<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
-------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ______________ to ______________
Commission File No.: 0-22936
-------
Crown NorthCorp, Inc.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 22-3172740
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1251 Dublin Road, Columbus, Ohio 43215
------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(614) 488-1169
---------------------------
(Issuer's telephone number)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the issuer was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
------ -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
As of July 31, 1996, the issuer had 8,199,799 shares of its common
stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one).
Yes No X
----- -----
<PAGE> 2
CROWN NORTHCORP, INC.
FORM 10-QSB
QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGES
----------------------------- -----
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet as of June 30, 1996............. I-1
Consolidated Statements of Operations for the three
months ended June 30, 1996 and 1995........................ I-2
Consolidated Statements of Operations for the six
months ended June 30, 1996 and 1995........................ I-3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995........................ I-4 to I-5
Consolidated Statement of Stockholders' Equity
for the six months ended June 30, 1996..................... I-6
Notes to Consolidated Financial Statements-
June 30, 1996 and 1995..................................... I-7 to I-13
Item 2. Management's Discussion and Analysis or Plan of
Operation................................................. I-14 to I-25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... II-1
Item 2. Changes in Securities...................................... II-1
Item 3. Defaults Upon Senior Securities............................ II-1
Item 4. Submission of Matters to a Vote of Security Holders........ II-1
Item 5. Other Information.......................................... II-2 to II-9
Item 6. Exhibits and Reports on Form 8-K........................... II-10
(a) Exhibits.......................................... II-10
(b) Reports on Form 8-K............................... II-10
Signature.................................................................... II-11
Exhibit Index................................................................ II-12
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. - Financial Statements
- ------------------------------
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 271,017
Receivables, less
collection allowance of $154,084 3,936,541
Prepaid expenses and other assets 199,114
-----------
Total current assets 4,406,672
Property and equipment, at cost, net of
accumulated depreciation of $1,076,143 2,303,803
Restricted Cash 393,942
Goodwill - Net of accumulated amortization
of $145,600 470,678
Other assets 656,383
-----------
$ 8,231,478
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 303,093
Other accrued liabilities 474,125
Current portion of long-term obligations 35,000
Notes payable 2,250,000
-----------
Total current liabilities 3,062,218
-----------
Long-Term Obligations - Less current portion
Industrial development revenue bond 1,330,000
Deferred income taxes 129,000
-----------
Total long-term obligations 1,459,000
-----------
Commitments
Stockholders' Equity:
Common stock 82,500
Additional paid-in capital 2,192,772
Retained earnings 1,478,586
Treasury stock, at cost (16,736)
Excess purchase price of subsidiary (26,862)
-----------
Total stockholders' equity 3,710,260
-----------
$ 8,231,478
===========
</TABLE>
See accompanying notes to consolidated financial statements.
I-1
<PAGE> 4
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues:
Management fees $ 1,563,485 $1,528,408
Disposition, liquidation
and bonus fees 916,086 1,357,784
Incentive fees 152,501 439,354
Other 98,878 91,411
----------- ----------
Total revenues 2,730,950 3,416,957
----------- ----------
Operating and administrative
expenses:
Personnel 2,355,600 2,244,521
Occupancy 370,011 233,330
Insurance 65,641 69,895
Depreciation and amortization 1,325,900 190,814
Other 339,863 372,640
----------- ----------
Total operating and
administrative expenses 4,457,015 3,111,200
----------- ----------
Earnings (loss)from operations (1,726,065) 305,757
Other Expenses:
Minority interest (161,069) --
Interest 66,451 19,399
Loss on write-off of property
and equipment 47,594 --
----------- ----------
Total other expenses (47,024) 19,399
----------- ----------
Earnings (loss) before income taxes (1,679,041) 286,358
Income tax expense (604,216) 122,000
----------- ----------
Net earnings (loss) ($1,074,825) $ 164,358
=========== ==========
Net earnings (loss) per share ($ 0.13) $ 0.02
=========== ==========
Weighted average shares
outstanding 8,199,779 8,249,779
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
I-2
<PAGE> 5
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
----------- ----------
<S> <C> <C>
Revenues:
Management fees $ 3,306,012 $3,617,281
Disposition, liquidation
and bonus fees 1,696,122 2,955,031
Incentive fees 1,302,219 439,354
Other 167,136 104,678
----------- ----------
Total revenues 6,471,489 7,116,344
----------- ----------
Operating and administrative
expenses:
Personnel 5,131,103 4,705,897
Occupancy 786,805 462,805
Insurance 144,425 144,250
Depreciation and amortization 1,667,050 387,303
Other 592,188 651,755
----------- ----------
Total operating and
administrative expenses 8,321,571 6,352,010
----------- ----------
Earnings (loss) from operations (1,850,082) 764,344
Other expenses:
Minority interest (175,837) --
Interest 93,618 34,069
Loss on write-off of property
and equipment 47,594 --
----------- ----------
Total other expenses (34,625) 34,069
----------- ----------
Earnings (loss) before income taxes (1,815,457) 730,265
Income tax expense (635,582) 308,000
----------- ----------
Net earnings (loss) ($1,179,875) $ 422,265
=========== ==========
Net earnings (loss) per share ($ 0.14) $ 0.05
=========== ==========
Weighted average shares
outstanding 8,199,779 8,249,816
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
I-3
<PAGE> 6
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operating activities:
Net earnings (loss) $(1,179,875) $ 422,265
Adjustments to reconcile net earnings (loss)
to net cash provided by operating
activities:
Depreciation and amortization 1,667,050 387,303
Deferred income taxes 120,089 (9,000)
Loss on disposal of property and
equipment 47,594 --
Minority interest (175,837) --
Equity income from investment in
partnerships 26,573 (19,227)
Bond payment from escrow fund 52,928 27,483
Change in operating assets
and liabilities:
Accounts receivable 1,749,372 (230,230)
Prepaid expenses and
other assets (32,431) 1,412
Accounts payable and
accrued expenses (2,221,223) (13,585)
----------- -----------
Net cash provided by operating activities 54,240 566,421
----------- -----------
Investing activities:
Capital expenditures (228,445) (220,307)
Acquisition of CSW stock -- (952,222)
Corporate stock acquisitions (156,000) --
Distribution from partnership 5,000 --
Earnest money deposits (35,000) --
Investment in partnerships -- (9,900)
Purchase of treasury stock -- (219)
CSW cash at acquisition date -- 16,305
----------- -----------
Net cash (used in) investing activities (414,445) (1,166,343)
----------- -----------
Financing activities:
Principal payments on notes and bond
payable (730,000) (230,000)
Principal payments on capital lease
obligations -- (8,620)
Proceeds from notes payable 1,650,000 700,000
Payment of loan fees (18,181) (19,217)
Deposits on lease financings (18,524) --
Distributions to minority interest (527,611) (2,762)
----------- -----------
Net cash provided by financing activities 355,684 439,401
----------- -----------
Net (decrease) in cash during the
period (4,521) (160,521)
Cash and cash equivalents at
beginning of period 275,538 607,487
----------- -----------
Cash and cash equivalents at
end of period $ 271,017 $ 446,966
=========== ===========
</TABLE>
I-4
<PAGE> 7
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Supplemental information:
Cash paid for income taxes $ 1,565,475 $ 215,565
=========== ===========
Cash paid for interest $ 99,483 $ 29,877
=========== ===========
Noncash investing and financing activities:
Purchase accounting for Crown NorthCorp acquisition of CSW:
Accounts receivable $ 830,769
Prepaid expenses 12,812
Property and equipment 97,654
Goodwill 1,734,264
Other assets 13,557
Accounts payable and accrued expenses (79,150)
Deferred tax liability (282,000)
Notes payable (1,270,000)
Minority interest (121,989)
Additional paid-in capital (952,222)
-----------
CSW cash at acquisition date $ (16,305)
===========
</TABLE>
See accompanying notes to consolidated financial statements.
I-5
<PAGE> 8
CROWN NORTHCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
EXCESS
COMMON STOCK ADDITIONAL TREASURY STOCK PURCHASE TOTAL
------------------- PAID-IN RETAINED ------------------- PRICE OF STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT SUBSIDIARY EQUITY
--------- ------- ---------- ----------- ------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT
DECEMBER 31,
1995 8,250,000 $82,500 $2,192,772 $ 2,658,461 (50,221) $(16,736) $ (53,742) $4,863,255
NET (LOSS) -- -- -- (1,179,875) -- -- -- (1,179,875)
AMORTIZATION OF
EXCESS PURCHASE
PRICE OF
SUBSIDIARY -- -- -- -- -- -- 26,880 26,880
--------- ------- ---------- ----------- ------- -------- ----------- ----------
BALANCES AT
JUNE 30,
1996 8,250,000 $82,500 $2,192,772 $ 1,478,586 (50,221 $(16,736) $ (26,862) $3,710,260
========= ======= ========== =========== ======= ======== =========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
I-6
<PAGE> 9
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
1 General and Basis of Presentation
---------------------------------
The accompanying unaudited consolidated financial statements of Crown
NorthCorp, Inc., and subsidiaries (the "Company") reflect all material
adjustments consisting of only normal recurring adjustments which, in
the opinion of management, are necessary for a fair presentation of
results for the interim periods. Certain information and footnote
disclosures required under generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"), although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the year-end financial statements and notes thereto
included in the Company's Form 10-KSB for the year ended December 31,
1995.
The results of operations for the six months ended June 30, 1996 and
1995, respectively, are not necessarily indicative of the results to be
expected for the entire fiscal year or any other period.
The consolidated financial statements of the Company include the
accounts of Crown NorthCorp, Inc. (formerly known as NorthCorp
Realty Advisors, Inc.) and its subsidiaries as follows:
<TABLE>
<CAPTION>
NAME PERCENT OWNED
<S> <C>
Crown Revenue Services, Inc., ("Crown") 100%
Prime Tempus, Inc. ("Tempus") 100%
Crown Properties, Inc. ("CPI") 100%
CSW Associates, Inc. ("CSW") 80%
Crown Revenue Services Joint Venture I 75%
("Crown JV")
Choice Hotels Venezuela, C.A. ("Choice C.A.") 52%
CHV Corporation, A.V.V. ("Choice A.V.V.") 52%
</TABLE>
I-7
<PAGE> 10
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
Related parties own the 20% minority interest in CSW and the 25%
minority interest in Crown JV. All material intercompany accounts and
transactions have been eliminated.
2. Acquisitions
------------
Effective August 4, 1994, American Holdings, Inc. (now known as Pure
World, Inc., "Pure World") and its wholly owned subsidiary, NorthCorp
Realty Advisors, Inc. ("NorthCorp"), entered into a Stock Purchase and
Exchange Agreement (the "Acquisition Agreement") with Ronald E. Roark
("Buyer"), and his wholly owned company, Crown. This resulted in Crown
becoming a wholly owned subsidiary of NorthCorp, and Buyer owning 51%
of the resulting entity.
The Acquisition Agreement contains operating covenants, which provide
that until August 4, 1996: (1) Without unanimous consent of the Board
of Directors, the Company cannot make distributions, enter into
transactions with affiliates of the Buyer, change the compensation of
certain executives of the Company or issue securities of the Company
except for up to 400,000 shares of common stock for an employee stock
option plan and (2) Pure World will appoint one member of the Board of
Directors of the Company.
Crown NorthCorp, Inc. acquired 80% of CSW in June, 1995 for $952,222
cash and $1,270,000 in notes payable to the former shareholders. The
CSW acquisition was accounted for using the purchase method which
resulted in the Company recording goodwill of approximately $1,730,000.
As of March 31, 1996, the unamortized goodwill relating to the CSW
acquisition was approximately $1,170,000. During the second quarter of
1996, the Company recorded a write down of the goodwill in the amount
of $1,170,000. This amount is included in depreciation and amortization
in the statement of operations for the six months ended June 30, 1996
(see Note 7 to Consolidated Financial Statements).
I-8
<PAGE> 11
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
The acceleration of revenues from CSW's existing contracts plus a
changing business environment, which led to its inability to either
expand existing contractual relationships or to develop new business
for the Company, led to an adjustment of goodwill.
Effective October 1, 1995, the Company acquired 100% of the outstanding
capital stock of Tempus for $173,911 cash (net of cash acquired).
Effective March 1, 1996, the Company acquired 52% of the
outstanding capital stock of Choice C.A. and Choice A.V.V. for
$156,000 in cash (see Note 7 to Consolidated Financial
Statements).
The following information summarizes the results of operations, on a
pro forma basis, as though all companies had been combined as of
January 1, 1995:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
-------------
<S> <C>
Revenues $ 9,610,000
============
Expenses and tax
provision $ 9,236,000
============
Net Income $ 374,000
============
Earnings per share $ .05
============
</TABLE>
I-9
<PAGE> 12
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
3. Income taxes
------------
For the six months ended June 30, 1996 and 1995, the components of
income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Current $(755,671) $ 317,000
Deferred 120,089 (9,000)
--------- ---------
Total income tax expense $(635,582) $ 308,000
========= =========
</TABLE>
At June 30, 1996, the Company had recorded a net deferred tax liability
as follows:
<TABLE>
<S> <C>
Assets:
Current:
Collection allowance $ 52,338
Items not currently deductible and other 5,300
Long-term - depreciation and amortization 12,000
---------
Total assets $ 69,638
---------
Liabilities:
Current - conversion from cash to accrual
method of tax reporting for CSW ($ 70,500)
Long-term - conversion from cash to accrual
method of tax reporting for CSW (141,000)
---------
Total liabilities ($211,500)
---------
Net deferred tax liability ($141,862)
=========
</TABLE>
I-10
<PAGE> 13
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
4. Retainage on disposition fees
-----------------------------
Under the terms of its contracts, the Resolution Trust Corporation
("RTC") retains a portion of the earned disposition fees (between 10%
and 15% depending on the contract) pending expiration or termination of
the contracts. The purpose of the retention is to provide a fund
against which the RTC may recover costs attributable to assets that may
remain unsold at the time of contract expiration or termination. If the
retainage exceeds such costs, the excess is to be remitted back to the
Company. The Company, however, has no obligation to reimburse the RTC
for such costs exceeding the retention. Retainage is not recorded in
the accounts of the Company until the final audit of the expired
contract is complete, due to the uncertainty of the timing and
estimated proceeds ultimately to be received. The gross retainage for
contracts for which final audits are not complete at June 30, 1996
totaled approximately $486,000. Included in this amount are the RTC
contracts of CSW which had retainages of approximately $400,000 at June
30, 1996, for which final contract audits had not yet been completed.
These retainages were also sold in the CSW transaction.
In connection with the acquisition of Crown (the NorthCorp business
combination discussed in Note 2), NorthCorp entered into an agreement
with Pure World providing that one half of approximately $2,830,000 of
gross retainage outstanding as of July 31, 1994 will be remitted to
Pure World if collected. Similarly on July 31, 1994, Crown entered into
a retainage sharing agreement with an affiliate of the Buyer also
providing for one half of approximately $1,265,000 of gross retainage
outstanding as of July 31, 1994 to be remitted to the affiliate if
collected.
During 1996 and 1995, final contract audits were completed on sixteen
RTC contracts. Gross retainage on these contracts was approximately
$4,558,000. The Company has recorded retainage
I-11
<PAGE> 14
CROWN NORTHCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
revenue, net of questioned costs, unsold asset recovery costs and the
retainage due either Pure World or Buyer, of $185,981 in 1996 and
$636,959 in 1995. No retainage revenue was recorded prior to 1995. No
retainage revenue has been received as of June 30, 1996. The Company
and the FDIC, as successor to the RTC are in ongoing negotiations to
settle all issues surrounding the payment of retainages. Management
anticipates receiving retainage revenues in 1996 attributable to those
RTC contracts upon which audits have been completed.
5. Contingent Liabilities and Commitments
--------------------------------------
During the six months ended June 30, 1996 and through August 1, 1996,
there has been no material change in the status of pending litigation
as disclosed in the Company's Form 10-KSB for the year ended December
31, 1995.
During the six months ended June 30, 1996 and through August 1, 1996,
the Company had not entered into any material commitments other than
those disclosed in the Company's Form 10-KSB for the year ended
December 31, 1995.
6. Stockholders' Equity
--------------------
At June 30, 1996, the Company has 30,000,000 authorized shares of its
$.01 par value common stock. During 1995, the Company's Board of
Directors authorized 1,000,000 shares of preferred stock. As of June
30, 1996, no shares of preferred stock were issued.
A stock option plan for the outside directors of the Company was
approved by the Board of Directors in July 1995 and ratified by the
Company's stockholders in May 1996. Under the plan, each outside
director may be granted options for 100,000 shares of the Company's
common stock at an option price equal to the common stock's market
value on the date of grant. The options vest over a four-year period if
the Company achieves
I-12
<PAGE> 15
certain stock price thresholds. No options have been granted under this
plan as of June 30, 1996.
7. Subsequent Event; sale of subsidiary
------------------------------------
Pursuant to an action taken by the Company's board of directors on July
23, 1996, effective July 31, 1996, the Company sold its 80% interest in
CSW. As a result of the sale, the buyer acquired assets of CSW
including cash, contracts, receivables and the investments in Choice
C.A. and Choice A.V.V. and assumed liabilities of CSW including a
long-term lease for CSW's offices and liabilities associated with
acquired contracts.
I-13
<PAGE> 16
Item 2. - Management's Discussion and Analysis or Plan of Operations
- --------------------------------------------------------------------
GENERAL
The Company derives its revenues primarily from the financial services it
provides under asset management, disposition and servicing contracts with
private- and public-sector clients. In operating under these contracts, the
company manages and disposes of real estate and loan assets, services individual
loans and loan portfolios and manages tax-exempt bond financings, administers
receiverships and manages various corporate and partnership interests throughout
the United States. Primarily through strategic acquisitions or alliances, the
Company is attempting to both expand and diversify its core businesses and to
develop and enter new businesses.
The Company presently operates under private-sector contracts with various
clients, including investment banking firms and partnerships. At June 30, 1996,
the private-sector assets under management pursuant to these contracts had an
aggregate book value of $968 million, which more than doubled from $428 million
at June 30, 1995. Assets are added to most of these contracts by addenda, each
with its own compensation structure. During the second quarter of 1996, assets
with an aggregate book value of $197 million were added to these contracts.
Historically, the Company has derived the majority of its revenues from
public-sector contracts, primarily with the Federal Deposit Insurance
Corporation ("FDIC") and the Resolution Trust Corporation ("RTC"). Business
available from these agencies has substantially declined over the last two
years, as issues arising out of bank and thrift failures of the late 1980s and
early 1990s have been resolved. The RTC's statutory authority expired December
31, 1995, at which time its remaining assets and operations were assigned to the
FDIC. At June 30, 1996, the Company was managing assets with an aggregate book
value of $44 million under contracts with the FDIC and the Texas Department of
Insurance. As public-sector contracts have expired or reduced in size, the
associated reduction in revenues, as well as the administrative costs related to
the winding up of these contracts, have materially contributed to the Company's
recent operating losses. Management believes that public-sector contracts will
not be an ongoing primary business of the Company and, as a result, has
implemented strategies to permit the Company to more competitively pursue
private-sector contracts.
