engaged in the purchasing, financing and servicing of non-prime automobile
installment loans. Search is also initiating non-auto consumer finance
operations. Search common shares and its 9%/7% convertible preferred shares are
traded over the counter bulletin board under the symbols "SRCG" and "SRCGP",
respectively.
<PAGE> 35
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT ("Standstill Agreement") is made and entered
into effective as of November 21, 1996 by and among SEARCH CAPITAL GROUP, INC.,
a Delaware corporation ("Search"), CRAIG HALL ("Hall"), LARRY LEVEY ("Levey"),
HALL FINANCIAL GROUP, INC. ("HFG"), a Delaware corporation, PHOENIX/INWOOD
CORPORATION ("PIC"), a Texas corporation, and HALL PHOENIX/INWOOD, LTD.
("HPI"), a Texas limited partnership. (Hall, Levey, HFG, PIC, and HPI are
sometimes collectively referred to as the "Stockholders" and individually as a
"Stockholder").
RECITALS
WHEREAS, the Stockholders own, either jointly or severally, some or all of
the "Stockholder Search Securities" (as defined below)
WHEREAS, certain disputes have arisen between Search and the Stockholders
and certain lawsuits have been filed regarding such disputes in both Delaware
and Texas.
WHEREAS, Search and the Stockholders have agreed to resolve such disputes
and lawsuits as more fully set forth in that certain Compromise and Settlement
Agreement dated November ___, 1996 ("Settlement Agreement") by and among Search
and the Stockholders.
WHEREAS, pursuant to the Settlement Agreement, Search and the Stockholders
have agreed to enter into this Standstill Agreement on the terms and conditions
below.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
covenants, payments of money or other consideration, and agreements set forth
below, the receipt and sufficiency of which is hereby acknowledged and agreed
to, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used in this Standstill Agreement shall
have the meaning set forth in the Settlement Agreement except for the
capitalized terms specifically set forth below:
a. "Effective Date" means the date upon which this Agreement has been
fully signed by all of the parties hereto as noted below under the
parties' respective signatures.
b. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules promulgated thereunder as in effect on the Effective Date.
c. "Group" has the same meaning as the term "group" set forth in Section
13(d)(3) of the Exchange Act.
<PAGE> 36
d. "Person" means any individual, firm, corporation, partnership or other
entity, including without limitation, any "person" or "group" within the
meaning of Section 13(d) under the Exchange Act.
e. "Search Affiliate" means each "affiliate" or "associate" of Search (as
such terms are defined in Rule 12b-2 under the Exchange Act as of the
Effective Date), whether or not such Person is such an Affiliate as of the
Effective Date, and each officer, director, employee, shareholder,
consultant, agent, representative, successor and assign, of either Search
or any Search Affiliate; excluding, however, the Stockholders and any
Stockholder Affiliate.
f. "Search Securities" means all common stock, preferred stock, options,
warrants, notes, and debentures (whether senior or subordinated, secured
or unsecured, convertible or nonconvertible), and any other securities,
which have been issued prior to the Effective Date and/or which are issued
during the Standstill Period, by Search or any member of the Search Group.
g. "Standstill Period" means the period of time beginning with the
Effective Date and ending on the earlier of (i) the fifth (5th)
anniversary of the Effective Date or (ii) an Event of Default on the
Subordinated Note.
h. "Stockholder Affiliate" means each "affiliate" or "associate" of a
Stockholder (as such terms are defined in Rule 12b-2 under the Exchange
Act as of the Effective Date), whether or not such Person is such an
Affiliate as of the Effective Date, and each officer, director, employee,
shareholder, consultant, agent, representative, successor and assign, of
either a Stockholder or any Stockholder Affiliate; excluding, however,
Search and any Search Affiliate.
i. "Stockholder Documents" means any and all agreements, contracts or
other arrangements to which a Stockholder and/or a Stockholder Affiliate
is a party along with Search and/or a Search Affiliate.
j. "Stockholder Search Securities" means all Search Securities owned,
possessed, or acquired by all of the Stockholders and/or any Stockholder
Affiliate prior to the Effective Date.
2. STANDSTILL COVENANTS OF STOCKHOLDERS. During the Standstill Period, the
Stockholders jointly and severally covenant that the Stockholders shall not,
and the Stockholders shall cause each Stockholder Affiliate (and each such
Affiliate's own affiliates and associates), not to:
<PAGE> 37
a. No Acquisition of Securities: acquire, offer or propose to acquire, or
agree to acquire, directly or indirectly, alone or in concert with any
other Person, by purchase, exchange, gift or otherwise, any Search
Securities or direct or indirect rights, warrants or options to acquire
(through purchase, exchange, conversion or otherwise) any Search
Securities, or any securities issued in connection with any merger,
consolidation, sale of assets, combination or otherwise to which Search or
any Search Affiliate is a party.
b. No Proxy Solicitation: (i) make, or in any way participate in, directly
or indirectly, alone or in concert with others, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act, as in effect on the Effective Date) or become a
"participant" in any "election contest" (as such terms are defined or used
in Rule 14a-11 under the Exchange Act) with respect to Search or any
Search Affiliate; or (ii) seek to advise or influence any Person with
respect to the voting of any Search Securities, or (iii) initiate, propose
or otherwise solicit Search Securities holders for the approval of one or
more stockholders or other securities holders proposals or induce or
attempt to induce any other Person to initiate any stockholder or other
securities holder proposal.
c. No Formation of a Group; No Influence: take any action, alone or in
concert with any other Person, to (i) form, join or in any way participate
in a Group with respect to any of the Search Securities; (ii) acquire or
affect the control of Search or any Search Affiliate; (iii) control or
influence the management, Board of Directors, policies or affairs of
Search or any Search Affiliate; or (iv) participate in or encourage any
Persons to take any action which is prohibited to be taken by the
Stockholders or any Stockholder Affiliate pursuant to this Standstill
Agreement.
d. No Statements: except (i) with respect to the letter approved as part
of the Settlement Agreement, and (ii) for Stockholder(s) referring people
to Search or the press release mentioned in the Settlement Agreement, make
any statement or proposal, whether written or oral, alone or in concert
with any other Person, to the Board of Directors of Search or any Search
Affiliate, to any director or officer of Search or any Search Affiliate,
to any shareholder, noteholder, securities holder or creditor of Search or
any Search Affiliate, or otherwise make any public announcement or
proposal whatsoever with respect to Search or any Search Affiliate,
including but not limited to a merger or other business combination, sale
or transfer of assets, liquidation or other corporate transaction by
Search or any Search Affiliate.