I-14
<PAGE> 17
Management is encouraged by the expansion of its contractual relationship with
the Federal Home Loan Mortgage Corporation, a quasi-public agency, to provide
loss mitigation and loan workout services. At June 30, 1996, the Company had
over 1,200 loans under management with an aggregate book value of more than $121
million.
I-15
<PAGE> 18
BUSINESS OUTLOOK
This report contains certain "forward-looking statements" within the meaning of
Section 21E of the Exchange Act, as amended, and is subject to the safe-harbor
created by such sections. The Company's actual results could differ
significantly from those contained herein and as a result of certain factors set
forth below and elsewhere in this report.
Throughout the first half of 1996, there were fewer assets available in the
financial services markets than in prior periods. Primary reasons for this
circumstance include a significant decline in public-sector assets, largely
attributable to reductions in assets available through the RTC, and the lack of
expansion in private-sector markets. Management has redeployed portions of its
operations which have serviced public-sector opportunities to concentrate its
financial and human resources both on expanding existing private-sector
businesses and on developing new ones. The table below indicates the movement of
the Company's operations to private-sector portfolios.
Assets Under Management
-----------------------
<TABLE>
<CAPTION>
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Number of Assets
- Public Sector 475 2,345
Contract Book Value
- Public Sector $44 million $408 million
Number of Assets
- Private Sector 1,598 523
Contract Book Value
- Private Sector $968 million $428 million
Total Number of Assets 2,073 2,868
Total Contract Value $1.012 billion $836 million
</TABLE>
As indicated above, during the Company's ongoing restructuring, the total
contract value of assets under management has increased. There can be no
assurance, however, that this trend will continue. Additionally, the decline in
public-sector business has led to
I-16
<PAGE> 19
material declines in the Company's revenues and will continue to do so unless
the Company is successful in expanding and developing private-sector businesses.
In restructuring the Company to operate primarily in private-sector financial
markets, the Company is able to maintain lower staffing levels than would be
required in the administration of predominately public-sector portfolios;
private-sector portfolios typically involve lower numbers of assets with higher
average balances. For the six months ended June 30, 1996, the Company's ongoing
staff reductions have resulted in annual payroll reductions of $1.1 million.
During the third quarter of 1996, the Company anticipates effecting additional
staff reductions which will reduce annual payroll expense by $500,000. In
addition to the reductions in staffing, the Company anticipates curtailing
operations in its Washington D.C. office during the third quarter of 1996. In
the third quarter of 1996, the Company sold a subsidiary, which resulted in the
closing of the Miami, Florida office of the Company (see Note 7 to Consolidated
Financial Statements). The Company anticipates however, that it will retain a
presence in both the Washington and Miami markets.
While continuing to restructure its existing operations, management is also
proceeding to expand the Company's core asset management, disposition and
servicing business through strategic acquisitions. The Company has entered into
a letter of intent and is negotiating a definitive agreement to acquire Eastern
Realty Corporation and affiliated entities involved in asset management and real
estate development. Pursuant to this transaction, which is subject to the
approval of the Company's board of directors, the Company would issue
convertible preferred stock and stock warrants to acquire these entities. There
can be no assurance that the transaction will happen under these terms or at
all.
Management intends to continue to aggressively pursue acquisition opportunities
arising out of the substantial consolidations in the markets in which the
Company operates.
Over and above acquisition activities, management is also continuing to develop
and expand both new and existing private-sector business lines including
businesses related to, among other things, student loans, bond portfolios and
tax certificates. Management continues to pursue asset management and
disposition opportunities with both domestic and foreign governments. As an
example of the latter, the
I-17
<PAGE> 20
Company, in the third quarter of 1996, is establishing a Danish corporation to
pursue business opportunities in Europe. This corporation has secured
third-party financing of up to $225,000 for operational purposes.
I-18
<PAGE> 21
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
The following discussion and analysis sets forth the significant changes in the
results of the operations of the Company for the three months ended June 30,
1996 and 1995. This discussion should be read in conjunction with the
Consolidated Financial Statements and Notes to the Consolidated Financial
Statements.
For comparative purposes, the following table defines the periods that
operations of the Company are reflected in the Consolidated Financial
Statements:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
Name 1996 1995
---- ---- ----
<S> <C> <C>
Crown NorthCorp 4/1-6/30 4/1-6/30
Crown 4/1-6/30 4/1-6/30
Tempus 4/1-6/30 N/A
CPI 4/1-6/30 4/1-6/30
CSW 4/1-6/30 N/A
Crown JV 4/1-6/30 4/1-6/30
Choice C.A. 3/1-6/30 N/A
Choice A.V.V. 3/1-6/30 N/A
-----------------------------------------------------------------
</TABLE>
Total revenues for the second quarter of 1996 decreased to $2.7 million from
$3.4 million for the second quarter of 1995. The decrease was due primarily to
disposition fees decreasing due to the expiration of RTC contracts by year-end
1995.
Management fee revenues increased slightly to $1.6 million for the second
quarter of 1996 from $1.5 million for the second quarter of 1995. The increase
was due to the addition of the operations of CSW and Tempus, as Crown saw
significant decreases in management fee revenues due to the expiration of all
RTC contracts by year-end 1995.
Disposition, liquidation and bonus fee revenues of $920,000 for the second
quarter of 1996 decreased from $1.4 million for the second quarter of 1995. The
addition of the operations of CSW added $300,000 in disposition fee revenues,
while Crown had a decrease of
I-19
<PAGE> 22
$780,000 due to the expiration of all RTC contracts by year-end 1995.
Incentive fee revenues decreased to $150,000 for the second quarter of 1996 from
$440,000 for the second quarter of 1995. The decrease was due to a reduced
number of remaining assets in the FDIC contract of the Company.
Other revenues remained at relatively the same levels for the second quarter of
1996 and 1995.
Personnel costs increased slightly to $2.4 million for the second quarter of
1996 from $2.2 million for the second quarter of 1995. The addition of the
operations of CSW and Tempus resulted in the net increase in personnel costs.
Due to the expiration of the RTC contracts of Crown NorthCorp and Crown,
personnel costs were reduced accordingly by $560,000. At June 30, 1996, the
Company had 121 full-time employees.
Occupancy costs of $370,000 for the second quarter of 1996 increased from
$230,000 for the second quarter of 1995. The increase was due primarily to the
addition of the operations of CSW and Tempus, as these costs actually decreased
by $50,000 between Crown NorthCorp and Crown for the costs associated with the
expirations of public-sector contracts.
Insurance costs remained relatively unchanged for the second quarter of 1996
when compared to the second quarter of 1995.
Depreciation and amortization increased to $1.3 million for the second quarter
of 1996 from $190,000 for the second quarter of 1995. Approximately $1,170,000
of the increase was due to the write down of the remaining unamortized goodwill
related to the CSW acquisition.
Other expenses decreased to $340,000 for the second quarter of 1996 from
$370,000 for the second quarter of 1995. The expiration of the RTC contracts and
the continued streamlining of operations resulted in the decrease, as the
addition of the operations of CSW and Tempus added to the other expenses of the
Company.
Minority interest of ($160,000) for the second quarter of 1996 reflects the 20%
of CSW operations not owned by the Company.
I-20
<PAGE> 23
Interest expense more than tripled to $70,000 for the second quarter of 1996
from $19,000 for the second quarter of 1995. The interest on debt resulting from
the CSW acquisition, and increased bank borrowing to fund operations of the
Company resulted in the increase.
Loss on write-off of property and equipment was $50,000 for the second quarter
of 1996. This was a result of outdated computers and equipment being donated to
charity by the Company.
Income tax expense decreased to ($600,000) for the second quarter of 1996 from
$120,000 for the second quarter of 1995 (See Note 3 to the Consolidated
Financial Statements). The majority of the decrease was due to the taxable loss
carryback related primarily to the write down of the CSW goodwill.
I-21
<PAGE> 24
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995.
The following discussion and analysis sets forth the significant changes in the
results of the operations of the Company for the six months ended June 30, 1996
and 1995. This discussion should be read in conjunction with the Consolidated
Financial Statements and Notes to the Consolidated Financial Statements.
For comparative purposes, the following table defines the periods that
operations of the Company are reflected in the Consolidated Financial
Statements:
<TABLE>
<CAPTION>
-------------------------------------------------------------
Name 1996 1995
---- ---- ----
<S> <C> <C>
Crown NorthCorp 1/1-6/30 1/1-6/30
Crown 1/1-6/30 1/1-6/30
Tempus 1/1-6/30 N/A
CPI 1/1-6/30 1/1-6/30
CSW 1/1-6/30 N/A
Crown JV 1/1-6/30 1/1-6/30
Choice C.A. 3/1-6/30 N/A
Choice A.V.V. 3/1-6/30 N/A
-------------------------------------------------------------
</TABLE>
Total revenues decreased to $6.5 million for the first six months of 1996 from
$7.l million for the six months of 1995. The decrease was due primarily to the
expiration by year-end 1995 of the RTC contracts of Crown, as total revenues
decreased by $2.6 million. The addition of the operations of CSW and Tempus
added $2 million in total revenues for the first six months of 1996 versus the
same period of 1995.
Management fee revenues of $3.3 million for the first six months of 1996
decreased from $3.6 million for the six months of 1995. The addition of the
operations of CSW and Tempus increased management fee revenues by $900,000. For
Crown, the expiration of the RTC contracts by year-end 1995 resulted in a
decrease of more than $1.2 million in management fee revenues for the first six
months of 1996 versus the first six months of 1995.
I-22
<PAGE> 25
Disposition, liquidation and bonus fee revenues decreased to $1.7 million for
the first six months of 1996 from $3 million for the first six months of 1995.
The expiration of the RTC contracts by year-end 1995, and the reduction in
disposition activity of the FDIC contract of Crown NorthCorp resulted in a
decrease of over $1.95 million for the first six months of 1996 versus the same
period for 1995. The addition of the operations of CSW for the first six months
of 1996 increased disposition, liquidation and bonus fee revenues by $650,000
from the same period for 1995.
Incentive fee revenues of $1.3 million for the first six months of 1996
increased from $440,000 for the first six months of 1995. The increase was due
to certain performance levels being reached pursuant to the terms of the FDIC
contracts of the Company. The addition of the operations of CSW accounted for
$300,000 of these revenues for the first six months of 1996, while the other $1
million was earned through the FDIC contract of Crown NorthCorp. All of the 1995
revenues for this period were earned through the FDIC contract of Crown
NorthCorp.
Other revenues increased to $170,000 for the first six months of 1996 from
$100,000 for the first six months of 1995. Operations from joint ventures of the
Company and the addition of the operations of CSW and Tempus resulted in the
increase.
Personnel expenses of $5.1 million for the first six months of 1996 increased
from $4.7 million for the first six months of 1995. The addition of the
operations of CSW and Tempus increased personnel costs by $1.3 million for the
first six months of 1996 versus the same period of 1995. Due to the expiration
of public-sector contracts of the Company, there were reductions in personnel
costs of $900,000 for Crown NorthCorp and Crown for the first six months of 1996
from the first six months of 1995.
Occupancy costs increased to $790,000 for the first six months of 1996 from
$460,000 for the first six months of 1995. The addition of the operations of CSW
and Tempus increased occupancy costs by $405,000 for the first six months of
1996. Due to the costs associated with the expiration of the RTC contracts by
year-end 1995 for Crown NorthCorp and Crown, the corresponding occupancy costs
decreased by $75,000.
Insurance costs remained at relatively the same levels for the first six months
of 1996 and 1995.
I-23
<PAGE> 26
Depreciation and amortization of $1.7 million for the first six months of 1996
increased from $390,000 for the first six months of 1995. Approximately
$1,170,000 of the increase was due to the write down of the remaining
unamortized goodwill balance related to the CSW acquisition.
Other expenses decreased to $590,000 for the first six months of 1996 from
$650,000 for the first six months of 1995. This decrease was due to the
continued streamlining of operations by the Company.
Minority Interest of ($180,000) for the first six months of 1996 reflects the
20% of CSW operations not owned by the Company.
Interest expense increased to $90,000 for the first six months of 1996 from
$30,000 for the first six months of 1995. The interest on debt resulting from
the CSW acquisition, and increased bank borrowings to fund operations of the
Company resulted in the increase.
Loss on write-off of property and equipment was $50,000 for the first six months
of 1996. This was a result of outdated computers and equipment being donated to
charity by the Company.
Income tax expense decreased to ($640,000) for the first six months of 1996 from
$310,000 for the first six months of 1995 (See Note 3 to the Consolidated
Financial Statements). The majority of the decrease was due to the taxable loss
carryback related to the write down of the CSW goodwill.
I-24
<PAGE> 27
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had working capital of $1.3 million (including
cash and cash equivalents of $271,017) and $1,330,000 of long-term debt. The
Company had a $750,000 revolving line of credit, having an outstanding balance
of $750,000 at June 30, 1996. Subsequent to June 30, 1996 the Company has
entered into negotiations with the bank with respect to an additional credit
facility.
In March, 1996, the Company borrowed $1.5 million under an installment note
having nine monthly installments of $166,667 each. Under the original terms of
the note, payments were to begin July 31, 1996. Subsequently, the bank amended
the terms to payments of interest only through February, 1997, at which time the
outstanding loan balance of $1,500,000 is due.
In June, 1996, the Company paid the second and final $350,000 installment on the
note for the acquisition of CSW.
The Company is implementing strategies to decrease operating costs through staff
reductions and office closings. Management anticipates the need to use external
financing from time to time to maintain operations and to fund future business
acquisitions. Unless the Company continues to decrease operating costs while
expanding its revenue base, its working capital position will deteriorate.
I-25
<PAGE> 28
PART II - OTHER INFORMATION
- ---------------------------
Item 1. - Legal Proceedings
- ---------------------------
None
Item 2. - Changes in Securities
- -------------------------------
None
Item 3. - Defaults Upon Senior Securities
- -----------------------------------------
None
Item 4. - Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
(a) The Company held its Annual Meeting of Stockholders on May 7,
1996.
(b) Not applicable
(c) At the meeting, stockholders voted on the following two
proposals:
PROPOSAL NO. 1. Proposal to ratify the 1995 Formula Stock
Option Plan for non - employee directors of the Company.
PROPOSAL NO. 2. To elect five directors for the ensuing year.
Stockholders approved both proposals. The results of the voting were:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Proposal No. 1 4,324,995 1,181,724 3,899
Proposal No. 2
</TABLE>
Votes for all nominees 5,510,376
Votes to withhold authority from the following nominees:
<TABLE>
<S> <C>
Ronald E. Roark 242
Louis J. Castelli 242
John Everets, Jr. 242
John W. Galuchie, Jr. 242
Thomas F. Wratten 242
</TABLE>
(d) Not applicable
II-1
<PAGE> 29
Item 5. - Other Information
- ---------------------------
Resignation of Louis J. Castelli as President and Chief Operating
- -----------------------------------------------------------------
Officer
- -------
On August 6, 1996, Louis J. Castelli submitted his resignation as President and
Chief Operating Officer of the Company, effective August 31, 1996. Mr. Castelli
will assume the same posts with a speciality electronics firm based in Columbus,
Ohio. He will continue to serve as a member of the Company's board of directors.
The Company is forming a search committee to evaluate candidates to succeed Mr.
Castelli.
Form 4 filings; Registration Rights Agreements
- ----------------------------------------------
On August 6 and 7, 1996, Forms 4 were filed with the SEC reporting the sale on
July 30, 1996 of 1,073,491 shares of the Company's common stock, representing
13.01% of the outstanding common stock, as follows: (i) the sale by Pure World
of 48,843 shares owned by it directly; (ii) the sale by Paul O. Koether,
President and Chief Executive Officer of Pure World, of 488,249 shares owned by
him directly or indirectly; and (iii) the sale by Natalie I. Koether of 536,399
shares owned by her directly or indirectly. The sales price was $0.75 per
share.
In conjunction with the sales discussed in the preceding paragraph, as well as
related sales, the Company has entered into registration rights agreements with
respect to 1,232,044 shares of the Company's common stock, representing 14.93%
of the outstanding common stock, in the form appearing on Exhibit 10.38 with the
following parties:
<TABLE>
<CAPTION>
Party
-----
Shares
- ------
<S> <C>
Edwin M. Ellman, Self-Directed Individual
Retirement Account No. 2 266,667
Asdale Limited 400,000
The Gordon V. and Helen C. Smith Foundation 404,677
HNS, LLC 134,000
Jay N. Rollins 26,700
-----------
1,232,044
</TABLE>
II-2
<PAGE> 30
Resignation of John W. Galuchie as a director
- ---------------------------------------------
As is set forth above in Note 2 to the Consolidated Financial Statements,
pursuant to the Acquisition Agreement, until August 4, 1996, Pure World had the
right to appoint one member of the Board of Directors of the Company. Pure World
had designated John W. Galuchie, Jr. to serve as a director. Mr. Galuchie
submitted his resignation as a director, effective July 30, 1996.
Disposition of CSW
- ------------------
Pursuant to an action by the Company's board of directors, on August 8, 1996,
the Company and Tucker Holding Company, Ltd. , an Ohio limited liability company
("Tucker") entered into a Stock Purchase Agreement (the "Purchase Agreement")
with CSW Acquisition Corp., a Florida corporation ("CSWA") and Bradley S. Weiss
("Weiss") whereby the Company and Tucker sold and CSWA purchased all of the
issued and outstanding stock of CSW. CSWA is a Florida corporation of which
Weiss is President. The purchase and sale was effective July 31, 1996 (the
"Effective Date"). Transfer of record ownership shall take place on the earlier
of (i) the date CSWA obtains consent of certain parties with whom CSW contracts
or (ii) the expiration dates of these contracts.
Tucker holds 4,207,500 shares of the Company's common stock, representing 51% of
the outstanding common stock. Prior to the Effective Date, Tucker, Ronald E.
Roark, the Chairman and Chief Executive Officer of the Company, Louis J.
Castelli, the President and Chief Operating Officer of the Company and Weiss, an
Executive Vice President of the Company, had advised the Company that (i) they
constituted a "group" for purposes of Section 13(d)(3) of the Exchange Act, (ii)
that the ownership interests of Messrs. Roark, Castelli and Weiss in Tucker were
76.19%, 19.05% and 4.76% respectively and (iii) each of Tucker, Mr. Roark, Mr.
Castelli and Mr. Weiss shared the power to direct the voting and disposition of
these 4,207,500 shares. Prior to the Effective Date, each of Tucker, Mr. Roark,
Mr. Castelli and Mr. Weiss may be deemed to have been in a position to exercise
a controlling influence over the Company. Prior to the Effective Date, the
Amended and Restated Operating Agreement ("Operating Agreement") governing the
affairs of Tucker provided Mr. Weiss with the option, exercisable at any time
until March 31, 1997, to have Mr. Weiss' membership interest in Tucker exchanged
for either (i) an in-kind distribution to Mr. Weiss of 4.76% of all of the
assets of Tucker or (ii) cash in an amount equal to 4.76% of the fair market
value of Tucker's assets (provided, however, that the fair market value of the
common stock
II-3
<PAGE> 31
of the Company held by Tucker would be valued at not less than $.8125 per
share). Prior to the Effective Date, the Operating Agreement also included
provisions protecting Mr. Weiss from having his indirect, beneficial ownership
in the Company resulting from his membership interest in Tucker diluted as a
result of actions taken by or with respect to Tucker.
Prior to the Effective Date, the Company and Mr. Weiss were parties to an
employment agreement (the "Weiss Employment Agreement") for an initial two-year
term ending February 28, 1997. The Weiss Employment Agreement provided for Mr.
Weiss to receive a base salary of $125,000 per year plus a bonus equal to 20% of
the net operating income in excess of $3,600,000 of certain contracts of CSW.
Mr. Weiss served as chairman and chief executive officer of CSW.
Pursuant to the Purchase Agreement, the Company sold eighty shares, or 80% of
CSW's capital stock, to CSWA and Tucker sold twenty shares, or 20% of CSW's
capital stock, to CSWA in exchange for ten dollars and the assignment by Weiss
of his ownership interests in Tucker to Tucker. Also pursuant to the Purchase
Agreement, (i) Tucker and Mr. Weiss executed a mutual release whereby Tucker
and Mr. Weiss released each other from any and all claims either may have with
respect to the Operating Agreement and (ii) the Company and Mr. Weiss executed
a mutual release acknowledging the termination of the Weiss Employment
Agreement. Mr. Weiss resigned as an Executive Vice President of the Company,
on the Effective Date.
In entering into the Purchase Agreement, the Company determined the appropriate
consideration by evaluating several factors including (i) the assets of CSW,
(ii) the liabilities of CSW, including liabilities associated with a long-term
lease for CSW's offices and expenses associated with the ongoing operations of
CSW, (iii) the effect of Mr. Weiss' assignment of his interest in Tucker on the
anti-dilution provisions in the Operating Agreement, (iv) the Weiss Employment
Agreement and (v) the taxable loss carry back available to the Company as well
as the ability to restructure an obligation of the Company by reason of the
carry back.
II-4
<PAGE> 32
As of the Effective Date, the ownership interests of Messrs. Roark and Castelli
in Tucker were 80% and 20% respectively.
Pro forma Financial Information
- -------------------------------
Set forth below is certain unaudited pro forma financial information of Crown
NorthCorp, Inc. (the Company) for the dates indicated. The unaudited pro forma
financial statements include the accounts of the Company and subsidiaries. The
statements of operations have been adjusted to reflect the sale of CSW
Associates, Inc. (described in Note 1 in the Notes to Pro forma Consolidated
Statements) had the transaction taken place on January 1, 1995. The balance
sheet has been adjusted to reflect the sale had the transaction taken place on
June 30, 1996.
The pro forma information of the Company is not intended to be indicative of
either the results of operations or the financial position which may be attained
in the future. In view of the foregoing, caution should be exercised in placing
excessive reliance on the pro forma information.
II-5
<PAGE> 33
CROWN NORTHCORP, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Crown NorthCorp, Inc. Adjusted
Consolidated Pro forma Consolidated
Historical Adjustments Pro forma
----------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 271,017 $ (92,877) (c) $ 178,140
Receivables, less collection
allowance 3,936,541 (705,864) (c)
267,429 (d) 3,498,106
Prepaid expenses and other assets 199,114 199,114
----------------------------------------------------
Total current assets 4,406,672 (531,312) 3,875,360
Property and equipment, at cost,
less accumulated depreciation 2,303,803 (189,166) 2,114,637
Restricted cash 393,942 393,942
Goodwill-net of accumulated
amortization 470,678 470,678
Other assets 656,383 (394,961) 261,422
----------------------------------------------------
Total Assets $ 8,231,478 $(1,115,439) $ 7,116,039
====================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $ 303,093 $ (25,861) (c) $ 277,232
Accrued other liabilities 474,125 (81,349) (c) 392,776
Notes payable 2,285,000 2,285,000
----------------------------------------------------
Total current liabilities 3,062,218 (107,210) 2,955,008
Other Liabilities:
Industrial development revenue bond 1,330,000 1,330,000
Deferred income taxes 129,000 129,000
----------------------------------------------------
Total other liabilities 1,459,000 0 1,459,000
Stockholders' equity:
Common stock 82,500 82,500
Additional paid-in capital 2,192,772 2,192,772
Treasury stock (16,736) (16,736)
Excess purchase price of subsidiary (26,862) (26,862)
Retained earnings 1,478,586 (1,275,658) (c)
267,429 (d) 470,357
----------------------------------------------------
Total stockholders' equity 3,710,260 (1,008,229) 2,702,031
----------------------------------------------------
Total Liabilities and
Stockholders' Equity $ 8,231,478 $(1,115,439) $ 7,116,039
====================================================
</TABLE>
See accompanying notes to Pro forma Financial Statements
II-6
<PAGE> 34
Crown NorthCorp, Inc.
Pro forma Consolidated Statements of Operations
For the year ended December 31, 1995
and for the six months ended June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
For the twelve months ended
December 31, 1995
-----------------------------------------------
Crown
NorthCorp, Inc. Adjusted
Consolidated Pro forma Consolidated
Historical Adjustments Pro forma
---------------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Management fees $ 7,459,832 $1,576,281 (a) $ 5,883,551
Disposition, liquidation and bonus fees 6,943,795 2,477,304 (a) 4,466,491
Incentive fees 3,297,964 1,213,383 (a) 2,084,581
Other 381,591 27,703 (a) 353,888
----------- ---------- -----------
Total revenues 18,083,182 5,294,671 12,788,511
----------- ---------- -----------
OPERATING & ADMINISTRATIVE EXPENSES:
Personnel 10,451,878 1,341,056 (a) 9,110,822
Occupancy 1,180,827 240,059 (a) 940,768
Insurance 303,894 7,892 (a) 296,002
Depreciation and amortization 1,040,656 388,787 (a) 651,869
Other 1,481,370 254,071 (a) 1,227,299
----------- ---------- ----------
Total operating & administrative expenses 14,458,625 2,231,865 12,226,760
----------- ---------- -----------
EARNINGS (LOSS) FROM OPERATIONS 3,624,557 3,062,806 561,751
----------- ---------- -----------
OTHER EXPENSES:
Minority interest 397,222 397,458 (a) (236)
Interest 166,037 39,397 (a) 126,640
Loss on write-off of property and equipment 19,884 11,997 (a) 7,887
----------- ---------- -----------
Total other expenses 583,143 448,852 134,291
----------- ---------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 3,041,414 2,613,954 427,460
INCOME TAX EXPENSE 1,348,668 1,024,124 (a) 324,544
---------- ---------- -----------
NET EARNINGS (LOSS) $1,692,746 $1,589,830 $ 102,916
========== ========== ===========
NET EARNINGS (LOSS) PER SHARE $0.21 $0.19 $0.02
========== ========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,244,381 8,244,381 8,244,381
========== ========== ===========
<CAPTION>
For the six months ended
June 30, 1996
------------------------------------------------
Crown
NorthCorp, Inc. Adjusted
Consolidated Pro forma Consolidated
Historical Adjustments Pro forma
--------------- ----------- ------------
<S> <C> <C> <C>
REVENUES:
Management fees $ 3,306,012 $ 699,094 (b) $ 2,606,918
Disposition, liquidation and bonus fees 1,696,122 649,842 (b) 1,046,280
Incentive fees 1,302,219 303,102 (b) 999,117
Other 167,136 34,607 (b) 132,529
----------- ---------- -----------
Total revenues 6,471,489 1,686,645 4,784,844
----------- ---------- -----------
OPERATING & ADMINISTRATIVE EXPENSES:
Personnel 5,131,103 1,166,655 (b) 3,964,448
Occupancy 786,805 268,074 (b) 518,731
Insurance 144,425 9,246 (b) 135,179
Depreciation and amortization 1,667,050 1,386,730 (b) 280,320
Other 592,188 59,345 (b) 532,843
----------- ---------- -----------
Total operating & administrative expenses 8,321,571 2,890,050 5,431,521
----------- ---------- -----------
EARNINGS (LOSS) FROM OPERATIONS (1,850,082) (1,203,405) (646,677)
----------- ----------- -----------
OTHER EXPENSES:
Minority interest (175,837) (175,837)(b) 0
Interest 93,618 0 93,618
Loss on write-off of property and equipment 47,594 0 47,594
----------- ---------- -----------
Total other expenses (34,625) (175,837) 141,212
------------ ---------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (1,815,457) (1,027,568) (787,889)
INCOME TAX EXPENSE (635,582) (324,220)(b) (311,362)
------------ ----------- -----------
NET EARNINGS (LOSS) $(1,179,875) $ (703,348) $ (476,527)
------------ ----------- -----------
NET EARNINGS (LOSS) PER SHARE ($0.14) ($0.09) ($0.05)
------------ ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING 8,199,779 8,199,779 8,199,779
------------ ----------- -----------
</TABLE>
See accompanying notes to Pro forma Financial Statements
II-7
<PAGE> 35
CROWN NORTHCORP, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS
1. On August 8, 1996, the Company and Tucker Holding Company, Ltd., an
Ohio limited liability company ("Tucker") entered into a Stock Purchase
Agreement (the "Purchase Agreement") with CSW Acquisition Corp., a
Florida corporation ("CSWA") and Bradley S. Weiss ("Weiss") whereby the
Company and Tucker sold and CSWA purchased all of the issued and
outstanding stock of CSW. CSWA is a newly formed corporation of which
Weiss is President and sold shareholder. The purchase and sale was
effective July 31, 1996.
Tucker holds 4,207,500 shares of the Company's common stock,
representing 51% of the outstanding common stock. Prior to the purchase
and sale, the ownership interests of Messrs. Roark, Castelli and Weiss
in Tucker were 76.19%, 19.05% and 4.76% respectively.
Pursuant to the Purchase Agreement, the Company sold eighty shares, or
80% of CSW's capital stock, to CSWA and Tucker sold 20 shares, or 20%
of CSW's capital stock, to CSWA in exchange for ten dollars and the
assignment by Weiss of his ownership interests in Tucker to Tucker.
Effective July 31, 1996, the ownership interests of Messrs. Roark and
Castelli in Tucker were 80% and 20%, respectively.
2. The following pro forma adjustments have been made to the Company's
historical statements to reflect the CSW sale described above:
(a) Elimination of CSW operations included in the Company's
historical financial statements for the twelve months
ended December 31, 1995.
(b) Elimination of CSW operations included in the Company's
historical financial statements for the six months ended
June 30, 1996.
(c) Recording the effect of CSW sale on the Company's balance
sheet as follows:
II-8
<PAGE> 36
<TABLE>
<S> <C>
Cash $ (92,877)
Receivables (705,864)
Property & Equipment (189,166)
Other Assets (394,961)
Accounts Payable 25,861
Accrual Other Liabilities 81,349
-----------
Loss on Sale $(1,275,658)
===========
</TABLE>
(d) Recording the tax effect of $267,429 resulting from loss
on sale on the Company's balance sheet.
II-9
<PAGE> 37
Item 6. - Exhibits and Reports on Form 8-K
- ------------------------------------------
(a) Exhibits
Exhibit
Number
- ------
10.37 Stock Purchase Agreement dated as of July 31, 1996
by and among Crown NorthCorp, Inc., Tucker Holding
Company, Ltd., CSW Acquisition Corp. and Bradley S.
Weiss.
10.38 Form of Registration Rights Agreement between Crown
NorthCorp, Inc. and various parties dated July 30,
1996.
(b) Reports on Form 8-K
None
II-10
<PAGE> 38
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CROWN NORTHCORP, INC.
Dated: August 14, 1996 By: /s/ Richard A. Brock
-------------------------------------
Richard A. Brock
Acting Chief Financial Officer
II-11
<PAGE> 39
EXHIBIT INDEX
-------------
Exhibit
Number
- ------
10.37 Stock Purchase Agreement dated as of July 31, 1996
by and among Crown NorthCorp, Inc., Tucker Holding
Company, Ltd., CSW Acquisition Corp. and Bradley S.
Weiss (1).
10.38 Form of Registration Rights Agreement between Crown
NorthCorp, Inc. and various parties dated July 30,
1996 (1).
- ----------------------------------
(1) Filed herewith
II-12
<PAGE> 1
Exhibit 10.37
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is made and entered
into on the 8th day of August, 1996 to be effective as of July 31, 1996,
by and between (i) CSW ACQUISITION CORP., a Florida corporation ("BUYER"), (ii)
CSW ASSOCIATES, INC., a Delaware corporation (the "COMPANY" or "CSW")., (iii)
CROWN NORTHCORP, INC., a Delaware corporation, f/k/a Northcorp Realty Advisors,
Inc. ("NORTHCORP") and TUCKER HOLDING COMPANY, LTD., an Ohio limited liability
comopany ("TUCKER"), (Northcorp and Tucker shall hereinafter be sometimes
referred to individually as a "SELLER or a "SHAREHOLDER" and collectively as the
"SELLERS" or the "SHAREHOLDERS"), and (iv) Bradley S. Weiss, solely for purposes
of Sections 1.2, 2.2, 2.3, 2.4, 7.4, and 9.13 of this Agreement ("WEISS").
RECITALS
--------
A. The Sellers, collectively, own One Hundred (100) shares of common
stock, par value $.01 per share, of the Company (the "SHARES"), which constitute
all of the issued and outstanding shares of stock of the Company.
B. The Company is in the business of managing and marketing various
real estate, loan and related assets.
C. Buyer desires to purchase, and the Shareholders desire to sell, all
of the shares of capital stock of the Company (the "Shares"), on the terms and
subject to the conditions set forth herein.
D. Capitalized terms used in this Agreement are used as defined in
Article IX or elsewhere in this Agreement.
<PAGE> 2
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree as follows:
ARTICLE I - PURCHASE OF CAPITAL STOCK; PURCHASE PRICE
1.1 SALE AND PURCHASE OF STOCK. On the terms and subject to the
conditions of this Agreement, the Sellers agree to sell, convey, assign,
transfer and deliver the Shares to Buyer, and Buyer shall purchase, acquire and
accept delivery of the Shares.
1.2 CONSIDERATION. The Consideration for the Shares shall be:
(a) Ten Dollars ($10.00); and
(b) the assignment by Weiss, the sole shareholder of Buyer, of
his ownership interests in Tucker to Tucker or its designee.
ARTICLE II - CLOSING
2.1 CLOSING. Subject to the conditions stated in Article VI of this
Agreement, the closing of the transactions contemplated hereby (the "CLOSING")
shall be held at 10:00 am, Miami time, on August 1, 1996, at the offices of
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell
Avenue, Miami, Florida 33131, or on such other date, time and location as the
parties may mutually agree. The date upon which the Closing occurs is
hereinafter referred to as the "CLOSING DATE". The effective date of the Closing
shall be July 31, 1996.
2.2 DELIVERIES BY THE SELLERS. At or prior to the Closing, the Sellers
shall deliver to Buyer:
(a) one or more certificates representing all of the Shares,
with all necessary transfer stamps and with such other instruments or documents
as are necessary to transfer to Buyer good, valid and marketable title to the
Shares, free and clear of any and all Liens;
(b) a certificate executed by an authorized officer of the
Company on behalf of the Company, in the form attached hereto as EXHIBIT A, to
the effect that the conditions set forth in Article V below have been satisfied;
2
<PAGE> 3
(c) a certificate executed by the Secretary of each Seller, of
the resolutions adopted by the Board of Directors or the Managers of each
Seller, in the form attached hereto as EXHIBIT B, with respect to the approval
of this Agreement and the Collateral Agreements and the transactions
contemplated hereby and thereby;
(d) a mutual release (the "TUCKER RELEASE") executed by Tucker
and Buyer pursuant to which (i) Tucker and all members of Tucker, other than
Weiss, release Weiss from any and all claims that Tucker, and/or all other
members of Tucker, may have against Weiss pursuant to (A) that certain Amended
and Restated Operating Agreement of Tucker Holding Company, Ltd., dated June 22,
1995, (the "TUCKER OPERATING AGREEMENT") or (B) any other matters relating to
Tucker, and (ii) Weiss relinquishes all rights he may have, including but not
limited to all rights pursuant to the Operating Agreement;
(e) a mutual release (the "NORTHCORP EMPLOYMENT RELEASE")
executed by Northcorp and Buyer pursuant to which (i) Northcorp acknowledges the
termination of, and releases, Weiss from any and all claims that Northcorp may
have against Weiss pursuant to that certain Employment Agreement entered into by
and between Weiss and Northcorp, dated May 4, 1995 (the "NORTHCORP EMPLOYMENT
AGREEMENT"), and (ii) Weiss acknowledges the termination of his employment with
Northcorp and relinquishes all rights or claims to further compensation that he
may have pursuant to the Northcorp Employment Agreement;
(f) an opinion letter from the Sellers' legal counsel, the
form and content of which are acceptable to Buyer and its counsel;
(g) documents satisfactory to Buyer and its counsel evidencing
that the Company's ownership interest of the Choice Hotels Venezuelan franchise
(and related companies) is vested in the Company;
(h) an Operating Agreement, in the form attached hereto as
EXHIBIT E, pursuant to which the Buyer shall obtain complete control over the
Company and its operations pending the termination of the Escrow Agreement
described in SECTION 2.4 hereof (the "OPERATING AGREEMENT");
(i) a Servicing Agreement, in form satisfactory to Buyer and
its counsel, and which may be included as part of the Operating Agreement,
pursuant to which CSW may continue servicing the approximately 600 assets
presently assigned to CSW under the FHLMC Loss Mitigation contract at a rate to
CSW equal to eighty-five percent (85%) of the gross billings to FHLMC on those
assets; and
(j) an Escrow Agreement in the form attached hereto as EXHIBIT
C.
2.3 DELIVERIES BY BUYER. At or prior to the Closing, Buyer shall
deliver to the Sellers:
3
<PAGE> 4
(a) an assignment agreement whereby Weiss assigns his
membership interests in Tucker to Tucker or its designee, pursuant to Section
1.2 hereof (the "TUCKER ASSIGNMENT AGREEMENT");
(b) the Tucker Release;
(c) the Northcorp Employment Release;
(d) an opinion letter from the Buyer's legal counsel as to the
Buyer's authority to enter into this Agreement and its good standing; and
(e) an Escrow Agreement in the form attached hereto as EXHIBIT
C.
2.4 ESCROW AGREEMENT.
(a) Notwithstanding anything to the contrary contained herein,
the parties have agreed that the following documents will be held in escrow
until the "ESCROW TERMINATION DATE", which shall be the earlier of (i) the
Buyer's receipt of the approval and consents from the Federal Deposit Insurance
Company that are necessary for the purchase and sale of the Shares hereunder or
(ii) December 16, 1996, pursuant to the terms of the Escrow Agreement:
(i) stock certificates representing the Shares (the "STOCK
CERTIFICATES"); and
(ii) Stock Powers executed by each Seller pursuant to which
each Seller transfers to Buyer the Shares represented by the stock certificates
(the "STOCK POWERS").