<PAGE> 38
e. No Shopping: alone, or in concert with any other Person, solicit,
encourage, entertain or discuss with any Person, any proposal with respect
to Search or any Search Affiliate, including but not limited to, a
business combination or other transaction with, or a change of control of,
Search or any Search Affiliate.
f. No Tender Offers: make, solicit, encourage, discuss or participate in,
alone or in concert with any other Person, a tender offer for or exchange
for any Search Securities.
g. No Asset Acquisition Offers: acquire, offer to acquire or agree to
acquire, directly or indirectly, alone or in concert with other Person, by
purchase, exchange or otherwise (i) all or a substantial portion of the
assets, tangible and/or intangible, of Search and/or any Search Affiliate,
or (ii) direct or indirect rights, warrants or options to acquire any
assets of Search and/or any Search Affiliate.
h. No Financing: arrange, or in any way participate in or encourage,
directly or indirectly, alone or in concert with any other Person, any
financing for the purchase, exchange, acquisition or transfer of any
assets of Search or any Search Affiliate or any of the Search Securities.
i. No Call of Meeting: alone or in concert with any other Person (i) call,
or seek to call, any meeting of Search's shareholders, noteholders,
securities holders and/or other creditors, or (ii) in connection with such
meeting make any request to examine, copy or make extracts from any of
Search's books, records, or list of shareholders.
j. No Announcement: announce an intention to do, or enter into any
agreement, arrangement or understanding with any other Person to do, any
of the actions restricted or prohibited under this Section 2, including
but not limited to (i) announcing a change in their intent, purpose, plans
or proposals with respect to either Search, any Search Affiliate or any of
the Search Securities; or (ii) proposing any amendment to or termination
of any of the terms of the Settlement Agreement or any of the terms of any
agreement contemplated by the Settlement Agreement, including but not
limited to this Standstill Agreement, except for final Exchange Act
Section 13(d) filings regarding the transfer of the Stockholder Search
Securities by the Stockholders to Search.
k. No Creditor Actions; Bankruptcy: alone, or in concert with any other
Person, (i) communicate with any of Search's creditors regarding Search or
any Search Affiliate; (ii) file, or initiate the filing of any
<PAGE> 39
bankruptcy petition against Search or any Search Affiliate; or (iii) take
any other action which has a material negative effect on Search's
financial condition.
3. COVENANT NOT TO SUE. During the Standstill Period, the Stockholders jointly
and severally covenant that the Stockholders shall not, and the Stockholders
shall cause each Stockholder Affiliate (and each such Affiliate's own
affiliates and associates), not to, encourage, commence or participate in any
action, lawsuit, or any other legal proceeding against Search or any Search
Affiliates.
4. NO PUBLIC STATEMENTS.
a. By Stockholders. During the Standstill Period, the Stockholders jointly
and severally covenant that the Stockholders shall not, and the
Stockholders shall cause each Stockholder Affiliate (and each such
Affiliate's own affiliates and associates), not to, make any public
statements about Search or any Search Affiliate.
b. By Search. During the Standstill Period, Search covenants that Search
shall not, and Search shall cause each Search Affiliate (and each such
Affiliate's own affiliates and associates), not to, make any public
statements about the Stockholders or any Stockholder Affiliate.
5. SPECIFIC PERFORMANCE. Search will be entitled to an injunction to prevent
a breach of the provisions of the Standstill Agreement and to specific
enforcement of its terms. The Stockholders consent, and shall cause the
Stockholder Affiliates to consent, to personal jurisdiction in any action
brought in the United States District Court for the Northern District of Texas
or in any court of the State of Texas having subject matter jurisdiction and to
service of process upon them.
6. NO ASSIGNMENT. The Stockholders represent and warrant that they have not
sold, gifted or transferred in any other manner any Search Securities.
7. CHOICE OF LAW. Search and Stockholders agree that this Standstill
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas.
8. PARTIAL INVALIDITY. Should any of the parts, terms, clauses or provisions
of this Standstill Agreement be declared or determined by any court of competent
jurisdiction to be illegal or invalid, the validity of the remaining parts,
terms, clauses and provisions shall not be affected thereby and said invalid or
illegal part, term, clause or provision shall be deemed not to be a part of the
Standstill Agreement.
<PAGE> 40
9. MERGER. This Standstill Agreement supersedes all previous negotiations,
representations and discussions by the parties hereto concerning the subject
matter hereof, and integrates the whole of all of their agreements and
understanding concerning the subject matter hereof. No oral representations or
undertakings concerning the subject matter hereof shall operate to amend,
supersede, or replace any of the terms or conditions set forth in this
Standstill Agreement.
10. AMENDMENT. This Standstill Agreement may only be amended in writing signed
by authorized representatives of all the parties hereto. This Agreement cannot
be changed or terminated orally.
11. BINDING ON SUCCESSORS. This Standstill Agreement shall be binding upon and
shall inure to the benefit of the parties and their representatives, heirs,
successors, and assigns.
12. ADDITIONAL REMEDIES. In addition to any other remedies available to Search
at law or equity if this Standstill Agreement is breached by a Stockholder or
Stockholder Affiliate, the parties hereto agree as follows:
a. Transfer of Securities. If, at any time or from time to time during the
Standstill Period, any Stockholder or Stockholder Affiliate violates
Section 2.a of this Standstill Agreement, Search shall have the right to
(i) purchase all Search Securities acquired and still held by any and all
Stockholders and/or Stockholder Affiliates for the price of One Dollar
($1.00) and (ii) direct the Search's securities transfer agent to transfer
all such Search Securities from the Stockholders and Stockholder
Affiliates to Search.
b. Disgorgement of Profits. If, at any time or from time to time during
the Standstill Period, any Stockholder or Stockholder Affiliate violates
Section 2.a of this Standstill Agreement and acquires and then resells,
exchanges or otherwise transfers such Search Securities, Search shall have
the right to force the Stockholders and/or Stockholder Affiliates to
promptly pay to Search in cash an amount of money equal to the greater of
(i) the amount of money or other consideration received by the
Stockholders and/or Stockholder Affiliates upon any such resale, exchange
or other transfer of such Search Securities, and (ii) the market value of
the Search Securities.
13. NOTICES. All notices given with regard to this Standstill Agreement shall
be given in accordance with the terms of Section 24 of the Settlement
Agreement.
14. PERMITTED COMMUNICATIONS. Notwithstanding any of the foregoing, the
Stockholders may (i) file any documents required by the Securities and Exchange
Commission, provided that the
<PAGE> 41
content of any document(s) so filed does not violate any of the other terms and
conditions of this Standstill Agreement; (ii) respond to any legal subpoena,
after notice to Search immediately following service of such subpoena; and
(iii) if so advised by counsel, the Stockholders may file the Settlement
Documents with the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties have executed this Standstill Agreement to
be effective for all purposes as of the Effective Date.
Executed to be effective as of the date above written.
SEARCH CAPITAL GROUP, INC. ("Search")
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
"STOCKHOLDERS"
---------------------------------------
CRAIG HALL
PHOENIX/INWOOD CORP.
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
HALL PHOENIX/INWOOD, LTD.
By: PHOENIX/INWOOD CORP.,
GENERAL PARTNER
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
<PAGE> 42
HALL FINANCIAL GROUP, INC.
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
---------------------------------------
LARRY LEVEY
<PAGE> 1
EXHIBIT 10.2
MUTUAL RELEASE AGREEMENT
THIS MUTUAL RELEASE AGREEMENT ("Release Agreement") is made and
entered into effective as of November 21, 1996 by and among SEARCH CAPITAL
GROUP, INC., a Delaware corporation ("Search"), GEORGE C. EVANS ("Evans"),
CRAIG HALL ("Hall"), LARRY LEVEY ("Levey"), HALL FINANCIAL GROUP, INC. ("HFG"),
a Delaware corporation, PHOENIX/INWOOD CORPORATION ("PIC"), a Texas
corporation, and HALL PHOENIX/INWOOD, LTD. ("HPI"), a Texas limited
partnership. (Hall, Levey, HFG, PIC, and HPI are sometimes collectively
referred to as the "Stockholders" and individually as a "Stockholder").
RECITALS
WHEREAS, the Stockholders own, either jointly or severally, the
"Stockholder Search Securities" (as defined below).
WHEREAS, certain disputes have arisen between Search and the
Stockholders and certain lawsuits have been filed regarding such disputes in
both Delaware and Texas.
WHEREAS, Search and the Stockholders have agreed to resolve such
disputes and lawsuits as more fully set forth in that certain Compromise and
Settlement Agreement dated November ___, 1996 ("Settlement Agreement") by and
among Search and the Stockholders.
WHEREAS, pursuant to the Settlement Agreement, Search and the
Stockholders have agreed to enter into this Mutual Release Agreement on the
terms and conditions below.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
covenants, payments of money or other consideration, and agreements set forth
below, the receipt and sufficiency of which is hereby acknowledged and agreed
to, the parties hereto agree as follows:
1. DEFINITIONS Capitalized terms used in this Release Agreement shall have the
meaning set forth in the Settlement Agreement except for the capitalized terms
specifically set forth below:
a. "Effective Date" means the date upon which the Settlement
Agreement and this Release Agreement have been fully signed by all of the
parties hereto.
b. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
c. "Search Affiliate" means each "affiliate" or "associate" of Search
(as such terms are defined in Rule 12b-2 under the Exchange Act as of the
Effective Date), whether or not such person or entity is such an Affiliate as
of the Effective Date, and each officer, director, employee, shareholder,
consultant, agent, representative, successor and assign, of
<PAGE> 2
either Search or any Search Affiliate; excluding, however, the Stockholders and
any Stockholder Affiliate.
d. "Search Group" means Search, all Search Affiliates, and all
officers, directors, employees, shareholders, consultants, agents,
representatives, successors and assigns, of either Search or any Search
Affiliate.
e. "Search Securities" means all common stock, convertible preferred
stock, warrants, and debentures (whether senior or subordinated, secured or
unsecured, convertible or nonconvertible), and any other securities, which have
been issued prior to the Effective Date and/or which are issued during the
Standstill Period, by Search or any member of the Search Group.
f. "Stockholder Affiliate" means each "affiliate" or "associate" of a
Stockholder (as such terms are defined in Rule 12b-2 under the Exchange Act as
of the Effective Date), whether or not such person or entity is such an
Affiliate as of the Effective Date, and each officer, director, employee,
shareholder, consultant, agent, representative, successor and assign, of either
a Stockholder or any Stockholder Affiliate; excluding, however, Search and any
Search Affiliate.
g. "Stockholder Documents" means any and all agreements, contracts or
other arrangements to which a Stockholder and/or a Stockholder Affiliate is a
party along with Search and/or a Search Affiliate.
h. "Stockholder Search Securities" means all Search Securities owned,
possessed, or acquired by all of the Stockholders and/or any Stockholder
Affiliate prior to the Effective Date.
i. "Lawsuits" means Craig Hall and Larry E. Levey v. Search Capital
Group, Inc., C.A. No. 15264, pending in the Court of Chancery of the State of
Delaware in and for New Castle County, and Search Capital Group, Inc. v. Hall
Financial Group, Inc., Phoenix/Inwood Corp., Hall Phoenix/Inwood, Ltd., Craig
Hall and Larry Levey, No. 9611254, pending in the 162nd Judicial District,
Dallas County, Texas.
2. Stockholder Release. For the purposes and considerations set forth in the
Settlement Agreement, the Stockholders and the Stockholder Affiliates, do
hereby compromise, settle and fully release, acquit, and forever discharge, the
Search Group, as well as all persons (whether natural, corporate, or otherwise)
in privity with them, including all of their predecessors and successors,
affiliates, corporate subsidiaries, divisions, any of their present and former
officers, directors, employees, agents, representatives, independent
contractors, attorneys, assigns and insurers, from any and all claims, demands,
damages, actions, causes of action, liability, expense, losses, costs or
attorneys fee of any and every nature, known or unknown, suspected or
unsuspected, fixed or contingent, either in or arising out of the law of
contract or torts, whether arising under statutory law or
<PAGE> 3
common law, federal law or state law, at law or in equity, arising out of any
act, omission, representation, communication, conduct or other matter occurring
prior to the Effective Date of the Settlement Agreement, specifically
including, but not limited to: any matter arising out of or in any way related
to the acts, facts, transactions, occurrences, representations, or omissions
set forth or alleged in the Lawsuits, or which could have been set forth or
alleged in the Lawsuits; any claims regarding alleged mismanagement of Search
and/or any other member of the Search Group; claims for alleged abdication of
authority; claims for alleged self-dealing; claims for alleged breach of
fiduciary duty; claims for alleged fraud in the inducement; claims for alleged
fraud (both statutory and common law); claims for indemnity; claims for alleged
tortious interference; claims for alleged misrepresentation; claims for alleged
failure to disclose; claims for alleged defamation; claims under Section 220(d)
of the Delaware General Corporation Law; claims under federal securities law
(including, but not limited to, the Exchange Act and/or alleged rights of
rescission under the Securities Act of 1933) or blue sky laws; claims for
sanctions; and any and all claims arising out of the activities and conduct of
Search and/or any other member of the Search Group prior to the Effective Date.