(b) On the Escrow Termination Date, the escrow agent named in
the Escrow Agreement (the "ESCROW AGENT") shall deliver the stock certificates
and stock powers relating to the Shares to Buyer and the stock certificate and
the Stock Power relating to the Northcorp Shares to Tucker.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
OF THE SELLERS
Each of the Sellers hereby jointly and severally make the following
representations and warranties to Buyer, each of which shall be deemed a
material inducement for the Buyer to enter into this Agreement (and Buyer, in
executing, delivering and consummating this Agreement, has relied and will rely
upon the correctness and completeness of each of such representations and
warranties):
4
<PAGE> 5
3.1 CORPORATE EXISTENCE AND QUALIFICATION. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; has the corporate power to own, manage, lease and hold its
assets and to carry on its business as and where such assets are presently
located and such business is presently conducted; and neither the character of
the Company's assets nor the nature of the Company's business requires the
Company to be qualified to do business as a foreign corporation in any
jurisdiction. The Company's articles of incorporation and by-laws have not been
amended or supplemented and are in full force and effect as of the date hereof.
True, complete and correct copies of the Company's articles of incorporation and
by-laws, as presently in effect, are attached hereto as EXHIBIT D.
3.2 SUBSIDIARIES. Except as otherwise set forth on Schedule 3.2, the
Company does not have any subsidiaries, participate in any partnership or joint
venture, own any capital stock of any corporation or otherwise own or hold any
equity interest in any Person. The term "Company" shall hereinafter include any
subsidiaries of the Company.
3.3 CORPORATE RECORD BOOKS. The corporate minute books of the Company
have been made available to Buyer, are complete and correct and contain all of
the proceedings of the shareholders and directors of the Company. The stock
record book of the Company has been delivered to Buyer for inspection prior to
the date hereof and is complete and correct, and all requisite Federal and State
documentary stamps have been affixed thereon and canceled.
3.4 CAPITAL STOCK. The authorized capital stock of the Company consists
of One Thousand (1,000) shares of Common Stock, of which One Hundred (100)
shares are issued and outstanding and held by the Sellers in the amounts set
forth opposite their names on SCHEDULE 3.4 attached hereto.
3.5 TITLE TO STOCK. All of the Shares are, and at the Closing will be
(a) owned by the Sellers, (b) duly authorized, validly issued and fully paid and
nonassessable, and (c) free of all Liens. At the Closing, each Seller will
convey, good and marketable title to the Shares, free and clear of any and all
Liens and contractual restrictions or limitations of any kind or nature
whatsoever.
3.6 OPTIONS AND RIGHTS. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements under which the Company is bound or obligated to issue or otherwise
transfer any additional shares of its capital stock or rights to purchase shares
of its capital stock to any Person, and there are no agreements, arrangements or
understandings between any Seller and/or the Company and any other Person
regarding the Shares (or the transfer, disposition, holding or voting thereof).
3.7 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by each of the Shareholders, and each of the
Shareholders has all
5
<PAGE> 6
requisite power and legal capacity to execute and deliver this Agreement and all
Collateral Agreements executed and delivered or to be executed and delivered in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its respective obligations hereunder and under the Collateral
Agreements. The execution, delivery and performance of this Agreement and all
other agreements and transactions contemplated hereby have been duly authorized
by the Board of Directors or Managers, and the shareholders or members of each
Seller, if necessary, and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated hereby.
Each of the Sellers is entering into this Agreement on such Seller's own
volition, free from any undue influence or coercion. This Agreement and each
Collateral Agreement to which a Shareholder is a party constitutes, or upon
execution and delivery will constitute, the legal, valid and binding obligation
of such party, enforceable in accordance with its terms.
3.8 NO VIOLATION. The execution and delivery by the Sellers of this
Agreement, and any and all other agreements contemplated hereby, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Sellers do not and will not, except as set forth on SCHEDULE 3.8 attached
hereto, (a) conflict with or result in a breach of the terms, conditions or
provisions of, (b) constitute a default or event of default under (with due
notice, lapse of time or both), (c) result in the creation of any Lien upon the
capital stock or assets of the Company pursuant to, (d) give any third party the
right to accelerate any obligation under, (e) result in a violation of, or (f)
require any authorization, consent, approval, exemption or other action by or
notice to any court or Governmental Authority pursuant to, the articles of
incorporation or by-laws of the Company or any Legal Requirement, any Order or
any Contract to which the Company or any of its assets or any Seller is subject.
The Company and the Sellers will comply with all applicable Legal Requirements,
Orders and Contracts in connection with the execution, delivery and performance
of this Agreement and the transactions contemplated hereby.
3.9 NO PROCEEDINGS. No suit, action or other proceeding is pending or
to the Knowledge of the Sellers, threatened before any Governmental Authority
seeking to restrain the Company or any Seller or prohibit their entry into this
Agreement or prohibit the Closing, or seeking Damages against the Company or any
of its assets or properties as a result of the consummation of this Agreement.
3.10 FINANCIAL STATEMENTS; ABSENCE OF UNDISCLOSED LIABILITIES.
(a) The Company has delivered to Buyer true and complete
copies of its unaudited Financial Statements dated as of July 31, 1996.
(b) Except as otherwise set forth in SCHEDULE 3.10 attached
hereto or in the Financial Statements delivered to Buyer pursuant to SECTION
3.10(A), the Company does not have, nor are any of the assets or properties of
the Company subject to, any liabilities or obligations (whether accrued,
absolute, contingent, known, unknown or otherwise, and
6
<PAGE> 7
whether or not of a nature required to be reflected or reserved against in a
balance sheet in accordance with GAAP). There are no facts in existence on the
date hereof that might reasonably serve as the basis for any liabilities or
obligations of the Company that are not disclosed in the Financial Statements
delivered to Buyer pursuant to SECTION 3.10(A) or on SCHEDULE 3.10 hereto.
3.11 EMPLOYEES. SCHEDULE 3.11 attached hereto sets forth a complete
list of the Company's employees. The Company has been, since March 1, 1995, and
currently is, in compliance with all Federal, State and local Legal Requirements
and Orders affecting employment and employment practices of the Company
(including, without limitation, those Legal Requirements promulgated by the
Equal Employment Opportunity Commission), including terms and conditions of
employment and wages and hours. The Company is not a party to any collective
bargaining agreement or other labor agreement relating to the Company or the
Company's employees. To the Knowledge of the Sellers, there are no complaints
regarding the Company or the Company's employees pending before the National
Labor Relations Board or any similar state or local labor agency; there are no
labor strikes, slow-downs or stoppages or other labor troubles pending or
threatened by or with respect to the Company or the Company's employees. The
Company is in compliance with all federal, state and local laws respecting
employment, wages and hours with respect to its employees.
3.12 ABSENCE OF CERTAIN CHANGES. Since June 30, 1996, there has not
been (a) any Material Adverse Change in the business, prospects, financial
condition, revenues, expenses or operations of the Company; (b) any material
decrease in the cash and cash equivalents of the Company from the amounts shown
on the June 30, 1996 balance sheet included in the Financial Statements, (c) to
the Knowledge of the Sellers, any damage, destruction or loss, whether covered
by insurance or not, with regard to the Company's properties and business; (d)
any declaration, setting aside or payment of any dividend or distribution
(whether in cash, stock or property) in respect of the Company's capital stock,
or any redemption or other acquisition of such capital stock by the Company; (e)
any increase in the rate of compensation or in the benefits payable or to become
payable by the Company to its directors, officers, employees or consultants; (f)
any amendment, modification or termination of any existing, or entering into any
new, contract, agreement, arrangement or plan relating to any salary, bonus,
insurance, pension, health or other employee welfare or benefit plan for or with
any directors, officers, employees or consultants of the Company; (g) any entry
into any Contract not in the ordinary course of business, including without
limitation relating to any borrowing or capital expenditure; (h) any disposition
by the Company of any asset not in the ordinary course of business; or (i) any
change by the Company in accounting methods or principles.
3.13 COMPLIANCE WITH LAWS. The Company is and has been in compliance in
all respects with any and all Legal Requirements applicable to the Company. To
the Knowledge of the Sellers, the Company has not received or entered into any
citations, complaints, consent orders, compliance schedules, or other similar
enforcement orders or
7
<PAGE> 8
received any written notice from any Governmental Authority or any other written
notice that would indicate that there is not currently compliance with all such
Legal Requirements, and there are no set of facts relating to the Company which
would cause the Company to be not in compliance with all Legal Requirements.
3.14 PERMITS. The Company has all Permits necessary for the Company to
own, operate, use and/or maintain its assets and properties and to conduct its
business and operations as presently conducted. All such Permits are in effect,
no proceeding is pending or, to the Knowledge of the Sellers, threatened to
modify, suspend or revoke, withdraw, terminate, or otherwise limit any such
Permits, and no administrative or governmental actions have been taken or, to
the Knowledge of the Sellers, threatened in connection with the expiration or
renewal of such Permits. No violations have occurred that remain uncured,
unwaived, or otherwise unresolved, or are occurring in respect of any such
Permits.
3.15 LITIGATION; DEFAULT. Except as otherwise set forth in SCHEDULE
3.15, there are no claims, actions, suits, investigations or proceedings against
the Company pending or, to the Knowledge of the Sellers, threatened in any court
or before or by any Governmental Authority, or before any arbitrator, that might
have an adverse effect (whether covered by insurance or not) on the business,
operations, prospects, assets, Shares, securities or financial condition of the
Company and, there is no basis for any such claim, action, suit, investigation
or proceeding. The Company is not in default under, and no condition exists
(whether covered by insurance or not) that with or without notice or lapse of
time or both would or could (i) constitute a default under, or breach or
violation of, any Legal Requirement, Permit or Contract applicable to the
Company, or (ii) accelerate or permit the acceleration of the performance
required under, or give any other party the right to terminate, any Contract
applicable to the Company, other than defaults, breaches, violations or
accelerations that would not have an adverse effect on the business, operations,
prospects, assets, securities or financial condition of the Company.
3.16 TAX MATTERS. Except as set forth on SCHEDULE 3.16 hereto:
(a) All federal, state and local tax returns (including
information returns) and reports of the Company required by any applicable law,
rule, regulation or procedure of any federal, state or local agency, authority
or body to be filed prior to the date hereof have been duly filed (or extensions
for time have been duly filed and the appropriate estimated payments have been
made) and were true, correct and complete as of the date of filing;
(b) The Company has paid all Taxes, assessments, fees,
penalties, interest and other governmental charges owed, or that may
subsequently be determined to be owed, by the Company with respect to all
periods ending on or prior to the Closing Date;
8
<PAGE> 9
(c) There is no pending or threatened claim by any federal,
state or local taxing authority against, or with respect to, the Company for
payment of additional Taxes for any period prior to the date hereof;
(d) All Taxes and other assessments and levies required to be
withheld by the Company from employees for income Taxes, social security Taxes
and unemployment insurance Taxes have been collected or withheld, and either
paid to the respective governmental agencies, or set aside in accounts and held
for such purpose;
(e) There are no Liens for Taxes upon any property or assets
of the Company, except for Liens for Taxes not yet due and payable. Neither the
Sellers nor the Company has executed a waiver of the statute of limitations on
the right of the Internal Revenue Service or any other Taxing Authority to
assess additional Taxes or to contest the income or loss with respect to any tax
return;
(f) The basis of any depreciable assets, and the methods used
in determining allowable depreciation (including, without limitation, cost
recovery), are correct and in compliance with the Internal Revenue Code of 1986,
as amended, and the regulations promulgated thereunder (the "CODE"); and
(g) The Company has not been a member of an Affiliated Group
filing a consolidated federal income tax return other than a group the common
parent of which is Northcorp.
3.17 CONTRACTS AND COMMITMENTS.
(a) To the Knowledge of the Sellers, SCHEDULE 3.17 sets forth
each of the following Contracts to which the Company is a party or by which it
or any of its assets or properties is bound, whether written or oral:
(i) any Contract that cannot by its terms be
terminated by the Company with 30 days' or less notice without penalty;
(ii) any Contract or commitment for the employment
or engagement of any agent, broker or other employee or independent
contractor which cannot by its terms be terminated by the Company with
thirty (30) days' or less notice without penalty;
(iii) any pension, profit sharing, bonus, retirement,
stock option, stock purchase or other plan providing for deferred or
other compensation or related to employees or any other employee
benefit plan (other than as set forth in SCHEDULE 3.17 hereto), or any
Contract with any labor union;
9
<PAGE> 10
(iv) any Contract with any Seller or with any
affiliate of any Seller;
(v) any Contract relating to or providing for loans
to officers, directors, employees or Affiliates;
(vi) any Contract or commitment for capital
expenditures by the Company in excess of $1,000 in the aggregate;
(vii) any lease or license with respect to any assets
of the Company, real or personal, whether as landlord, tenant, licensor
or licensee;
(viii) any Contract, indenture or other instrument
relating to the borrowing of money or the guarantee of any obligation
or the deferred payment of the purchase price of any asset or property;
(ix) any Contract for the sale of any asset or group
of assets that in the aggregate have a fair market value or book value
on the Company's books of greater than $500;
(x) any assignment, license, indemnification or
Contract with respect to any intangible property, including, without
limitation, any Proprietary Rights;
(xi) any warranty Contract with respect to services
rendered (or to be rendered) or products sold or leased;
(xii) any Contract which prohibits, restricts or
limits in any way the payment of dividends or distributions by the
Company;
(xiii) any Contract under which it has granted any
Person any registration rights (including piggyback rights) with
respect to any securities;
(xiv) any Contracts with independent agents, brokers,
dealers or distributors;
(xv) any sales, commissions, advertising or
marketing Contracts;
(xvi) any Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xvii) any agreement that purports to limit the
Company's or any Shareholder's freedom to compete freely in any line of
business or in any geographic area;
10
<PAGE> 11
(xviii) any Contracts with Persons with which,
directly or indirectly, any Seller also has a Contract; or
(xix) any other Contract which is material to the
Company's operations or business prospects.
(b) Except as set forth on SCHEDULE 3.17 attached hereto, no
consent of any party to any Contract is required in connection with the
execution, delivery or performance of this Agreement, or the consummation of the
transactions contemplated hereby.
(c) All of the Contracts listed or required to be listed in
SCHEDULE 3.17 are valid, binding and in full force and effect, subject to the
terms contained therein, and, to the Knowledge of the Sellers, except as
disclosed in SCHEDULE 3.17, the Company has not been notified or advised by any
party thereto, nor are the Sellers aware, of such party's intention or desire to
terminate or modify any such Contract in any respect. To the Knowledge of the
Sellers, the Company is not in breach of any of the terms or covenants of any
Contract listed or required to be listed in SCHEDULE 3.17.
3.18 TRUE AND COMPLETE COPIES. Copies of all Contracts delivered and to
be delivered hereunder by the Sellers are and will be true and complete copies
of such Contracts.
3.19 TITLE AND RELATED MATTERS.
(a) The Company has good and marketable title to all of the
properties and assets reflected in the Financial Statements or acquired after
the date thereof, free and clear of any and all Liens, except as otherwise
reflected in the Financial Statements or the notes thereto.
(b) The Company owns, and will on the Closing Date own, good
and marketable title to all the personal property and assets, tangible or
intangible, used in its business, whether or not reflected on the Company's
Balance Sheet, except for those assets leased by the Company, all of which
leases are in good standing and no party is in default thereunder. None of the
properties or assets belonging to or held by the Company is or will be on the
Closing Date subject to any (i) Contracts of sale or lease, or (ii) Liens. Such
personal property and assets are, and as of the Closing Date will be, adequate
to carry on the Company's business as currently conducted and as proposed to be
conducted after the Closing Date.
(c) All machinery and equipment regularly used by the Company
in the conduct of its business is in good operating condition and repair, except
for ordinary wear and tear, and except for normal breakdowns and servicing
requirements consistent with the Company's prior practices and normal industry
standards.
11
<PAGE> 12
(d) There has not been since June 30, 1996, and will not be
prior to the Closing Date, any sale, lease, or any other disposition or
distribution by the Company of any of the assets or properties now or hereafter
owned by it, except for transactions in the ordinary and regular course of
business or as otherwise consented to, in writing, by the Buyer. After the
Closing, the Buyer will own, or have the unrestricted right to use, all
properties and assets that are currently used in connec tion with the business
of the Company.
(e) SCHEDULE 3.19 attached hereto sets forth a description of
all real property owned or leased by the Company.
3.20 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Except as set
forth in SCHEDULE 3.20 attached hereto, neither the Company, nor any ERISA
Affiliate (defined below) of the Company, is a party to or participates in or
has any liability or contingent liability with respect to:
(i) any "EMPLOYEE WELFARE BENEFIT PLAN" or "EMPLOYEE
PENSION BENEFIT PLAN" or "MULTI-EMPLOYER PLAN" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any employee,
director, consultant or agent, whether or not pursuant to a
Contract, arrangement, custom or informal understanding which
constitutes an "employee benefit plan" (as defined in Section
3(3) of ERISA); or
(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
Any plan, arrangement or agreement required to be
listed on SCHEDULE 3.20 for which the Company or any ERISA
Affiliate of the Company may have any liability or contingent
liability is sometimes hereinafter referred to as a "BENEFIT
PLAN". For purposes of this Section 3.20, the term "ERISA
AFFILIATE" shall mean any trade or business, whether or not
incorporated, that together with the Company would be deemed a
"SINGLE EMPLOYER" within the meaning of Section 4001(b)(1) of
ERISA.
(b) PLAN DOCUMENTS AND REPORTS. A true and correct copy of
each of the Benefit Plans listed on SCHEDULE 3.20, and all contracts relating
thereto, or to the funding
12
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thereof, including, without limitation, all trust agreements, insurance
contracts, investment management agreements, subscription and participation
agreements and recordkeeping agreements, each as in effect on the date hereof,
has been supplied to the Buyer. In the case of any Benefit Plan that is not in
written form, the Buyer has been supplied with an accurate description of such
Benefit Plan as in effect on the date hereof. A true and correct copy of the
three most recent annual reports and accompanying schedules, the three most
recent actuarial reports, and the most recent summary plan description and
Internal Revenue Service determination letter with respect to each such Benefit
Plan, to the extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not readily
tradeable) held with respect to any funded Benefit Plan has been supplied to the
Buyer by the Company, and there have been no material changes in the financial
condition in the respective Benefit Plans from that stated in the annual reports
and actuarial reports supplied to the Buyer.