3. Search Group Releases. For the purpose and considerations set forth in the
Settlement Agreement, Search, Evans, and the Search Affiliates, do hereby
compromise, settle and fully release, acquit, and forever discharge, the
Stockholders and Stockholders Affiliates, as well as all persons (whether
natural, corporate, or otherwise) in privity with them, including all of their
predecessors and successors, affiliates, corporate subsidiaries, divisions, any
of their present and former officers, directors, employees, agents,
representatives, independent contractors, attorneys, assigns and insurers, from
any and all claims, demands, damages, actions, causes of action, liability,
expense, losses, costs or attorneys fee of any and every nature, known or
unknown, suspected or unsuspected, fixed or contingent, either in or arising
out of the law of contract or torts, whether arising under statutory law or
common law, federal law or state law, at law or in equity, arising out of any
act, omission, representation, communication, conduct or other matter occurring
prior to the Effective Date of the Settlement Agreement, specifically
including, but not limited to: any matter arising out of or in any way related
to the acts, facts, transactions, occurrences, representations, or omissions
set forth or alleged in the Lawsuits, or which could have been set forth or
alleged in the Lawsuits; claims for alleged greenmail; claims for alleged
breach of fiduciary duty; claims for alleged fraud (both statutory and common
law); claims for indemnity; claims for alleged tortious interference; claims
for wrongful termination; claims for alleged failure to disclose; claims for
alleged defamation; claims for alleged misrepresentation; claims under Section
220(d) of the Delaware General Corporation Law; claims under federal securities
law (including, but not limited to, the Exchange Act and claims related to the
filing of and/or disclosures in the 13D statement(s)) or blue sky laws; claims
for
<PAGE> 4
sanctions; and any and all claims arising out of the Stockholders'
activities and conduct with respect to their ownership of securities in and/or
position as members of the board of directors of Search Capital Group, Inc.
4. No Assignment of Claims. The Stockholders and Search Group expressly warrant
to each other that no claims, demands, controversies, actions, causes of
action, liability, damages, injuries, losses or other rights which are
mentioned in the Release Agreement or in the Settlement Agreement have been
assigned, conveyed, or in any other manner transferred to any other person or
entity.
5. Partial Invalidity. Should any of the parts, terms, clauses or provisions of
this Release Agreement be declared or determined by any court of competent
jurisdiction to be illegal or invalid, the validity of the remaining parts,
terms, clauses and provisions shall not be affected thereby and said invalid or
illegal part, term, clause or provision shall be deemed not to be a part of the
Release Agreement.
6. Choice of Law. Search and the Stockholders agree that this Release
Agreement shall be governed by and construed in accordance with the laws of
the State of Texas.
7. Full Authority. Each party hereto represents, warrants and covenants that
such party has the full power and authority to enter into and execute this
Release Agreement and carry out its terms and conditions, and upon signing this
Release Agreement, that this Release Agreement shall be a binding obligation on
such party, enforceable with the terms and conditions of the Release Agreement
and the terms and conditions of the Settlement Agreement.
8. Review by Counsel. Search and the Stockholders acknowledge that this
Release Agreement has been reviewed by their respective counsel and that they
are voluntarily executing the same as their free act and deed for the purposes
herein stated.
9. No Release. Notwithstanding any other provision herein to the contrary
or apparently to the contrary, nothing in this Release Agreement shall be
construed as releasing any party from such party's obligations as set forth in
the Settlement Agreement.
10. Counterparts. This Release may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
This Release shall become binding when one or more counterparts taken together
shall have been executed and delivered (which deliveries may be by telefax) by
the parties.
11. No Admission of Liability. It is understood and agreed that this Release
Agreement is being executed in connection with the
<PAGE> 5
settlement and compromise of doubtful and disputed claims, and that the payment
received by the Stockholders shall not be construed as an admission of
liability on the part of Search nor any member of the Search Group, by whom
liability is expressly denied. All parties to this Release Agreement expressly
deny any liability.
12. Voluntary Acceptance. The parties hereby declare that the terms of this
Release Agreement have been completely read and are fully understood and are
voluntarily accepted for the purpose of making a full and final compromise,
adjustment and settlement of any and all claims, disputed or otherwise, on
account of the alleged injuries and damages above mentioned, and for the
express purpose of precluding forever any further or additional claims of the
parties arising out of their relationships prior to the date of the execution
of this Release Agreement.
13. No Precedent. All parties agree that this Release Agreement shall not be
used as a precedent in any other claim, suit, cause or hearing. Any attempt to
use this release as a precedent for any other case shall be considered a
material breach of the Agreement and shall subject the breaching party to
liability as to the non-breaching party for damages.
14. Arms Length. This Release Agreement was entered into in good faith
based upon arms length negotiation between the parties and their counsel.
IN WITNESS WHEREOF, the parties hereto have executed this Release
Agreement effective as of the date set forth above in the preamble to this
Release Agreement.
PLEASE READ THIS DOCUMENT CAREFULLY; IT RELEASES CLAIMS.
SEARCH CAPITAL GROUP, INC.
By /s/ Robert D. Idzi
------------------------
Title: Senior EVP & CFO
/s/ George C. Evans
----------------------------
GEORGE C. EVANS
/s/ Craig Hall
----------------------------
CRAIG HALL
/s/ Larry Levey
----------------------------
LARRY LEVEY
HALL FINANCIAL GROUP, INC.
By /s/ Larry Levey
------------------------
Title: Vice President
<PAGE> 6
PHOENIX/INWOOD CORPORATION
By /s/ Larry Levey
-----------------------
Title: Vice President
HALL PHOENIX/INWOOD, LTD.
By /s/ Larry Levey
-----------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.3
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT ("Standstill Agreement") is made and entered
into effective as of November 21, 1996 by and among SEARCH CAPITAL GROUP, INC.,
a Delaware corporation ("Search"), CRAIG HALL ("Hall"), LARRY LEVEY ("Levey"),
HALL FINANCIAL GROUP, INC. ("HFG"), a Delaware corporation, PHOENIX/INWOOD
CORPORATION ("PIC"), a Texas corporation, and HALL PHOENIX/INWOOD, LTD.
("HPI"), a Texas limited partnership. (Hall, Levey, HFG, PIC, and HPI are
sometimes collectively referred to as the "Stockholders" and individually as a
"Stockholder").
RECITALS
WHEREAS, the Stockholders own, either jointly or severally, some or
all of the "Stockholder Search Securities" (as defined below)
WHEREAS, certain disputes have arisen between Search and the
Stockholders and certain lawsuits have been filed regarding such disputes in
both Delaware and Texas.
WHEREAS, Search and the Stockholders have agreed to resolve such
disputes and lawsuits as more fully set forth in that certain Compromise and
Settlement Agreement dated November ___, 1996 ("Settlement Agreement") by and
among Search and the Stockholders.
WHEREAS, pursuant to the Settlement Agreement, Search and the
Stockholders have agreed to enter into this Standstill Agreement on the terms
and conditions below.