(c) COMPLIANCE WITH LAWS; LIABILITIES. As to all Benefit
Plans, except as otherwise specified on SCHEDULE 3.20, the Company is in
compliance with the terms of all Benefit Plans and every Benefit Plan is in
compliance with all of the requirements and provisions of ERISA and all other
laws and regulations applicable thereto, including without limitation the timely
filing of all annual reports or other filings required with respect to such
Benefit Plans. None of the assets of any Benefit Plan is invested in employer
securities or employer real property, as those terms are defined in Section
407(d) of ERISA. There have been no "PROHIBITED TRANSACTIONS" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit
Plan and neither the Company nor any ERISA Affiliate of the Company has
otherwise engaged in any prohibited transaction. There has been no "ACCUMULATED
FUNDING DEFICIENCY" as defined in Section 302 of ERISA, nor has any "REPORTABLE
EVENT" as defined in Section 4043(b) of ERISA occurred with respect to any
Benefit Plan. Actuarially adequate accruals for all obligations or contingent
obligations under the Benefit Plans are reflected in the Company's Financial
Statements provided to the Buyer and such obligations include a pro rata amount
of the contributions which would otherwise have been made in accordance with
past practices for the Benefit Plan years which include the Closing Date.
3.21 INTELLECTUAL PROPERTY.
(a) SCHEDULE 3.21 attached hereto sets forth a description of
all Proprietary Rights used by the Company in connection with, or related to,
its business.
(b) The Company has the right to use each Proprietary Right
listed in SCHEDULE 3.21, and except as otherwise set forth therein, each of such
Proprietary Rights is, and will be on the Closing Date, free and clear of all
royalty obligations and Liens. There are no Claims pending or threatened against
the Company or the Sellers that the use of any of the Proprietary Rights listed
on SCHEDULE 3.21 infringes the rights of any Person. Neither the Company nor the
Sellers has knowledge of any conflicting use of any of the Proprietary Rights.
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(c) The Company is not a party in any capacity to any
franchise, license or royalty agreement respecting any Proprietary Right, and
there is no conflict with the rights of others in respect to any Proprietary
Right now used in the conduct of the Company's business.
3.22 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 3.22
attached hereto: (a) neither the Company's business nor the operation thereof
violates any applicable Environmental Law or Environmental Permit and no
condition or occurrence (any accident, happening or event which occurs or has
occurred at any time prior to the Closing Date, which has resulted in, presently
results in or could result in a claim against the Company or the Buyer or
creates or could create a liability or loss for the Company or the Buyer) which,
with notice or the passage of time or both, would constitute a violation of any
Environmental Law or any Environmental Permit; (b) the Company has not
generated, transported, treated, stored or disposed of, in violation of any
Environmental Law or Environmental Permit, any pollutants, contaminants or
hazardous or toxic wastes, substances or materials on or at any of its property
or facilities now or previously owned, operated or leased by the Company; (c) to
the Knowledge of the Sellers, the Company has not received any notice from any
Governmental Authority or any private Person that the Company's business or the
operation of any of its facilities is in violation of any Environmental Law or
any Environmental Permit or that it is responsible (or potentially responsible)
for the clean-up of any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials; (d) no property now or previously owned, leased or
operated by the Company is listed or proposed for listing on the National
Priorities List pursuant to CERCLA or on any other federal, state or local list
of sites requiring investigation or clean-up; (e) there are no underground
storage tanks, active or abandoned, and no asbestos-containing materials
present, on or under any property now or previously owned, leased or operated by
the Company; and (f) the Company has timely filed all reports required to be
filed with respect to all of its property and facilities and has generated and
maintained all required data, documentation and records under all applicable
Environmental Laws.
3.23 DEALINGS WITH AFFILIATES. SCHEDULE 3.23 attached hereto sets forth
a complete list, including the parties thereto, of all oral or written
agreements and arrangements to which the Company is or will be a party, as of
July 31, 1996, and to which any one or more Affiliates is also a party.
3.24 BANKING ARRANGEMENTS. SCHEDULE 3.24 attached hereto sets forth the
name of each bank in or with which the Company has an account, credit line or
safety deposit box, and a brief description of each such account, credit line or
safety deposit box, including the names of all Persons currently authorized to
draw thereon or having access thereto. Except as otherwise set forth on SCHEDULE
3.24, the Company has no liability or obligation relating to funds or money
borrowed by or loaned to the Company (whether under any credit facility, line of
credit, loan, indenture, advance, pledge or otherwise). Since July 1, 1996,
there has been no withdrawal of funds from, or the issuance of checks or
obligations against, any of the assets of the Company.
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3.25 INSURANCE. SCHEDULE 3.25 hereto sets forth a complete and correct
list of all insurance policies presently in effect that relate to the Company,
all of which are and have been in full force and effect from and after the
date(s) set forth on SCHEDULE 3.25. The Sellers hereby agree to maintain the
Company as an "additional insured" on all insurance policies in which the
Company is currenty listed as an "additional insured" for a period of thirty
(30) days following the Closing Date.
3.26 ACCOUNTS RECEIVABLE. The accounts receivable of the Company
reflected in the Financial Statements and such additional accounts receivable as
are reflected on the books of the Company on the date hereof are good and
collectible except to the extent reserved against thereon (which reserves have
been determined based upon actual prior experience and are consistent with prior
practices). All such accounts receivable (except to the extent so reserved
against) are valid, genuine and subsisting, arise out of bona fide transactions,
performance of services or other business transactions and are not subject to
any defenses, set-offs or counterclaims.
3.27 IMPROPER AND OTHER PAYMENTS. To the Knowledge of the Sellers,
except as set forth on SCHEDULE 3.27 attached hereto, (a) neither any Seller,
the Company, any director, officer or employee thereof, nor any agent or
representative of the Company nor any Person acting on behalf of any of them,
has made, paid or received any unlawful bribes, kickbacks or other similar
payments to or from any Person or Governmental Authority, (b) no improper
foreign payment (as defined in the Foreign Corrupt Practices Act) has been made,
and (c) the internal accounting controls of the Company are adequate to detect
any of the foregoing under current circumstances.
3.28 SERVICE CLAIMS. No service liability claim is pending or, to the
Knowledge of the Sellers, threatened against the Company or against any other
party with respect to the services of the Company. SCHEDULE 3.28 attached hereto
lists all service liability claims which have been asserted against the Company
or the Sellers (or in respect of which the Company or the Sellers received
written notice or are otherwise aware) since March 1, 1995 with respect to the
services of the Company.
3.29 RELATIONS WITH THIRD PARTIES. The Company maintains good relations
with all customers and other parties with whom the Company has significant
relations, and no such party has canceled, terminated or made any threat to
either the Shareholders or the Company to cancel or otherwise terminate its
relationship with the Company or to materially decrease its usage of the
services of the Company.
3.30 NO BROKERS OR FINDERS. No Person has or will have any right,
interest or claim against the Buyer for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement.
3.31 INCORPORATION OF REPRESENTATIONS SET FORTH IN COLLATERAL
AGREEMENTS. Each of the statements, representations and warranties of the
Sellers contained in the Collateral
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Agreements is hereby incorporated by reference as completely as if set out in
full herein and, accordingly, for all purposes hereunder, are and shall be
deemed to be made jointly and severally by the Sellers as if repeated verbatim
herein.
3.32 FULL DISCLOSURE. The information furnished by the Sellers to Buyer
pursuant to this Agreement (including, without limitation, information contained
in the exhibits hereto, the schedules identified herein, the documents referred
to in such schedules and the certificates and other documents to be executed or
delivered pursuant hereto by the Sellers at or prior to the Closing) is not, nor
at the Closing will be, false or misleading in any material respect, or
contains, or at the Closing will contain, any misstatement of material fact, or
omits, or at the Closing will omit, to state any material fact required to be
stated in order to make the statements therein not misleading.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer makes the following representations and warranties to the
Sellers, each of which shall be deemed a material inducement for the Sellers to
enter into this Agreement (and the Sellers, in executing, delivering and
consummating this Agreement, have relied and will rely upon the correctness and
completeness of each of such representations and warranties):
4.1 CORPORATE EXISTENCE AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida; has the corporate power to own, manage, lease and hold its properties
and to carry on its business as and where such properties are presently located
and such business is presently conducted; and neither the character of Buyer's
assets nor the nature of Buyer's business requires Buyer to be qualified to do
business as a foreign corporation in any jurisdiction.
4.2 AUTHORITY, APPROVAL AND ENFORCEABILITY. This Agreement has been
duly executed and delivered by Buyer and Buyer has all requisite corporate power
and legal capacity to execute and deliver this Agreement and all Collateral
Agreements executed and delivered or to be executed and delivered by Buyer in
connection with the transactions provided for hereby, to consummate the
transactions contemplated hereby and by the Collateral Agreements, and to
perform its obligations hereunder and under the Collateral Agreements. The
execution and delivery of this Agreement and the Collateral Agreements and the
performance of the transactions contemplated hereby and thereby are duly and
validly authorized and approved by all corporate action necessary on behalf of
Buyer. This Agreement and each Collateral Agreement to which Buyer is a party
constitutes, or upon execution and delivery will constitute, the legal, valid
and binding obligation of Buyer, enforceable in accordance with its terms.
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4.3 NO BROKERS OR FINDERS. No Person has or will have any right,
interest or claim against the Sellers for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement.
4.4 NO PROCEEDINGS. No suit, action or other proceeding is pending or
threatened before any Governmental Authority seeking to restrain Buyer or
prohibit its entry into this Agreement or prohibit the Closing, or seeking
Damages against Buyer or any of its assets or properties as a result of the
consummation of this Agreement.
4.5 NO VIOLATION. The execution, delivery and performance by the Buyer
of this Agreement, and all other agreements contemplated hereby, and the
fulfillment of and compliance with the respective terms hereof and thereof by
the Buyer, do not and will not (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) result in a violation of, or (c) require
any authorization, consent, approval, exemption or other action by or notice to
any Governmental Authority pursuant to, the articles of incorporation, by-laws
or any other organizational document of the Buyer.
4.6 INCORPORATION OF REPRESENTATIONS SET FORTH IN COLLATERAL
AGREEMENTS. Each of the statements, representations and warranties of Buyer
contained in the Collateral Agreements is hereby incorporated by reference as
completely as if set out in full herein and, accordingly, for all purposes
hereunder, are and shall be deemed to be made by the Buyer as if repeated
verbatim herein.
ARTICLE V - OBLIGATIONS PRIOR TO CLOSING
From the date of this Agreement through the Closing:
5.1 BUYER'S ACCESS TO INFORMATION. The Company and the Shareholders
shall permit Buyer and its authorized employees, agents, accountants, legal
counsel and other representatives to have access to the books, records, data,
employees, counsel, accountants and other representatives at all times
reasonably requested by Buyer for the purpose of conducting an investigation of
the Company.
5.2 COMPANY'S CONDUCT OF BUSINESS AND OPERATIONS. The Company shall (a)
not make any payment of funds or any distribution to any Person, except in the
normal course of business and in accordance with past practices, (b) enter into
any Contract affecting the Company without Buyer's written approval, (c) comply
with all applicable Legal Requirements and (d) use its best efforts to preserve
the present relationships of the Company with its customers, agents, employees
and vendors.
5.3 GENERAL RESTRICTIONS. Except as otherwise expressly permitted in
this Agreement, without the prior written consent of Buyer, the Company shall
not:
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(i) merge into or with or consolidate with, any other
corporation or acquire the business or assets of any person;
(ii) amend its articles of incorporation or bylaws;
(iii) issue any capital stock or other securities, or grant,
or enter into any agreement to grant, any options, convertability rights, other
rights, warrants, calls or agreements relating to its securities;
(iv) create, incur, assume, guarantee or otherwise become
liable or obligated with respect to any indebtedness, or make any loan or
advance to, or any investment in, any person, except in each case in the
ordinary course of business;
(v) sell, transfer, lease, mortgage, encumber or otherwise
dispose of, or agree to sell, transfer, lease, mortgage, encumber or otherwise
dispose of, any assets;
(vi) maintain its books of account other than in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles and on a basis consistent with prior periods or make any change in
any of its accounting methods or practices;
(vii) engage in any one or more activities or transactions
outside the ordinary course of business including, but not limited to, any
failure of the Company to pay its creditors on a timely basis consistent with
past practices;
(viii) enter into any transaction or make any commitment which
could result in any of the representations, warranties or covenants of the
Company contained in this Agreement not being true and correct after the
occurrence of such transaction or event;
(ix) declare, pay or set aside for payment any dividend or
other distribution in respect of its capital stock, nor shall the Company,
directly or indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock; or
(x) commit to do any of the foregoing.
5.4 NOTICE REGARDING CHANGES. The Sellers shall promptly inform Buyer
in writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by the Sellers inaccurate or
misleading in any material respect. The Buyer shall promptly inform the Sellers
in writing of any change in facts and circumstances that could render any of the
representations and warranties made herein by it inaccurate or misleading in any
material respect.
5.5 ENSURE CONDITIONS MET. Each of the Sellers shall use its best
efforts to cause the conditions to Buyer's obligations at Closing to be
satisfied on or before the Closing
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Date. The Shareholders specifically agree to vote their shares of the Company's
stock and take such other actions as may be needed to cause the Company to
perform its obligations hereunder.
5.6 CONFIDENTIALITY. Each of the Sellers hereby agrees that he or it
shall not at any time either prior to or following the Closing, or at any time
if either the Sellers or Buyer fails to close the transactions contemplated
herein, directly or indirectly, disseminate, divulge, disclose, use or
communicate to or on behalf of any Person any information relating to the
transactions contemplated by this Agreement and the Collateral Agreements, or to
the Buyer, its shareholders, directors, officers, employees or agents,
including, without limitation, any information concerning the Buyer's financial
condition, customers, accounts, sources of leads and methods of obtaining new
customers or business or the methods generally of doing and operating its
business.
5.7 PUBLIC DISCLOSURE. Prior to the Closing Date, neither Buyer nor the
Sellers shall make any public disclosures relating to this Agreement or the
transactions contemplated hereby without the written agreement of the other
party. The only exception to this provision shall be such disclosure as may be
required by statute or law, provided, however, that the form and content (i.e.,
specific wording) of such disclosure shall be agreed upon mutually, in writing
by both Buyer and the Sellers.
ARTICLE VI - CONDITIONS TO PARTIES' OBLIGATIONS
6.1 CONDITIONS TO OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to carry out the transactions contemplated by this Agreement are
subject, at the option of the Company, to the satisfaction, or waiver by the
Company, of the following conditions:
(a) All representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing, and Buyer shall have performed and satisfied in all material
respects all covenants and agreements required by this Agreement to be performed
and satisfied by Buyer at or prior to the Closing;
(b) As of the Closing Date, no suit, action or other
proceeding shall be pending or threatened before any Governmental Authority
seeking to prohibit the Closing;
(c) The Sellers shall have received all agreements,
instruments and other documents required to be delivered to the Sellers pursuant
to SECTION 2.3 hereof, subject to the terms of the Escrow Agreement; and
(d) No preliminary or permanent injunction or other Order,
decree or ruling issued by any Governmental Authority, or any Legal Requirement
promulgated or
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enacted by any Governmental Authority shall be in effect, which
would prevent the consummation of the transactions contemplated hereby.
(e) Buyer shall have executed Form 8023-A electing to treat
the transaction in accordance with Section 338(h)(10) of the Code (the "SECTION
338(H)(10) ELECTION").
6.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
carry out the transactions contemplated by this Agreement are subject, at the
option of Buyer, to the satisfaction, or waiver by Buyer, of the following
conditions:
(a) All representations and warranties of the Sellers
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing, and each of the Sellers shall have performed and
satisfied in all material respects all agreements and covenants required by this
Agreement to be performed and satisfied by them at or prior to the Closing;
(b) The Sellers shall have complied with all covenants and
obligations of the Sellers set forth in Article V;
(c) As of the Closing Date, no suit, action or other
proceeding shall be pending or threatened before any Governmental Authority
seeking to prohibit the Closing;
(d) Buyer shall have received all agreements, instruments and
other documents required to be delivered to Buyer pursuant to Section 2.2
hereof, subject to the terms of the Escrow Agreement;
(e) Buyer shall have received written evidence, in form and
substance satisfactory to it, of the termination, at or prior to the Closing, of
any and all liens that encumber any of the assets of the Company;
(f) The satisfaction of Buyer, in its sole and absolute
discretion, with Buyer's completed due diligence investigation in connection
with the transactions contemplated by this Agreement; and
(g) No preliminary or permanent injunction or other Order,
decree or ruling issued by any Governmental Authority, or any Legal Requirement
promulgated or enacted by any Authority shall be in effect, which would prevent
the consummation of the transactions contemplated hereby.
ARTICLE VII - POST-CLOSING OBLIGATIONS
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7.1 AGREEMENT TO DEFEND. In the event any action, suit, proceeding or
investigation of the nature specified in SECTION 6.1(D) or SECTION 6.2(G) is
commenced, whether before or after the Closing Date, all the parties hereto
agree to cooperate and use their best efforts to defend against and respond
thereto.
7.2 NO TERMINATION OF SELLERS' OBLIGATIONS BY SUBSEQUENT INCAPACITY,
ETC. Each Seller specifically agrees that the obligations of such Seller
hereunder, including, without limitation, obligations pursuant to ARTICLE VIII
shall not be terminated by the dissolution or termination of any Seller, but
rather shall be binding on all successors and assigns.
7.3 DELIVERIES AFTER CLOSING. From time to time after the Closing, at
the Buyer's request and without expense to the Company and without further
consideration from the Buyer or the Company, the Sellers shall execute and
deliver such other instruments of conveyance and transfer and take such other
action as the Buyer reasonably may require to convey, transfer to and vest in
the Buyer and to put the Buyer in possession of any rights or property to be
sold, conveyed, transferred and delivered hereunder, including, without
limitation, any action to be taken pursuant to the terms and conditions of the
Escrow Agreement.
7.4 NON-DISPARAGEMENT. Each party hereby agrees to refrain from
disparaging, or otherwise making a derogatory or negative statement against or
about any other party or the Company, or aiding or encouraging any other person
to make any derogatory or negative comment against or about any other party or
the Company. In the event of any breach of this Section 7.4, the injured party
shall be entitled to an injunction restraining the breaching party from the
prohibited conduct. Nothing herein shall be construed as prohibiting the injured
party from pursuing any other remedies available for such breach or threatened
breach, including the recovery of damages from the breaching party.
7.5 PUBLIC DISCLOSURE. Neither the Buyer and nor the Sellers shall make
any public disclosures relating to this Agreement or the transactions
contemplated hereby without first providing the other party with an opportunity
to review and approve such disclosure, except to the extent any disclosure is
required by law or any stock exchange regulation, in which case any such
required disclosure shall be made only after consultation with the other party.
7.6 FURTHER ASSURANCES. If at any time after the Closing Date the Buyer
shall consider or be advised that any further deeds, assignments or assurances
in law or in any other things are necessary, desirable, advisable or proper to
vest, perfect or confirm, of record or otherwise, in the Buyer, the title to any
property or rights of Sellers acquired or to be acquired by reason of, or as a
result of, the transactions contemplated by this Agreement, the Sellers hereby
agree to execute and deliver all such proper deeds, assignments and assurances
in law and do all things necessary, desirable or proper to vest, perfect or
confirm title to such property or rights in the Company and otherwise to carry
out
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and fulfill the purpose and intent of this Agreement and the other agreements
contemplated hereby.
7.7 TAXES.
(a) The Company shall have two (2) taxable periods for the
year of the Company that begins on January 1, 1996 and ends on December 31,
1996. The first taxable period shall begin on January 1, 1996 and shall end on
the day prior to the Escrow Termination Date (the "FIRST PERIOD"). The second
taxable period shall begin on the Escrow Termination Date and shall end on
December 31, 1996 (the "SECOND PERIOD").
(b) The Company shall be included in the consolidated federal
corporate income tax return filed by Northcorp for the First Period, and
Northcorp shall be responsible for making all required payments associated with
such return. Northcorp shall be responsible for the payment of all Taxes of the
Company incurred during the First Period that are to be paid or reported on a
consolidated basis, and for the filing of all returns related to such Taxes. The
parties shall cooperate to ensure that all payments be made to satisfy all
intercompany liabilities, with respect to Taxes, as of the Escrow Termination
Date between the Company and all other members of Northcorp's Affiliated group,
so that the Company will have paid, as of the Escrow Termination Date, all Taxes
attributable to its operations to that date, and no Taxes attributable to any
other member of Northcorp's Affiliated Group. The Company shall be responsible
for the payment of all Taxes attributable to its operations, incurred during the
period beginning on the Closing Date and ending on the day prior to the Escrow
Termination Date, for which returns are not filed on a consolidated basis, and
for the filing all returns related to such Taxes.
(c) In the event that the Shares are delivered to Buyer upon
the termination of the escrow under the Escrow Agreement:
(i) the Company shall be responsible for the payment of
all Taxes of the Company incurred during the Second
Period, and thereafter, and for the filing of all
returns related to such Taxes. For purposes of
calculating the Taxes owed by the Company for the
Second Period, all items of income, expense,
deduction and allowance that are calculated on an
annual basis shall be apportioned between the First
Period and Second Period on a daily basis by
allocating an equal portion of each such item to each
day during the year; and
(ii) Buyer shall indemnify and hold Northcorp harmless
against any and all Taxes, interest and penalties due
by the Company (or any Affiliated Group of which the
Company becomes a member after the Escrow Termination
Date) for any taxable year or
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period beginning on or after the Escrow Termination
Date, and Buyer shall be entitled to all refunds with
respect to such Taxes.
(d) In the event that the Shares are delivered to the Sellers
upon the termination of the escrow under the Escrow Agreement, Northcorp shall
determine whether the Company shall be responsible for the payment and reporting
of all Taxes attributable to its operations, or whether Northcorp shall be
responsible for the payment and reporting of such Taxes on a consolidated basis.
(e) In all events, Buyer shall recognize and report any income
that was distributed to Buyer by the Company pursuant to the Operating Agreement
(a Collateral Agreement).
(f) Notwithstanding anything to the contrary contained herein,
and without limiting Northcorp's other obligations hereunder, Northcorp shall
indemnify and hold Buyer harmless against the following Taxes of Northcorp's
Affiliated Group (including all interest and penalties with respect thereto),
regardless of the taxable period in which such Taxes were incurred, and
Northcorp shall be entitled to all refunds with respect to such Taxes:
(i) Taxes attributable to the Section 338(h)(10)
Election;
(ii) Taxes attributable to intercompany
transactions recognized or taken into
account by reason of the Closing of this
Agreement (including restoration of
deferrals) by Northcorp, the Company or any
other member of an Affiliated Group that
includes the Company, in accordance with the
provisions of Section 1502 of the Code, the
Treasury Regulations promulgated thereunder
or any state and local laws; and
(iii) Taxes attributable to adjustments under
Sections 481 of the Code (or similar
provisions of state or local laws) with
respect to any changes of accounting methods
that may have taken place prior to the
Closing Date.
7.8 NORTHCORP CORPORATE OPPORTUNITIES. Buyer hereby agrees that for the
period beginning on July 31, 1996 and ending on the day prior to the Escrow
Termination Date, Buyer shall not enter into the following specific
transactions:
(a) The development of business relationships with Unger &
Associates, Inc., a Texas corporation, specifically with respect to the
acquisition of interests in portfolios of student loans; and
(b) The development of business relationships with either (i)
Cargill Financial Services Corporation, a Delaware corporation, or (ii) Lazard
Brothers & Co.
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Limited, a corporation established under the laws of the United Kingdom,
specifically with respect to the acquisition of tax certificates.
Prior to the Escrow Termination Date, there shall be no restrictions on Buyer,
other than the restrictions set forth in this Section 7.8, with respect to (i)
business relationships or (ii) the pursuit of any business opportunities, and
the Sellers agree not to commence any action which would preclude Buyer from
engaging in any activity not specifically set forth in this Section 7.8. From
and after the Escrow Termination Date, Buyer shall not be restricted in any way
with respect to any business activities and Buyer shall not be subject to any
Claims by the Sellers related thereto.
ARTICLE VIII
SURVIVAL OF TERMS; INDEMNIFICATION
----------------------------------
8.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
(other than the indemnification provisions set forth in this ARTICLE VIII, which
shall survive as provided below) set forth in this Agreement shall survive and
continue until all obligations set forth therein shall have been performed and
satisfied; and (b) all other representations and warranties, and the agreements
of the Sellers and the Buyer to indemnify each other set forth in this ARTICLE
VIII, shall survive and continue until, and all Claims with respect thereto
shall be made prior to the end of, the second (2nd) anniversary of the Closing
Date, except for representations, warranties and indemnities for which an
indemnification Claim shall be pending as of the end of the second (2nd)
anniversary of the Closing Date, in which event such indemnities shall survive
with respect to such Claim until the final disposition thereof, provided,
however, (a) the tax indemnification agreements provided in SECTION 8.2 shall
survive and continue until 60 days following the expiration of the applicable
statute of limitations; and (b) the representations and warranties with respect
to title to the Shares in SECTION 3.5, the title to the assets of the Company in
SECTION 3.19, and any undisclosed liabilities of the Company in SECTIONS 3.10
shall continue and survive without limitation.
8.2 INDEMNIFICATION BY THE SELLERS. Subject to this ARTICLE VIII, the
Buyer and its officers, directors, employees, shareholders, partners,
representatives and agents shall be indemnified and held harmless, on an
after-tax basis, by the Sellers, jointly and severally, at all times after the
date of this Agreement, against and in respect of any and all damage, loss,
deficiency, liability, obligation, commitment, claim, demand, action or cause of
action, assessment, tax, cost or expense (including, without limitation, all
interest, penalties and fees and expenses of counsel) resulting from, or in
respect of, any of the following:
24
<PAGE> 25
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Sellers under this
Agreement, any document relating thereto or contained in any schedule
or exhibit to this Agreement or from any misrepresentation in or
omission from any certificate, schedule, other agreement or instrument
by the Sellers or the Company hereunder;
(b) Any and all liabilities of the Company of any nature
whether accrued, absolute, contingent or otherwise, and whether known
or unknown, existing at the Closing Date to the extent not reflected
and reserved against in the Financial Statements or not otherwise
adequately disclosed in this Agreement or the schedules or exhibits
thereto, including, without limitation all tax liabilities of the
Company, together with any interest or penalties thereon or related
thereto, through the Closing Date and any tax liability of the Company
arising in connection with the transactions contemplated hereby. Any
Taxes, penalties or interest attributable to the operations of the
Company payable as a result of an audit of any tax return shall be
deemed to have accrued in the period to which such Taxes, penalties or
interest are attributable;
(c) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any Claim
incident to any of the foregoing.
(d) All other Claims of the Buyer shall be resolved in
accordance with SECTION 8.4.
8.3 INDEMNIFICATION BY THE BUYER. Subject to this ARTICLE VIII, the
Sellers and their successors, assigns, representatives and agents shall be
indemnified and held harmless, on an after-tax basis, by the Buyer, at all times
after the date of this Agreement, against and in respect of any and all damage,
loss, deficiency, liability, obligation, commitment, claim, demand, action or
cause of action, assessment, tax, cost or expense (including, without
limitation, all interest, penalties and fees and expenses of counsel) resulting
from, or in respect of, any misrepresentation, breach of war ranty, or
non-fulfillment of any obligation on the part of the Buyer under this Agreement,
any document relating thereto or contained in any schedule or exhibit to this
Agreement or from any misrepresentation in or omission from any certificate,
schedule, other agreement or instrument by the Buyer hereunder.
8.4 THIRD-PARTY CLAIMS. Except as otherwise provided in this Agreement,
the following procedures shall be applicable with respect to indemnification for
third-party Claims. Promptly after receipt by the party or parties seeking
indemnification hereunder (hereinafter referred to as the "INDEMNITEE") of
notice of the commencement of any (a) Tax audit or proceeding for the assessment
of tax by any taxing authority or any other proceeding likely to result in the
imposition of a tax liability or obligation or (b) any action or the assertion
(whether by legal process or otherwise) of any Claim, liability or obligation by
an indemnitee against which Claim, liability or obligation the other party or
parties to this Agreement (hereinafter referred to as the "INDEMNITOR") is, or
may be, required under this
25
<PAGE> 26
Agreement to indemnify such indemnitee, the indemnitee will, if a Claim thereon
is to be, or may be, made against the indemnitor, notify the indemnitor in
writing of the commencement or assertion thereof and give the indemnitor a copy
of such Claim, process and all legal pleadings. The failure of indemnitee to
provide prompt notice or delivery as aforesaid shall in no way limit, reduce or
derogate the obligations of indemnitor hereunder. The indemnitor shall have the
right to participate in the defense of such action with counsel of reputable
standing. The indemnitor shall have the right to assume the defense of such
action, including the employment of counsel reasonably satisfactory to the
indemnitee, and payment of all fees and expenses in connection with such action,
unless (w) such action may result in injunctions or other equitable remedies in
respect of the indemnitee or its business; (x) such action may result in
liabilities which, taken with other then existing Claims under this ARTICLE
VIII, would not be fully indemnified hereunder; (y) such action may have an
adverse impact on the business or financial condition of the indemnitee after
the Closing Date (including, without limitation, an effect on the tax
liabilities, earnings or ongoing business relationships of the indemnitee); or
(z) there are defenses available to the indemnitee which are in conflict with
those available to the indemnitor. The indemnitor and the indemnitee shall
cooperate in the defense of such Claims. In the case that the indemnitor shall
assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the indemnitee shall make available to the
indemnitor all relevant records and take such other action and sign such
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner.
Prior to paying or settling any Claim against which an
indemnitor is, or may be, obligated under this Agreement to indemnify an
indemnitee, the indemnitee must first supply the indemnitor with a copy of a
final court judgment or decree holding the indemnitee liable on such claim or
failing such judgment or decree, and must first receive the written approval of
the terms and conditions of such settlement from the indemnitor. The indemnitor
shall not be liable for any settlement of any such action effected without its
written consent, which consent shall not be unreasonably withheld.
Notwithstanding the immediately preceding sentence, if in any case where the
fees and expenses of counsel are at the expense of the indemnitor and the
indemnitee shall have requested the indemnitor to reimburse it for such fees and
expenses of counsel as incurred, the indemnitor agrees that it shall be liable
for any settlement of any action effected without its written consent if (A)
such settlement is entered into more than twenty business days after the receipt
of the aforesaid request and (B) the indemnitor shall have failed to reimburse
the indemnitee in accordance with such request for reimbursement prior to the
date of settlement. The indemnitor shall not, without the prior written consent
of the indemnitee, effect any settlement of any pending or threatened proceeding
in respect of which the indemnitee is or could have been a party and indemnity
could have been sought hereunder by the indemnitee, unless such settlement
includes an unconditional release of the indemnitee from all liability or claims
that are the subject of such proceeding.
An indemnitee shall have the right to employ its own counsel
in any case, but the fees and expenses of such counsel shall be at the expense
of the indemnitee unless (a)
26
<PAGE> 27
the employment of such counsel shall have been authorized in writing by the
indemnitor in connection with the defense of such action or Claim, (b) the
indemnitor shall not have employed, or is prohibited under this SECTION 8.4 from
employing, counsel in the defense of such action or Claim, or (c) such
indemnitee shall have reasonably concluded that there may be defenses available
to it which are contrary to, or inconsistent with, those available to the
indemnitor, in any of which events such fees and expenses of not more than one
additional counsel for the indemnified parties shall be borne by the indemnitor.
ARTICLE IX - DEFINITIONS
Capitalized terms used in this Agreement are used as defined in this
Article IX or elsewhere in this Agreement.
9.1 AFFILIATE. The term "Affiliate" shall mean, with respect to any
Person, any other Person controlling, controlled by or under common control with
such Person. The term "Control" as used in the preceding sentence means, with
respect to a corporation, the right to exercise, directly or indirectly, more
than 20% of the voting rights attributable to the shares of the controlled
corporation and, with respect to any Person other than a corporation, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person.
9.2 AFFILIATED GROUP. The term "Affiliated Group" means any affiliated
group within the meaning of Code Sec. 1504.
9.3 CERCLA. The term "CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980.
9.4 CLAIM. The term "Claim" means any action, claim, obligation,
liability, expense, lawsuit, demand, suit, inquiry, hearing, investigation,
notice of a violation, litigation, proceeding, arbitration, or other dispute,
whether civil, criminal, administrative or otherwise, whether pursuant to
contractual obligations or otherwise.
9.5 COLLATERAL AGREEMENTS. The term "Collateral Agreements" shall mean
the Escrow Agreement, the Releases, the Management Agreement and any and all
other agreements, instruments or documents required or expressly provided under
this Agreement to be executed and delivered in connection with the transactions
contemplated by this Agreement.
9.6 CONTRACTS. The term "Contracts", when described as being those of
or applicable to any Person, shall mean any and all contracts, agreements,
franchises, understandings, arrangements, leases, licenses, registrations,
authorizations, easements, servitudes, rights of way, mortgages, bonds, notes,
guaranties, liens, indebtedness, approvals
27
<PAGE> 28
or other instruments or undertakings to which such Person is a party or to which
or by which such Person or the property of such Person is subject or bound,
excluding any Permits.
9.7 DAMAGES. The term "Damages" shall mean any and all claims,
liabilities, judgments, losses, costs, penalties, damages and expenses
(including attorneys' fees and related costs, whether or not litigation is
instituted) of any nature or kind whatsoever.
9.8 ENVIRONMENTAL LAW. The term "Environmental Law" means any Legal
Requirement, Order or governmental requirement, which relates to or otherwise
imposes liability or standards of conduct concerning mining or reclamation of
mined land, discharges, emissions, releases or threatened releases of noises,
odors or any pollutants, contaminants or hazardous or toxic wastes, substances
or materials, whether as matter or energy, into ambient air, water, or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, clean-up, transport or handling of
pollutants, contaminants, or hazardous wastes, substances or materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, any so-called "Superlien" law, and any other similar
Federal, state, local, foreign or other Legal Requirements, including common-law
requirements.
9.9 ENVIRONMENTAL PERMIT. The term "Environmental Permit" shall mean
permits, certificates, approvals, licenses, orders and other authorizations
relating to or required by any Environmental Law and necessary or desirable for
the Corporation's business.
9.10 FINANCIAL STATEMENTS. The term "Financial Statements" shall mean
any or all of the financial statements of the Company, including balance sheets
and related statements of income and statements of changes in financial position
and the accompanying notes thereto.
9.11 GAAP. The term "GAAP" means generally accepted accounting
principles, applied on a consistent basis with the Financial Statements, as in
existence at the date hereof.
9.12 GOVERNMENTAL AUTHORITIES. The term "Governmental Authorities"
shall mean any nation or country (including but not limited to the United
States) and any commonwealth, territory or possession thereof and any political
subdivision of any of the foregoing, including but not limited to states,
provinces, municipalities, courts, departments, commissions, boards, bureaus,
agencies, ministries or other instrumentalities.
9.13 KNOWLEDGE OF THE SELLERS. The term "Knowledge of the Sellers"
shall mean the actual knowledge of any of the members, directors, managers or
executive officers of
28
<PAGE> 29
each Seller (including but not limited to the following individuals: Ronald E.
Roark, Louis J. Castelli, Stephen W. Brown, Richard Brock, and Grace Jenkins,
and excluding Bradley S. Weiss) with respect to the matter in question, and such
knowledge as any of such persons reasonably should have obtained as result of
their position as shareholders, members, directors, managers or executive
officers of a Seller.
9.14 LEGAL REQUIREMENTS. The term "Legal Requirements", when described
as being applicable to any Person, shall mean any and all laws (statutory,
judicial or otherwise), ordinances, regulations, judgments, orders, directives,
injunctions, writs, decrees or awards of, and any Contracts with any
Governmental Authority, in each case as and to the extent applicable to such
Person or such Person's business, operations or properties.
9.15 LIEN. The term "Lien" means any security interest, lien, mortgage,
pledge, hypothecation, encumbrance, Claim, easement, restriction or interest of
another Person of any kind or nature.
9.16 MATERIAL ADVERSE EFFECT. The term "Material Adverse Effect" means
any circum stances, state of facts or matters which has, or might reasonably be
expected to have, a material adverse effect in respect of the Company's
business, operations, properties, assets, condition (financial or otherwise),
results, plans, strategies or prospects.
9.17 MATERIAL ADVERSE CHANGE. The term "Material Adverse Change" means
any developments or changes which would have a Material Adverse Effect.
9.18 ORDER. The term "Order" means any decree, judgment, award, order,
consent decree, settlement agreement, injunction, rule, or consent of or by an
Authority.
9.19 PERMITS. The term "Permits" shall mean any and all permits,
licenses, legal status, orders or Contracts under any Legal Requirement or
otherwise granted by any Governmental Authority.
9.20 PERSON. The term "Person" shall mean any natural person,
corporation, unincorporated organization, partnership, limited liability
company, association, joint-stock company, joint venture, trust or government,
or any entity or political subdivision of any government.
9.21 PROPRIETARY RIGHTS. The term "Proprietary Rights" means any
patent, patent application, copyright, trademark, trade name, service mark,
service name, trade secret, know-how, confidential information or other
intellectual property or proprietary rights.
9.22 TAXES. The term "Taxes" shall mean all taxes, charges, fees,
levies or other assessments imposed by any federal, state, local or foreign
taxing authority, including without limitation, income, excise, property, sales,
transfer, attributable to or imposed on or with respect to any such assessment.
29
<PAGE> 30
ARTICLE X - MISCELLANEOUS
10.1 COSTS AND EXPENSES. Each of the parties to this Agreement shall
bear its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated
hereby.
10.2 NOTICES. Any notice, demand, request, instruction, correspondence
or other document to be given hereunder by any party hereto to another shall be
in writing and delivered personally, by courier service such as Federal Express,
or by other messenger or by U.S. registered or certified mail (postage prepaid
and return receipt requested), as follows:
BUYER: CSW Acquisition Corp.
1001 South Bayshore Drive
Suite 1200
Miami, Florida 33131
Attention: Bradley S. Weiss
WITH A COPY TO:
Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Marshall R. Pasternack, Esq.
SELLERS: Crown Northcorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attention: Ronald E. Roark
Tucker Holding Company, Ltd.