NOW, THEREFORE, in consideration of the foregoing recitals, and the
covenants, payments of money or other consideration, and agreements set forth
below, the receipt and sufficiency of which is hereby acknowledged and agreed
to, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used in this Standstill Agreement
shall have the meaning set forth in the Settlement Agreement except for the
capitalized terms specifically set forth below:
a. "Effective Date" means the date upon which this Agreement has
been fully signed by all of the parties hereto as noted below under
the parties' respective signatures.
b. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and all rules promulgated thereunder as in effect on the
Effective Date.
c. "Group" has the same meaning as the term "group" set forth in
Section 13(d)(3) of the Exchange Act.
<PAGE> 2
d. "Person" means any individual, firm, corporation, partnership
or other entity, including without limitation, any "person" or "group"
within the meaning of Section 13(d) under the Exchange Act.
e. "Search Affiliate" means each "affiliate" or "associate" of
Search (as such terms are defined in Rule 12b-2 under the Exchange Act
as of the Effective Date), whether or not such Person is such an
Affiliate as of the Effective Date, and each officer, director,
employee, shareholder, consultant, agent, representative, successor
and assign, of either Search or any Search Affiliate; excluding,
however, the Stockholders and any Stockholder Affiliate.
f. "Search Securities" means all common stock, preferred stock,
options, warrants, notes, and debentures (whether senior or
subordinated, secured or unsecured, convertible or nonconvertible),
and any other securities, which have been issued prior to the
Effective Date and/or which are issued during the Standstill Period,
by Search or any member of the Search Group.
g. "Standstill Period" means the period of time beginning with
the Effective Date and ending on the earlier of (i) the fifth (5th)
anniversary of the Effective Date or (ii) an Event of Default on the
Subordinated Note.
h. "Stockholder Affiliate" means each "affiliate" or "associate"
of a Stockholder (as such terms are defined in Rule 12b-2 under the
Exchange Act as of the Effective Date), whether or not such Person is
such an Affiliate as of the Effective Date, and each officer,
director, employee, shareholder, consultant, agent, representative,
successor and assign, of either a Stockholder or any Stockholder
Affiliate; excluding, however, Search and any Search Affiliate.
i. "Stockholder Documents" means any and all agreements,
contracts or other arrangements to which a Stockholder and/or a
Stockholder Affiliate is a party along with Search and/or a Search
Affiliate.
j. "Stockholder Search Securities" means all Search Securities
owned, possessed, or acquired by all of the Stockholders and/or any
Stockholder Affiliate prior to the Effective Date.
2. STANDSTILL COVENANTS OF STOCKHOLDERS. During the Standstill Period,
the Stockholders jointly and severally covenant that the Stockholders shall
not, and the Stockholders shall cause each Stockholder Affiliate (and each such
Affiliate's own affiliates and associates), not to:
<PAGE> 3
a. No Acquisition of Securities: acquire, offer or propose to
acquire, or agree to acquire, directly or indirectly, alone or in
concert with any other Person, by purchase, exchange, gift or
otherwise, any Search Securities or direct or indirect rights,
warrants or options to acquire (through purchase, exchange, conversion
or otherwise) any Search Securities, or any securities issued in
connection with any merger, consolidation, sale of assets, combination
or otherwise to which Search or any Search Affiliate is a party.
b. No Proxy Solicitation: (i) make, or in any way participate
in, directly or indirectly, alone or in concert with others, any
"solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the Exchange Act, as in effect on the Effective
Date) or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange Act) with
respect to Search or any Search Affiliate; or (ii) seek to advise or
influence any Person with respect to the voting of any Search
Securities, or (iii) initiate, propose or otherwise solicit Search
Securities holders for the approval of one or more stockholders or
other securities holders proposals or induce or attempt to induce any
other Person to initiate any stockholder or other securities holder
proposal.
c. No Formation of a Group; No Influence: take any action, alone
or in concert with any other Person, to (i) form, join or in any way
participate in a Group with respect to any of the Search Securities;
(ii) acquire or affect the control of Search or any Search Affiliate;
(iii) control or influence the management, Board of Directors,
policies or affairs of Search or any Search Affiliate; or (iv)
participate in or encourage any Persons to take any action which is
prohibited to be taken by the Stockholders or any Stockholder
Affiliate pursuant to this Standstill Agreement.
d. No Statements: except (i) with respect to the letter approved
as part of the Settlement Agreement, and (ii) for Stockholder(s)
referring people to Search or the press release mentioned in the
Settlement Agreement, make any statement or proposal, whether written
or oral, alone or in concert with any other Person, to the Board of
Directors of Search or any Search Affiliate, to any director or
officer of Search or any Search Affiliate, to any shareholder,
noteholder, securities holder or creditor of Search or any Search
Affiliate, or otherwise make any public announcement or proposal
whatsoever with respect to Search or any Search Affiliate, including
but not limited to a merger or other business combination, sale or
transfer of assets, liquidation or other corporate transaction by
Search or any Search Affiliate.
<PAGE> 4
e. No Shopping: alone, or in concert with any other Person,
solicit, encourage, entertain or discuss with any Person, any proposal
with respect to Search or any Search Affiliate, including but not
limited to, a business combination or other transaction with, or a
change of control of, Search or any Search Affiliate.
f. No Tender Offers: make, solicit, encourage, discuss or
participate in, alone or in concert with any other Person, a tender
offer for or exchange for any Search Securities.
g. No Asset Acquisition Offers: acquire, offer to acquire or
agree to acquire, directly or indirectly, alone or in concert with
other Person, by purchase, exchange or otherwise (i) all or a
substantial portion of the assets, tangible and/or intangible, of
Search and/or any Search Affiliate, or (ii) direct or indirect rights,
warrants or options to acquire any assets of Search and/or any Search
Affiliate.
h. No Financing: arrange, or in any way participate in or
encourage, directly or indirectly, alone or in concert with any other
Person, any financing for the purchase, exchange, acquisition or
transfer of any assets of Search or any Search Affiliate or any of the
Search Securities.
i. No Call of Meeting: alone or in concert with any other Person
(i) call, or seek to call, any meeting of Search's shareholders,
noteholders, securities holders and/or other creditors, or (ii) in
connection with such meeting make any request to examine, copy or make
extracts from any of Search's books, records, or list of shareholders.
j. No Announcement: announce an intention to do, or enter into
any agreement, arrangement or understanding with any other Person to
do, any of the actions restricted or prohibited under this Section 2,
including but not limited to (i) announcing a change in their intent,
purpose, plans or proposals with respect to either Search, any Search
Affiliate or any of the Search Securities; or (ii) proposing any
amendment to or termination of any of the terms of the Settlement
Agreement or any of the terms of any agreement contemplated by the
Settlement Agreement, including but not limited to this Standstill
Agreement, except for final Exchange Act Section 13(d) filings
regarding the transfer of the Stockholder Search Securities by the
Stockholders to Search.
k. No Creditor Actions; Bankruptcy: alone, or in concert with
any other Person, (i) communicate with any of Search's creditors
regarding Search or any Search Affiliate; (ii) file, or initiate the
filing of any
<PAGE> 5
bankruptcy petition against Search or any Search Affiliate; or (iii)
take any other action which has a material negative effect on Search's
financial condition.