1251 Dublin Road
Columbus, Ohio 43215
Attention: Ronald E. Roark
COMPANY: CSW Associates, Inc.
1001 South Bayshore Drive, Suite 1200
Miami, Florida 33131
Attention: Bradley S. Weiss
30
<PAGE> 31
Each of the above addresses may be changed by providing appropriate notice in
conformity with the provisions hereof.
10.3 GOVERNING LAW. The provisions of this Agreement and the documents
delivered pursuant hereto shall be governed by and construed in accordance with
the laws of the State of Florida. THE PARTIES TO THIS AGREEMENT (I) SUBMIT TO
THE JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE STATE OF FLORIDA FOR
PURPOSES OF ANY ACTION OR PROCEEDING HEREUNDER, (II) AGREE THAT THE VENUE OF ANY
SUCH ACTION OR PROCEEDING MAY BE LAID IN DADE COUNTY, FLORIDA AND (III) WAIVE
ANY CLAIM THAT THE SAME IS AN INCONVENIENT FORUM.
10.4 ENFORCEABILITY. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.5 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Buyer shall have the right to assign all of
its rights, benefits and obligations under this Agreement to any entity. The
Sellers shall have no right to assign or delegate any rights, benefits or
obligations under this Agreement by operation of law or otherwise, without the
prior written consent of Buyer. Nothing in this Agreement, express or implied,
is intended to confer upon any Person other than the parties hereto and their
respective permitted successors and assigns, any rights, benefits or obligations
hereunder.
10.6 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.7 EXHIBITS AND SCHEDULES. The exhibits and schedules referred to
herein are attached hereto and incorporated herein by this reference. Disclosure
of a specific item in any one schedule shall be deemed restricted only to the
Section to which such disclosure specifically relates except where (i) there is
an explicit cross-reference to another schedule, and (ii) Buyer could reasonably
be expected to ascertain the scope of the modification to a representation
intended by such cross-reference.
10.8 REFERENCES. Whenever required by the context, the singular number
of any term used in this Agreement shall include the plural and pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural, as the identification the Person may require.
31
<PAGE> 32
10.9 ATTORNEYS' FEES. In the event any suit or other legal proceeding
is brought for the enforcement of any of the provisions of this Agreement, the
parties hereto agree that the prevailing party or parties shall be entitled to
recover from the other party or parties upon final judgment on the merits
reasonable attorneys' fees (ataxes thereon, if any), including attorneys' fees
for any appeal, and costs incurred in bringing such suit or proceeding.
10.10 INJUNCTIVE RELIEF. The parties hereto agree that in the event of
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
10.11 DEALINGS IN GOOD FAITH; BEST EFFORTS. Each party hereto agrees to
act in good faith with respect to the other party in exercising its rights and
discharging its obligations under this Agreement. Each party further agrees to
use its best efforts to ensure that the purposes of this Agreement are realized
and to take all further steps as are necessary to implement the provisions of
this Agreement. Each party agrees to execute, deliver and file any document or
instrument necessary or advisable to realize the purposes of this Agreement.
10.12 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement,
together with all exhibits and schedules attached hereto, constitutes the entire
agreement between and among the parties hereto pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof except as set forth specifically
herein or contemplated hereby. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (regardless of whether
similar), nor shall any such waiver constitute a continuing waiver unless
otherwise expressly provided.
32
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
"BUYER":
CSW ACQUISITION CORP., a Florida corporation
By: /s/ Bradley S. Weiss
-----------------------------------------------
Bradley S. Weiss, President
"SELLERS":
CROWN NORTHCORP, INC.
By: /s/ Ronald E. Roark
-----------------------------------------------
Ronald E. Roark, Chairman and C.O.E
TUCKER HOLDING COMPANY, LTD.
By: /s/ Ronald E. Roark
-----------------------------------------------
Ronald E. Roark, Manager
"THE COMPANY":
CSW ASSOCIATES, INC.
By: /s/ Ronald E. Roark
-----------------------------------------------
Name: Ronald E. Roark
---------------------------------------------
Title: Vice President
---------------------------------------------
"WEISS," as a party to this
Agreement solely for purposes of
Sections 1.2, 2.2, 2.3, 2.4, 7.4,
and 9.13:
/s/ Bradley S. Weiss
-----------------------------------------------
BRADLEY S. WEISS
33
<PAGE> 34
LIST OF SCHEDULES AND EXHIBITS
------------------------------
Schedule 3.2 - Subsidiaries
Schedule 3.4 - Capital Stock
Schedule 3.8 - Defaults and Consents
Schedule 3.10 - Undisclosed Liabilities
Schedule 3.11 - Employees
Schedule 3.15 - Litigation/Default
Schedule 3.16 - Tax Matters
Schedule 3.17 - Contracts and Commitments
Schedule 3.19 - Real Property
Schedule 3.20 - ERISA Plans
Schedule 3.21 - Intellectual Property
Schedule 3.22 - Environmental Matters
Schedule 3.23 - Dealings with Affiliates
Schedule 3.24 - Banking
Schedule 3.25 - Insurance
Schedule 3.28 - Service Claims
Exhibit A - Officer's Certificate
Exhibit B - Secretary's Certificate
Exhibit C - Escrow Agreement
Exhibit D - Articles of Incorporation & Bylaws
Exhibit E - Operating Agreement
<PAGE> 35
SCHEDULE 3.2
SUBSIDIARIES
The Company owns 52% of the common stock of both Choice Hotel
Venezuela, C.A. and CHV Corporation, A.V.V.
<PAGE> 36
SCHEDULE 3.4
CAPITAL STOCK
The Company has authority to issue one thousand (1,000) shares of
common stock, par value $.01 per share. One hundred (100) shares of common stock
are issued and outstanding, the ownership of which is as follows:
STOCKHOLDER SHARES
----------- ------
Crown NorthCorp, Inc. 80
Tucker Holding Company, Ltd. 20
<PAGE> 37
SCHEDULE 3.8
DEFAULTS AND CONSENTS
The Federal Deposit Insurance Corporation, both for itself and in its
capacity as the successor in interest to the Resolution Trust Corporation, must
consent to the change in control of the Company with respect to the following
contracts:
RTC Atlanta Contract No. ###-##-####
FDIC RALA 92-03022-N-KF
The Company, as the tenant, and Brickell Bay Tower Ltd, Inc., as the
landlord, are parties to a certain office lease dated August 23, 1995. Pursuant
to Article 14 of that lease, the change of control of the Company is a deemed
assignment of that lease to which the landlord has a right to consent. Buyer
acknowledges this provision and agrees to assume all loss, cost and expense
arising out of any attempt by the landlord to enforce any rights it may have
arising out of this provision.
<PAGE> 38
SCHEDULE 3.10
UNDISCLOSED LIABILITIES
The law firm of F. Briceno & Asociados, Caracas, Venezuela, has an outstanding
bill to the Company of USD 43,000 for legal services, for which Buyer assumes
responsibility.
Any liabilities arising out of the termination of RTC Contract No. KCO-90-0502
are the responsibility of Buyer.
<PAGE> 39
SCHEDULE 3.11
EMPLOYEES
A listing of employees of the Company is attached.
To the Knowledge of the Sellers, Sidney Kaplan has a pending unemployment
compensation claim.
<PAGE> 40
CROWN // NORTHCORP
EMPLOYEE LISTING OF AS JULY 25,1996
<TABLE>
<CAPTION>
EMPLOYEE NAME LOCATION SOC. SEC #
- ------------- -------- ----------
<S> <C> <C>
ARNOLD, ROBERT S. MIAMI ###-##-####
BERGMANN, IRENE R. MIAMI ###-##-####
BOUTTE-NELLICLIFF, DEBBIE MIAMI ###-##-####
BUTERA, JULIE L. MIAMI ###-##-####
CARDONNE, JESUS MIAMI ###-##-####
CHEUNG, LILY MIAMI ###-##-####
CRAIG, ED MIAMI ###-##-####
DIEGUEZ, CARMEN JANETTE MIAMI ###-##-####
HEDGES, SHIRLEY L. MIAMI ###-##-####
HERNANDEZ, JON PAUL MIAMI ###-##-####
HERNANDEZ, PAULA MIAMI ###-##-####
HURST, THERESA C. MIAMI ###-##-####
LA ROZ, CARINA MIAMI ###-##-####
LACALLE, MARGARET MIAMI ###-##-####
LAUER, LISA L. MIAMI ###-##-####
LOPEZ, KARLENE A. MIAMI ###-##-####
MACIAS, RUBEN D. MIAMI ###-##-####
MARTINEZ, GLADELMIS MIAMI ###-##-####
MARIN, MARIA M. MIAMI ###-##-####
MORABITO, MICHAEL MIAMI ###-##-####
MORALES, GREETHEN MIAMI ###-##-####
MULET, MELISSA MIAMI ###-##-####
RAMOS, GRACE A. MIAMI ###-##-####
REY, FRANCISCO G. MIAMI ###-##-####
RIVERA, NANETTE MIAMI ###-##-####
RODRIGUEZ, GUILLERMO MIAMI ###-##-####
RODRIGUEZ, MIRIAM MIAMI ###-##-####
SANCHEZ, SANDRA M. MIAMI ###-##-####
SEBRO, DOUGLAS A. MIAMI ###-##-####
STEWART, ANNE MIAMI ###-##-####
TESSIER, CYNTHIA MIAMI ###-##-####
VAN VILET, MATTHEW G. MIAMI ###-##-####
VELASCO, OLGA BUSTO MIAMI ###-##-####
WEISS, BRADLEY S. MIAMI ###-##-####
</TABLE>
<PAGE> 41
SCHEDULE 3.15
LITIGATION/DEFAULT
PENDING LITIGATION
- ------------------
Bodner v. CSW Associates, Inc.
<PAGE> 42
SCHEDULE 3.16
TAX MATTERS
None
<PAGE> 43
SCHEDULE 3.17
CONTRACTS AND COMMITMENTS
<TABLE>
<CAPTION>
DESCRIPTION TERM MONTHLY COST
----------- ---- ------------
<S> <C> <C>
Pitney Bowes - Mail and postage
machines, scales 12/95-12/98 $407.14
Mita-Model 6090 photocopier 12/95-12/98 $859.00
Mita-Model 8090 photocopies 12/95-12/98 $859.00
</TABLE>
<PAGE> 44
SCHEDULE 3.19
REAL PROPERTY
None
<PAGE> 45
SCHEDULE 3.20
ERISA PLANS
EMPLOYEE PENSION BENEFIT PLAN
- -----------------------------
Crown presently maintains a 401(k) plan administered by T. Rowe Price in which
employees of the Company are eligible to participate. Following the Closing
Date, employees of the Company (or Buyer) will no longer be eligible to
participate in this plan. Crown will establish August 31, 1996 as the
termination date for affected persons in the plan. After that date, affected
persons will receive distributions or be entitled to make rollover payments
pursuant to the terms and conditions of the plan.
EMPLOYEE WELFARE BENEFIT PLANS
- ------------------------------
Crown presently maintains the following plans for the benefit of its employees,
including employees of the Company:
<TABLE>
<CAPTION>
PLAN PROVIDER STATUS FOLLOWING CLOSING
---- -------- ------------------------
<S> <C> <C>
Health Humana Buyer will assume and continue
coverage
Section 125 Avalon Benefits Coverage will terminate
Life insurance Erie Coverage will terminate
Dental American Prepaid Coverage will terminate
Dental
Long- and short-term
disability Paul Revere Life Coverage will terminate
</TABLE>
As to the coverages which will terminate, coverage for Company employees has
been maintained through separate billings. This may facilitate Buyer's efforts
in transferring these coverages.
<PAGE> 46
SCHEDULE 3.21
INTELLECTUAL PROPERTY
The Company presently utilizes certain computer software programs or
systems under multi-user licenses granted to Crown. Crown does not have the
right to assign these licenses to the Company as an unaffiliated entity.
Following the Escrow Termination Date, the Company will need to make independent
arrangements to continue to use this software. The affected software licenses
are:
1. Software provided by LAN Escort to operate the LAN at the Company's
office.
2. The Company presently operates on its LAN certain commercial
software packages governed by so-called "shrink-wrap" licenses such as, for
example, WordPerfect and Lotus. The Company may not be able to obtain upgrades
or maintenance on these software packages without making independent
arrangements with the software vendor.
<PAGE> 47
SCHEDULE 3.22
ENVIRONMENTAL MATTERS
None
<PAGE> 48
SCHEDULE 3.23
DEALINGS WITH AFFILIATES
At Closing, the Company will have no transactions or arrangements with
Affiliates except to the extent described in the Collateral Agreements.
<PAGE> 49
SCHEDULE 3.24
BANKING
The Company presently maintains the following bank accounts:
<TABLE>
<CAPTION>
BANK ACCOUNT NUMBER PURPOSE
---- -------------- -------
<S> <C> <C>
The Huntington National Bank 01891063514 Payroll
Barnett Bank 1596062736 Operations
Nations Bank 003 702 7770 Receipts
</TABLE>
The parties will arrange for cutoff balances for these accounts as of the
Closing Date.
The Company maintains no safe deposit boxes.
<PAGE> 50
SCHEDULE 3.25
INSURANCE
Crown presently maintains various corporate insurance coverages for and
on behalf of the Company. A summary of those coverages is attached.
<PAGE> 51
CSW CURRENT INSURANCE COSTS
FIGURES ARE APPROXIMATE - WITHIN 5%.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Property- $700.00
Contents $207,000
Extra Expense $50,000
Valuable Papers & Records $1,000,000 $1,000.00
Liability $1,000,000/$2,000,000 $951.00
Worker Comp.
Statutory Coverage A $13,203.00
500/500/500 Coverage B
EDP Various $125.00
Umbrella $10,000,000 $1,000.00
E & O $5,000,000 $28,125.00
(2,500,000 x 11.25)
Fidelity $6,500,000 $4,000.00
---------
TOTAL: $49,104.00
</TABLE>
<PAGE> 52
SCHEDULE 3.28
SERVICE CLAIMS
None
<PAGE> 53
EXHIBIT A
OFFICER'S CERTIFICATE
---------------------
<PAGE> 54
EXHIBIT A
OFFICER'S CERTIFICATE
The undersigned, being the duly elected and appointed Vice President of
CSW Associates, Inc., a Delaware corporation (the "Corporation"), hereby makes
the following certification on behalf of the Corporation:
The undersigned hereby certifies as follows:
1. All of the conditions set forth in Article V of the Stock
Purchase Agreement by and among CSW Acquisition Corp. ("Buyer"), the
Corporation, Crown NorthCorp, Inc., Tucker Holding Company, Ltd. and Bradley S.
Weiss ("Weiss") dated as of July 31, 1996 (the "Purchase Agreement") have been
satisfied as of the date hereof.
2. The Corporation acknowledges that Buyer and Weiss will be
relying on this Certificate in connection with the Closing (as defined in the
Purchase Agreement).
IN WITNESS WHEREOF, I have executed this Certificate on behalf of the
Corporation as of the date and year written below.
CSW ASSOCIATES, INC., a Delaware corporation
By: __________________________________________
Louis J. Castelli, Vice President
_____________________, 1996
<PAGE> 55
EXHIBIT B
SECRETARIES' CERTIFICATE
Attachment No. 1 Crown NorthCorp., Inc.
Attachment No. 2 Tucker Holding Company, Ltd.
<PAGE> 56
CROWN NORTHCORP, INC.
CERTIFICATION OF A RESOLUTION OF THE
------------------------------------
BOARD OF DIRECTORS
------------------
I, Stephen W. Brown, hereby certify that I am the duly elected,
qualified and acting Secretary of Crown NorthCorp, Inc. (the "Corporation") and
that, in accordance with the Bylaws of the Corporation, the following
resolutions were adopted by the unanimous written action of the Corporation's
board of directors as of July 31, 1996:
WHEREAS, the Corporation desires to sell to CSW Acquisition Corp.
("Buyer") the eighty (80) shares of common stock the Corporation owns
of CSW Associates, Inc. (f.k.a. NorthCorp Newco, Inc.),
NOW THEREFORE BE IT RESOLVED, that the Stock Purchase Agreement dated
as of July 31, 1996 between, on the one hand, the Corporation and
Tucker Holding Company, Ltd. ("Tucker") as Sellers and, on the other
hand, Buyer and Bradley S. Weiss (the "Purchase Agreement"), a copy of
which is attached hereto and made a part hereof as Exhibit A, be and is
hereby approved.
FURTHER RESOLVED, that the appropriate officers of the Corporation be
and are hereby authorized to execute and deliver the Purchase
Agreement, including the Collateral Agreements as defined therein, as
well as any other agreements, documents or certifications as may be
necessary or appropriate to carry out the purposes and intents of the
foregoing resolution.
FURTHER RESOLVED, that, pursuant to Section 144 of Delaware Corporation
Law, this board is aware that Messrs. Roark and Castelli, through
Tucker Holding Company, Ltd., are interested parties to the transaction
described above and that this board is satisfied that all the material
facts as to the transactions have been disclosed to the board, and the
board hereby authorizes the transaction.
I further certify that the foregoing resolution has not been rescinded
or amended in any way and remains in full force and effect.
Executed this day of August, 1996.
---------
----------------------------
Stephen W. Brown
<PAGE> 57
Attachment No. 2
TUCKER HOLDING COMPANY, LTD.
SECRETARY'S CERTIFICATION
-------------------------
I, Louis J. Castelli, hereby certify that I am the duly elected,
qualified and acting Secretary of Tucker Holding Company, Ltd. (the
"Corporation") and that the Managers of the Corporation took the following
action in writing without a meeting on July 31, 1996:
WHEREAS, Tucker desires to sell to CSW Acquisition Corp. ("Buyer") the
twenty (20) shares of common stock Tucker owns of CSW Associates, Inc.
(f.k.a. NorthCorp Newco, Inc.),
NOW THEREFORE BE IT RESOLVED, that the Stock Purchase Agreement dated
as of July 31, 1996 between, on the one hand, Crown NorthCorp, Inc. and
Tucker as Sellers and, on the other hand, Buyer and Bradley S. Weiss
(the "Purchase Agreement"), a copy of which is attached hereto and made
a part hereof as Exhibit A, be and is hereby approved.
FURTHER RESOLVED, that either Mr. Roark or Mr. Castelli be and are
hereby authorized to execute and deliver the Purchase Agreement,
including the Collateral Agreements as defined therein, as well as any
other agreements, documents or certifications as may be necessary or
appropriate to carry out the purposes and intents of the foregoing
resolution.
I further certify that the foregoing action has not been rescinded or
amended in any way and remains in full force and effect.
Executed this day of August, 1996.
---------
----------------------------
Louis J. Castelli
<PAGE> 58
ACTION IN WRITING WITHOUT MEETING BY MANAGERS OF
TUCKER HOLDING COMPANY, LTD.
JULY 31, 1996
The undersigned, being all of the Managers of Tucker Holding Company, Ltd.