3. COVENANT NOT TO SUE. During the Standstill Period, the Stockholders
jointly and severally covenant that the Stockholders shall not, and the
Stockholders shall cause each Stockholder Affiliate (and each such Affiliate's
own affiliates and associates), not to, encourage, commence or participate in
any action, lawsuit, or any other legal proceeding against Search or any Search
Affiliates.
4. NO PUBLIC STATEMENTS.
a. By Stockholders. During the Standstill Period, the
Stockholders jointly and severally covenant that the Stockholders
shall not, and the Stockholders shall cause each Stockholder Affiliate
(and each such Affiliate's own affiliates and associates), not to,
make any public statements about Search or any Search Affiliate.
b. By Search. During the Standstill Period, Search covenants
that Search shall not, and Search shall cause each Search Affiliate
(and each such Affiliate's own affiliates and associates), not to,
make any public statements about the Stockholders or any Stockholder
Affiliate.
5. SPECIFIC PERFORMANCE. Search will be entitled to an injunction to
prevent a breach of the provisions of the Standstill Agreement and to specific
enforcement of its terms. The Stockholders consent, and shall cause the
Stockholder Affiliates to consent, to personal jurisdiction in any action
brought in the United States District Court for the Northern District of Texas
or in any court of the State of Texas having subject matter jurisdiction and to
service of process upon them.
6. NO ASSIGNMENT. The Stockholders represent and warrant that they have
not sold, gifted or transferred in any other manner any Search Securities.
7. CHOICE OF LAW. Search and Stockholders agree that this Standstill
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas.
8. PARTIAL INVALIDITY. Should any of the parts, terms, clauses or
provisions of this Standstill Agreement be declared or determined by any court
of competent jurisdiction to be illegal or invalid, the validity of the
remaining parts, terms, clauses and provisions shall not be affected thereby
and said invalid or illegal part, term, clause or provision shall be deemed not
to be a part of the Standstill Agreement.
<PAGE> 6
9. MERGER. This Standstill Agreement supersedes all previous
negotiations, representations and discussions by the parties hereto concerning
the subject matter hereof, and integrates the whole of all of their agreements
and understanding concerning the subject matter hereof. No oral
representations or undertakings concerning the subject matter hereof shall
operate to amend, supersede, or replace any of the terms or conditions set
forth in this Standstill Agreement.
10. AMENDMENT. This Standstill Agreement may only be amended in writing
signed by authorized representatives of all the parties hereto. This Agreement
cannot be changed or terminated orally.
11. BINDING ON SUCCESSORS. This Standstill Agreement shall be binding
upon and shall inure to the benefit of the parties and their representatives,
heirs, successors, and assigns.
12. ADDITIONAL REMEDIES. In addition to any other remedies available to
Search at law or equity if this Standstill Agreement is breached by a
Stockholder or Stockholder Affiliate, the parties hereto agree as follows:
a. Transfer of Securities. If, at any time or from time to time
during the Standstill Period, any Stockholder or Stockholder Affiliate
violates Section 2.a of this Standstill Agreement, Search shall have
the right to (i) purchase all Search Securities acquired and still
held by any and all Stockholders and/or Stockholder Affiliates for the
price of One Dollar ($1.00) and (ii) direct the Search's securities
transfer agent to transfer all such Search Securities from the
Stockholders and Stockholder Affiliates to Search.
b. Disgorgement of Profits. If, at any time or from time to time
during the Standstill Period, any Stockholder or Stockholder Affiliate
violates Section 2.a of this Standstill Agreement and acquires and
then resells, exchanges or otherwise transfers such Search Securities,
Search shall have the right to force the Stockholders and/or
Stockholder Affiliates to promptly pay to Search in cash an amount of
money equal to the greater of (i) the amount of money or other
consideration received by the Stockholders and/or Stockholder
Affiliates upon any such resale, exchange or other transfer of such
Search Securities, and (ii) the market value of the Search Securities.
13. NOTICES. All notices given with regard to this Standstill Agreement
shall be given in accordance with the terms of Section 24 of the Settlement
Agreement.
14. PERMITTED COMMUNICATIONS. Notwithstanding any of the foregoing, the
Stockholders may (i) file any documents required by the Securities and Exchange
Commission, provided that the
<PAGE> 7
content of any document(s) so filed does not violate any of the other terms and
conditions of this Standstill Agreement; (ii) respond to any legal subpoena,
after notice to Search immediately following service of such subpoena; and
(iii) if so advised by counsel, the Stockholders may file the Settlement
Documents with the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties have executed this Standstill
Agreement to be effective for all purposes as of the Effective Date.
Executed to be effective as of the date above written.
SEARCH CAPITAL GROUP, INC. ("Search")
By: /s/ ROBERT D. IDZI
-------------------------
Printed Name: Robert D. Idzi
Title: Senior EVP & CFO
"STOCKHOLDERS"
/s/ CRAIG HALL
----------------------------
CRAIG HALL
PHOENIX/INWOOD CORP.
By: /s/ LARRY LEVEY
---------------------------
Printed Name: Larry Levey
Title: Vice President
HALL PHOENIX/INWOOD, LTD.
By: PHOENIX/INWOOD CORP.,
GENERAL PARTNER
By: /s/ LARRY LEVEY
---------------------------
Printed Name: Larry Levey
Title: Vice President
<PAGE> 8
HALL FINANCIAL GROUP, INC.
By: /s/ LARRY LEVEY
---------------------------
Printed Name: Larry Levey
Title: Vice President
/s/ LARRY LEVEY
------------------------------
LARRY LEVEY
<PAGE> 1
EXHIBIT 10.4
SUBORDINATED NOTE
$5,000,000.00 November 21, 1996
1. Agreement to Pay. FOR VALUE RECEIVED, SEARCH CAPITAL GROUP,
INC., a Delaware corporation, (herein called the "Borrower"), promises to pay
to the order of HALL PHOENIX/INWOOD, LTD. (herein called "Phoenix"), in the
manner provided herein, the principal sum of FIVE MILLION DOLLARS
($5,000,000.00), together with interest remaining from time to time unpaid at
the rate provided for in Section 2 hereof. This Promissory Note (hereinafter
the "Note") is given at closing under and in compliance with that certain
Compromise and Settlement Agreement dated November 21, 1996, by and between
Borrower, Craig Hall, Larry Levey, Hall Financial Group, Inc., Phoenix/Inwood
Corp. and Phoenix ("Settlement Agreement"). All terms used in this Note shall
have the meanings given to them in the Settlement Agreement if they are defined
in the Settlement Agreement and not in this Note.
2. Interest Rate. Outstanding principal balance hereof prior to
maturity shall bear interest from the date hereof until paid at the rate of 14%
per annum for the first six months after the date of this Note, at the rate of
15% per annum for the next six months, at the rate of 16% per annum for the
next six months, and at the rate of 17% per annum thereafter (herein called the
"Interest Rate"), in each case calculated daily on the basis of a 360-day year
for each day all or any part of the principal balance hereof shall remain
outstanding. All past due principal and/or interest or installment thereof
shall bear interest at the highest rate for which the undersigned may legally
contract under applicable law or, if no such rate is designated under
applicable law, at the rate of 18% per annum calculated on the basis of a 365
day year (herein called the "Default Interest Rate").
3. Payments. This Note shall be payable in monthly installments
of interest only commencing on the 1st day of December, 1996 and continuing
thereafter on the 1st day of each month until the Maturity Date (as hereinafter
defined). The Maturity Date shall be the earlier of (i) four years after the
execution of this Note or (ii) the date of closing by Borrower and/or
<PAGE> 2
Borrower's Affiliates on the sale or sales of any equity securities for cash or
issue subordinated debt whether on a pari passu basis or not with this Note for
cash or any combination thereof for cash, any or all of which must aggregate
$20,000,000.00 or more ("Maturity Date"). On the Maturity Date, the unpaid
principal balance hereof and all accrued but unpaid interest hereon shall
become due and payable. In the event Borrower and/or Borrower's Affiliates
shall sell equity securities for cash or issue subordinated debt which is on a
pari passu basis with this Note for cash or any combination thereof for cash
which aggregates less than $20,000,000.00, Borrower shall make a principal
payment on this Note at the time of closing on such sale in an amount equal to
the percentage that the amount of the sale is to $20,000,000.00 multiplied by
the then principal amount amount of this Note (i.e. a $10,000,000.00 sale would
require a principal payment equal to 50% of the then principal amount of the
Note). The sale of any equity securities or issuance of any subordinated debt
that is junior to this Note in a transaction to acquire (1) assets of another
entity or (2) stocks or securities of another entity and which equity
securities or subordinated debt is issued to the acquired company, its owners
and/or its creditors shall not be an event that accelerates the maturity of all
or any part of this Note to a date on or before four (4) years after the
execution of said Note. For example, the U.S. Lending transaction, of which
holder has knowledge, is a transaction the consummation of which shall not
accelerate the maturity of this Note provided any subordinated debt issued is
junior to this Note.
4. Method and Place of Payment. Payments upon this Note shall be
made in lawful money of the United States of America which shall be legal
tender for public and private debt at the time of payment, and shall be made at
750 N. St. Paul Street, Suite 200, Dallas, Texas 75201-3247 or such other place
as the holder of this Note may from time to time in writing appoint.
5. Subordination. The payment of principal and interest on this
Note is subordinated in right of payment to the prior payment of all "Senior
Indebtedness" of the Borrower, whether outstanding on this date or thereafter.
"Senior Indebtedness" is defined as the principal of, and premium and interest
on, indebtedness of the Borrower for money borrowed on a secured basis from
persons, firms, or corporations that regularly engage in the business of
lending money. In
<PAGE> 3
the event of any insolvency, bankruptcy, receivership, liquidation, any other
marshalling of the assets and liabilities of the Borrower, or any other event
of default under the documents governing the Senior Indebtedness, the holders
of the Senior Indebtedness will be entitled to receive payment in full of all
principal and interest on all Senior Indebtedness before the holder of the Note
is entitled to receive any payment on account of principal or interest.
6. Default and Acceleration. The outstanding principal balance
of this Note together with accrued and unpaid interest thereon, shall, at the
option of the holder of this Note and without demand, notice or legal process
of any kind become at once due and payable at the place last designated by
holder as the place for payment hereof, upon the occurrence of an Event of
Default. An "Event of Default" shall occur under this agreement if:
A. Borrower fails timely to pay an amount payable to
holder under this Note and fails to pay within five (5) days
of holder's giving written notice of such default to Borrower;
provided, however, that holder shall not be required to give
notice more than three (3) times during the term of this Note
and interest shall accrue at the Default Interest Rate until
such payment is made; or
B. Borrower breaches any other obligation under this
agreement or under any of the Settlement Documents, and fails
to cure the breach within 30 days of holder's giving a written
notice of such default toBorrower.
C. Any judgment or judgments aggregating in excess of
$1,000,000.00 in excess of applicable insurance coverage which
remains unpaid for more than thirty (30) days or for which no
bond is posted within the applicable time, or any injunction
or attachment is obtained against Borrower which remains
unstayed for a period of thirty (30) days or is enforced;
D. Borrower is dissolved, or fails to maintain its
corporate existence in good standing, or the usual business of
Borrower ceases or is suspended;
<PAGE> 4
E. Borrower becomes insolvent, makes an assignment for
the benefit of creditors, makes or sends notice of a bulk
transfer or calls a general meeting of its creditors or
principal creditors;
F. Any petition or application for any relief under the
bankruptcy laws of the United States now or hereafter in
effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed by or against Borrower
and Borrower fails to dismiss said petition or application
within sixty (60) days of the filing thereof;
G. The indictment of Borrower under any criminal
statute, or the commencement of criminal proceedings against
Borrower, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture
of any of the property having an aggregate value in excess of
$100,000 of Borrower;
H. Any event of default under any financing, security or
other agreement, document or instrument to which Borrower is a
party which Borrower does not timely cure;
I. Borrower's tangible net worth not including
subordinated debt falls below $12,000,000.00 if the U.S.
Lending transaction has not been consummated but
$15,000,000.00 if the U.S. Lending transaction has been
consummated;
J. Borrower fails to make a dividend payment on the
preferred stock of Borrower.
K. Borrower merges with another entity or transfers
substantially all of its assets to another entity and (i)
Borrower is not the surviving entity, (ii) the management of
Borrower is not the management for the surviving entity, or
(iii) Borrower's appointees and/or designees do not constitute
a majority of the Board of Directors of the surviving entity.
<PAGE> 5
L. Except as set forth in Section 3 of this Note,
Borrower and/or Borrower's Affiliates sells or issues
subordinated debt to any person or entity unless such
subordinated debt is subordinate to this Note.
7. Prepayment. This Note may be prepaid in part or in full at
any time without penalty upon 5 days notice. Partial prepayments shall be
applied first to accrued but unpaid interest and then to principal.
8. No Usury. It is the intent of Borrower and holder to comply
with the laws of the State of Texas with regard to the rate of interest charged
hereunder and, accordingly, notwithstanding any provision to the contrary in
the Note no such provision including without limitation any provision of this
Note providing for payment of interest or other charges shall require the
payment or permit the collection of any amount (herein called the "Excess
Interest") in excess of the maximum amount of interest permitted by law to be
contracted for, charged or collected for the use, detention, or forbearance in
the collection, of all or any portion of the indebtedness evidenced by this
Note; provided that if Excess Interest is provided for, or is adjudicated as
being provided for, in this Note or if Excess Interest is otherwise charged or
collected, then in such event:
(a) The provisions of this Section shall control and
govern;
(b) Borrower shall not be obligated to pay any Excess
Interest;
(c) Any Excess Interest that holder may have received
hereunder shall, at the option of holder, be (i) applied as a credit
against the then outstanding principal balance due under this Note, or
accrued and unpaid interest thereof, not to exceed the maximum amount
permitted by law, or both, (ii) refunded to the payor thereof, or
(iii) any combination of the foregoing;
(d) The applicable interest rate or rates shall be
automatically subject to reduction to the maximum lawful rate allowed
to be contracted for in writing under the applicable usury laws of the
State of Texas as of the date of disbursement of the indebtedness
evidenced hereby; and this Note and any writing otherwise constituting
a
<PAGE> 6
charge of Excess Interest shall be deemed to have been, and shall be,
reformed and modified to reflect such reduction in such interest rate
or rates; and
(e) Neither Borrower nor any other person shall have any
action or remedy against holder for any damages whatsoever or any
defense to enforcement of the Note arising out of the payment or
collection of any Excess Interest.
9. Costs of Enforcement. In the event that this Note is placed
in the hands of an attorney-at-law for collection after maturity, or upon
default specified in Section 6 hereof, or to enforce any of the rights,
requirements or remedies contained herein or in the other loan documents, then
and in any such event the Borrower hereby agreeS to pay within ten (10) days
after demand all reasonable costs of collecting or attempting to collect this
Note, or protecting or enforcing such rights, or evaluating, prosecuting or
defending any such proceedings, including, without limitation, reasonable
attorneys' fees (whether or not suit is brought), in addition to all principal,
interest and other amounts payable hereunder.
10. Time. Time is of the essence in the performance of this Note.
11. Notices. All notices must be in writing. Notices may be
given by U.S. Certified Mail, postage prepaid, addressed to the intended
recipient at the address set forth herein, or to such other notice address as
that party designates by notice to the other party, and any notice so given
shall be deemed given one business day after its deposit with the U.S. Postal
Service. A business day is any day other than a Saturday, Sunday, or legal
holiday in Texas. A notice given by other means shall be effective only when
actually received by the addressee.
If to Phoenix:
Hall Phoenix/Inwood, Ltd.
Attn: Craig Hall
750 N. St. Paul
Suite 200
Dallas, TX 75201-3247
<PAGE> 7
If to Borrower:
Search Capital Group, Inc. ("Search")
Attn: Ellis Regebogen
700 N. Pearl
Suite 400, L.B. 401
Dallas, TX 75201-2809
12. Waiver. Borrower and any and all others who may become liable
for all or part of the obligations of Borrower under this Note (all of the
foregoing being collectively "Obligor") agree to be jointly and severally bound
hereby and jointly and severally, and to the fullest extent permitted by law,
waive any and all demand, presentment for payment, notice of non-payment,
protest and notice of protest, notice of dishonor, and all lack of diligence
and delays in the enforcement of the payment hereof.
13. Holder's Actions. The remedies of the holder of this Note as
provided herein shall be cumulative and concurrent, and may be pursued
singularly, successively or together, at the sole discretion of the holder, and
may be exercised as often as occasion therefor shall arise and in connection
therewith:
(a) Failure of the holder, for any period of time or on
more than one occasion, to exercise its option to accelerate the
Maturity Date of this Note shall not constitute a waiver of the right
to exercise the same at any time thereafter or in the event of any
subsequent default;
(b) No act or omission or commission of the holder,
including specifically any failure to exercise any right, remedy or
recourse, shall be deemed to be a waiver of or release of the same and
any such waiver or release may be effected only through a written
document executed by the holder and then only to the extent
specifically recited therein;
(c) A waiver or release with reference to any event shall
not be construed as a waiver of release of any subsequent event,
similar or dissimilar, or as a bar to any subsequent exercise of the
holder's rights or remedies hereunder; and
<PAGE> 8
(d) Except as otherwise specifically required herein, no
notice to Borrower or any other person of the exercise of any right or
remedy granted to the holder by this Note shall be required.
14. Reports and Notices. Borrower shall give prompt notice to
holder of any default or claim of default by any party whether oral or in
writing under any financing agreement to which Borrower is a party. Borrower
shall give holder notice of any sale of securities or sale of subordinated debt
within five (5) days of such sale or issuance. Such notice shall include all
the information necessary to enable holder to determine whether the sale or
issuance is governed by the provisions of Paragraph 3. Borrower shall deliver
to holder copies of 10Qs and 10Ks within 10 days of their filing with the
Securities and Exchange Commission. On the first day of each month until the
maturity of this Note, Borrower shall provide to holder a certificate that
Borrower is in compliance with Paragraph 6. I of this Note.
15. Severability. The unenforceability or invalidity of any
provision or provisions hereof shall not render any other provision or
provisions hereof unenforceable or invalid.
16. Captions. The captions to the Sections of this Note are for
convenience only and shall not be deemed part of the text of the respective
Sections and shall not vary, by implication or otherwise, any of the provisions
of this Note.
17. Date of Performance: If this Note provides that any time
period expires or date for performance specified in this Note falls on a
nonbusiness day (i.e., a Saturday, Sunday, federal legal holiday or state legal
holiday in the State of Texas), such time period or performance deadline will
be extended to the next business day. Except as may be otherwise set forth
herein, any performance will be timely made if completed no later than 12:00
midnight, (Dallas, Texas, time) on the date the performance is due.
18. Governing Law. This Note shall be governed by the laws of the
State of Texas and venue shall be in Dallas County, Texas.
<PAGE> 9
IN WITNESS WHEREOF, the undersigned has executed this Note effective
as of the day, month and year set forth above.
SEARCH CAPITAL GROUP, INC.
By: /s/ ROBERT D. IDZI
-------------------------
Printed Name: Robert D. Idzi
Its: Senior EVP & CFO