("Tucker"), and being all of the Managers who would be entitled to a notice of
the meeting of the Managers, do, with Mr. Weiss abstaining, hereby in writing
without meeting adopt the following resolution:
WHEREAS, Tucker desires to sell to CSW Acquisition Corp. ("Buyer") the
twenty (20) shares of common stock Tucker owns of CSW Associates,
Inc. (f.k.a. NorthCorp Newco, Inc.),
NOW THEREFORE BE IT RESOLVED, that the Stock Purchase Agreement dated
as of July 31, 1996 between, on the one hand, Crown NorthCorp, Inc.
and Tucker as Sellers and, on the other hand, Buyer and Bradley S.
Weiss (the "Purchase Agreement"), a copy of which is attached hereto
and made a part hereof as Exhibit A, be and is hereby approved.
FURTHER RESOLVED, that either Mr. Roark or Mr. Castelli be and are
hereby authorized to execute and deliver the Purchase Agreement,
including the Collateral Agreements as defined therein, as well as any
other agreements, documents or certifications as may be necessary or
appropriate to carry out the purposes and intents of the foregoing
resolution.
- ------------------------------ ------------------------------------
Ronald E. Roark Louis J. Castelli
- ------------------------------
Bradley S. Weiss
<PAGE> 59
EXHIBIT C
ESCROW AGREEMENT
----------------
<PAGE> 60
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT ("ESCROW AGREEMENT"), dated as of July 31, 1996,
is made and entered by and among (i) CSW ACQUISITION CORP., a Florida
corporation ("BUYER"), (ii) CROWN NORTHCORP, INC., a Delaware corporation
("NORTHCORP"), and TUCKER HOLDING COMPANY, LTD., an Ohio limited liability
company ("TUCKER") (Northcorp and Tucker shall sometimes hereinafter be referred
to individually as a "SELLER" or collectively as the "SELLERS"), and (iii)
GREENBERG, TRAURIG, HOFFMAN, LIPOFF, ROSEN & QUENTEL, P.A., as Escrow Agent (the
"ESCROW AGENT").
W I T N E S S E T H:
WHEREAS, the Sellers are all of the shareholders of CSW Associates,
Inc. (the "COMPANY");
WHEREAS, the Buyer and the Sellers are parties to that certain Stock
Purchase Agreement dated effective as of July 31, 1996 (the "STOCK PURCHASE
AGREEMENT") pursuant to which the Buyer has agreed to purchase from the Sellers
and the Sellers have agreed to sell to the Buyer, One Hundred (100) shares of
common stock of the Company (the "SHARES"), which constitute all of the issued
and outstanding shares of the Company; and
WHEREAS, the Buyer and the Sellers desire to escrow certain documents
related to the Stock Purchase Agreement (the "TRANSACTION DOCUMENTS") set forth
in Section A.1. hereof, pending the earlier of (i) Buyer's receipt of the FDIC
Consents, as that term is defined below, or (ii) December 16, 1996.
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, Buyer, Sellers and Escrow Agent agree as
follows:
A. DELIVERIES TO ESCROW AGENT.
---------------------------
1. The Sellers and the Buyer shall cause to be delivered to
Escrow Agent the following Transaction Documents via express courier delivery
which may include overnight express mail:
1
<PAGE> 61
a. Certificate No. 1, dated ___________________, in the name of
Northcorp, representing eighty (80) Shares (a "STOCK CERTIFICATE");
b. A Stock Power executed by Northcorp, transferring the Shares
represented by Certificate No. 1 to Buyer (a "STOCK POWER");
c. Certificate No. 3, dated __________________, in the name of Tucker,
representing twenty (20) Shares (a "STOCK CERTIFICATE"); and
d. A Stock Power executed by Tucker, transferring the Shares
represented in Certificate No. 3 to Buyer (a "STOCK POWER").
2. Escrow Agent shall acknowledge receipt of the Transaction
Documents upon receipt of said Transaction Documents at the offices of Escrow
Agent located at 1221 Brickell Avenue, 21st Floor, Miami, Florida 33131. Escrow
Agent agrees to hold and distribute the Transaction Documents in accordance with
this Escrow Agreement.
3. The Transaction Documents shall be held by the Escrow Agent
until the earlier to occur of (i) a written request by both Seller and Buyer to
distribute the Transaction Documents, or (ii) upon the termination of this
Escrow Agreement as specified herein.
B. TERMINATION OF ESCROW AND DELIVERIES BY ESCROW AGENT. This Escrow
Agreement may be terminated at any time by and upon receipt by the Escrow Agent
of written notice of termination signed by both Seller and Buyer, or pursuant to
Sections B.1. and B.2. hereof. The Escrow Agent may resign at any time upon
thirty (30) days' prior written notice to both Buyer and Seller. If a successor
Escrow Agent is not appointed within thirty (30) days after notice of
resignation, the Escrow Agent may petition any court of competent jurisdiction
to name a successor escrow agent and the Escrow Agent herein shall be fully
relieved of all liability under this Escrow Agreement to any and all parties
upon the transfer of the Transaction Documents to the successor escrow agent
either designated by Buyer and Seller or appointed by the court.
1. RECEIPT OF FDIC CONSENTS. Upon the receipt by Buyer of all approvals
and consents by the Federal Deposit Insurance Corporation, both for itself and
in its capacity as the successor in interest to the Resolution Trust
Corporation, required for the transfer of the Shares to Buyer (the "FDIC
CONSENTS"), Buyer shall notify the Sellers and Escrow Agent of the termination
of this Agreement, and Escrow Agent shall deliver the Transaction Documents to
Buyer.
2
<PAGE> 62
2. AUTOMATIC TERMINATION. If this Agreement has not otherwise been
terminated prior to December 16, 1996, on that date, this Agreement shall
automatically terminate and Escrow Agent shall deliver the Transaction Documents
to Buyer.
C. NOTICES. Except as otherwise provided herein, all notices and other
communications required or permitted to be given hereunder shall be in writing
and shall be either delivered personally or mailed by first-class registered or
certified mail (mailed notices or communications shall be deemed given when
received) or Federal Express overnight mail, postage prepaid at the address set
forth below, or to such other address as may be so designed in writing by any
party hereto:
1. If to CSW Acquisition Corp., to it at:
CSW Acquisition Corp.
1001 South Bayshore Drive
Suite 1200
Miami, Florida 33131
Attention: Bradley S. Weiss, President
2. If to Crown Northcorp, Inc., to it at:
Crown Northcorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attention: Ronald E. Roark, President
3. If to Tucker Holding Company, Ltd., to it at:
Tucker Holding Company, Ltd.
1251 Dublin Road
Columbus, Ohio 43215
Attention: Ronald E. Roark, President
4. If to the Escrow Agent, to it at:
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
3
<PAGE> 63
Attention: Marshall R. Pasternack, Esq.
Telephone No. (305) 579-0748
Telecopy No. (305) 579-0717
A copy of each notice or other communication given to any party hereto shall be
sent simultaneously to the other party.
D. GENERAL.
1. This Escrow Agreement sets forth the entire agreement and
understanding of the parties with respect to the escrow of the Transaction
Documents provided for herein and supersedes all prior agreements, arrangements
and understandings relating to the subject matter hereof.
2. All the terms and conditions of this Escrow Agreement shall
be binding upon, and inure to the benefit of and be enforceable by, the parties
hereto and their respective successors, assigns, heirs and legal
representatives.
3. This Escrow Agreement may be amended, modified, superseded
or canceled, and any of the terms or conditions hereof may be waived, only by a
written instrument
executed by all of the parties hereto, or, in the case of a waiver, by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. No waiver by any party of any condition, or of
the breach of any term contained in this Escrow Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of the breach of any other term of this Escrow Agreement.
4. It is understood and agreed by each of the parties hereto
that the Escrow Agent shall perform only such duties and obligations as are
expressly set forth in this Agreement and that the Escrow Agent shall not have
any implied duties or obligations under this Agreement. The obligations of the
Escrow Agent shall be to store the Transaction Documents in the same manner
which Escrow Agent normally keeps transactions records in its offices. The
Escrow Agent shall not be liable for any actions taken by the Escrow Agent in
good faith pursuant to this Escrow Agreement, but only for its gross negligence
or willful misconduct.
5. The Sellers and Buyer shall indemnify and hold the Escrow
Agent harmless from and against any loss, liability, claim, action, suit or
damage whatsoever (including
4
<PAGE> 64
reasonable attorney's fees and court costs at trial and all appellate levels)
that may be incurred by or threatened against the Escrow Agent in its capacity
as escrow agent hereunder, except for the Escrow Agent's gross negligence or
willful misconduct. If there is any dispute between the parties as to the
disposition of all or any portion of the Transaction Documents held by the
Escrow Agent hereunder, then the Escrow Agent, in its sole discretion, is
authorized to interplead such Transaction Documents with any court of competent
jurisdiction and thereby be released from all responsibility hereunder with
respect to the documents so delivered to the court.
6. The Escrow Agent may: (i) act in reliance upon any document
or instrument delivered to it, and any signature contained in any such document
or instrument, which the Escrow Agent, in good faith, believes to be genuine,
(ii) assume the validity and accuracy of any statement or assertion contained in
any document or instrument delivered to it, and (iii) assume that any person
purporting to give any notice of instruction in connection with this Agreement
has been duly authorized to do so. The Escrow Agent shall not be responsible in
any manner for the sufficiency, adequacy or legal propriety of any certificate,
document or instrument delivered to it or held by it in escrow pursuant to this
Agreement.
7. The Escrow Agent shall not be deemed to have any knowledge
of the contents of any written notice, document or instrument, and no such
written notice, document or instrument shall be deemed to have been duly given
to the Escrow Agent, unless and until the Escrow Agent shall have actually
received such written notice, document or instrument.
8. The parties recognize that Escrow Agent has represented
Buyer in the past and has been involved in the process resulting in the
Transaction Documents. The parties agree that Escrow Agent may continue to
represent Buyer in connection with any matter whatsoever, including, without
limitation, any dispute or litigation concerning this Escrow Agreement.
9. This Escrow Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and same instrument. An executed counterpart
of this Escrow Agreement transmitted by telecopy shall be effective upon receipt
of the telecopy as an original counterpart.
10. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to that State's
rule regarding choice of law. Venue for any cause of action arising in
connection with this Escrow Agreement shall be in Dade County, Florida.
5
<PAGE> 65
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
CSW ACQUISITION CORP., a Florida
corporation
By:
--------------------------------------------
Bradley S. Weiss, President
CROWN NORTHCORP, INC., a Delaware
corporation
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
TUCKER HOLDING COMPANY, LTD., an
Ohio limited liability company
By:
--------------------------------------------
Name:
--------------------------------------------
Title:
--------------------------------------------
GREENBERG, TRAURIG, HOFFMAN,
LIPOFF, ROSEN & QUENTEL, P.A.
By:
--------------------------------------------
Marshall R. Pasternack, a Shareholder
of the Firm
6
<PAGE> 66
EXHIBIT D
ARTICLES OF INCORPORATION AND BYLAWS
------------------------------------
<PAGE> 67
RESTATED CERTIFICATE OF INCORPORATION
OF
NORTHCORP NEWCO, INC.
Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware
NorthCorp Newco, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), hereby certifies as follows:
(a) The name of the Corporation is NorthCorp Newco, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of the State of Delaware on May 1, 1995.
(b) This Restated Certificate of Incorporation restates, integrates and
further amends the provisions of the Certificate of Incorporation of the
Corporation, as heretofore amended, and was duly adopted in accordance with the
provisions of Sections 242 and 245 of the General Corporation Law of the State
of Delaware.
(c) The text of the Certificate of Incorporation, as heretofore
amended, is hereby restated, integrated, and further amended to read in its
entirety as follows:
FIRST: The name of the corporation is CSW Associates, Inc. (the
"Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, 19801. The name of the Corporation's registered agent at such address
is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of stock which the
Corporation shall have authority to issue is one thousand (1,000) shares of
Common Stock, par value $.01 per share.
1
<PAGE> 68
(b) Except as may otherwise be required by law, each holder
of Common Stock shall have one vote in respect of each share of Common Stock
held on all matters voted upon by stockholders.
(c) The authorized number of shares of Common Stock may be
increased or decreased from time to time by the affirmative vote of the holders
of a majority of the combined voting power of the then-outstanding shares of
all classes and series of stock of the Corporation entitled to vote generally
in the election of directors.
FIFTH: The business and affiars of the Corporation shall be
conducted and managed by, or under the direction of, the Board of Directors.
The total number of directors constituting the entire Board of Directors shall
be not less than one (1) nor more than nine (9), with the then-authorized
number of directors being fixed from time to time by or pursuant to a
resolution passed by the Board of Directors.
SIXTH: To the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, the Corporation shall indemnify
any person who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit, or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or non-profit entity, including
service with respect to employee benefit plans, against all expenses,
liability, and loss reasonably incurred or suffered by such person, and the
corporation shall advance expenses (including attorney's fees) to such person.
Nothwithstanding the foregoing, the Corporation shall be required to indemnify
a person and advance expenses to such person in connection with a proceeding
(or part thereof) commenced by such person only if the commencement of such
proceeding (or part thereof) was authorized by the Board of Directors. The
rights conferred on any person by this Article SIXTH shall not be exclusive of
any other rights which such person may have or hereafter acquire under any
statute, provision of this Restated Certificate of Incorporation, Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.
SEVENTH: A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any repeal or
modification of the first sentence of this Article SEVENTH shall not adversely
affect any right or protection of a director of the Corporation existing
hereunder with respect to any act or omission occurring prior to such repeal or
modification.
EIGHTH: The Corporation reserves the right at any time, and from
time to time, to amend, alter, repeal or rescind any provision contained in
this Restated Certificate of Incorporation in the manner now or hereafter
prescribed by law, and other provisions
2
<PAGE> 69
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed by law; and all
rights, preferences and privileges of whatsoever nature conferred upon the
stockholders, directors or any other persons whomsoever by and pursuant to this
Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the rights reserved in this Article EIGHTH.
IN WITNESS WHEREOF, NorthCorp Newco, Inc. has caused this Restated
Certificate of Incorporation to be signed by Stephen W. Brown, its Secretary,
this 28th day of June, 1995.
NorthCorp Newco, Inc.
By: /s/ STEPHEN W. BROWN
---------------------------
Title: Secretary
3
<PAGE> 70
NORTHCORP NEWCO, INC.
BYLAWS
ARTICLE I
OFFICES
-------
Section 1.2 REGISTERED OFFICE IN DELAWARE
The registered office of the corporation required by Section
131 of the General Corporation Law of the State of Delaware (the "GCL") shall
be in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2 OTHER OFFICES
The corporation may have offices at such other places both
within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS' MEETING
---------------------
Section 2.1 PLACE OF MEETINGS
All meetings of the stockholders shall be held at such place
either within or without the State of Delaware as shall be designated from time
to time by the Board of Directors and stated in the notice of the meeting.
Section 2.2 ANNUAL MEETINGS
Annual meetings of stockholders shall be held within 150 days
of the close of the corporation's fiscal year, or at such other date and time
as shall be designated from time to time by the Board of Directors, at which
the stockholders shall elect a Board of Directors, and transact such other
business as may properly be brought before the meeting.
Section 2.3 SPECIAL MEETINGS
Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the Chairman of the Board of Directors, or by
the President, and shall be called by the President or Secretary at the request
in writing of a majority of the Board of Directors, or at the request in
writing of one or more stockholders holding not less than twenty percent (20%)
of the
<PAGE> 71
voting power entitled to be present or represented at the meeting. Such
request shall state the purpose or purposes of the proposed meeting.
Section 2.4 NOTICE OF MEETINGS AND ADJOURNED MEETINGS
2.4.1 Written notice of each meeting of stockholders, annual
or special, shall be given which shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. Unless otherwise provided by the GCL, the written
notice of any meeting shall be given not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting. If mailed, such notice shall be deemed to be given when
deposited in the mail, postage prepaid, directed to the stockholder at his
address as it appears on the records of the corporation. An affidavit of
mailing of any notice or report, executed by the Secretary, Assistant Secretary
or any transfer agent of the corporation, shall be prima facie evidence of the
facts stated therein.
2.4.2 Any meeting of stockholders, annual or special, may
adjourn from time to time to reconvene at the same or some other place, and,
except as otherwise provided in this section, notice need not be given of any
such adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting, the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty (30) days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 2.5 WAIVER OF NOTICE
Notice of a meeting need not be given to any stockholder who
signs a written waiver of notice or a consent to holding the meeting or an
approval of the minutes thereof, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such stockholder or that the meeting is not lawfully
called or convened. All such waivers, consents and approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Section 2.6 ACTION WITHOUT MEETING
2.6.1 Unless otherwise provided in the Certificate of
Incorporation of this corporation, any action which may be taken at any annual
or special meeting of stockholders may be taken without a meeting, and without
prior notice, if a consent in writing, setting forth the action so taken, is
signed by the holders of the outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted;
provided, however, that directors may not be elected by written consent except
by unanimous written consent of all shares entitled to vote for the election of
directors.
2.6.2 Any stockholder given a written consent, or the
stockholder's
<PAGE> 72
proxyholders, or a transferee of the shares or a personal representative of the
stockholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the Corporation.
Section 2.7 QUORUM
2.7.1 Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, at each meeting of stockholders the presence in
person or by proxy of the holders of a majority in voting power of the
outstanding shares of stock entitled to vote at the meeting shall be necessary
and sufficient to constitute a quorum.
2.7.2 The stockholders present at a duly called or held
meeting at which a quorum is present may continue to transact business until
adjournment notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
Section 2.8 VOTING RIGHTS
Except as otherwise provided by the Certificate of
Incorporation, each stockholder entitled to vote at any meeting of stockholders
shall be entitled to one vote for each share of stock held by him which has
voting power upon the matter in question. Voting at meetings of stockholders
need not be by written ballot. At all meetings of stockholders for the election
of directors, a plurality of the votes cast shall be sufficient to elect. All
other elections and questions shall, unless otherwise provided by law, the
Certificate of Incorporation or these Bylaws, be decided by the affimative vote
of the holders of a majority in voting power of the shares of stock which are
present in person or by proxy and entitled to vote thereon.
Section 2.9 PROXIES
Each stockholder entitled to vote at a meeting of stockholders
may authorize person or persons to act for him by proxy, but no such proxy
shall be voted or acted upon after three (3) years from its date, unless the
proxy provides for a longer period. A proxy shall be irrevocable if it states
that it is irrevocable and if, and only so long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting
in person or by filing an instrument revoking the proxy or another proxy
bearing a later date with the Secretary of the corporation.
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Section 2.10 MANNER OF CONDUCTING MEETINGS
2.10.1 Meeting of stockholders shall be presided over by the Chairman
of the Board, if any, or in his absence by the President, or in his absence by
a Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
2.10.2 To the extent not in conflict with the provisions of the
GCL relating thereto, the Certificate of Incorporation, or express provisions
of these Bylaws, meetings shall be conducted pursuant to such rules as may be
adopted by the Board of Directors prior to the meeting or, if no rules have
been so adopted, pursuant to such rules as may be promulgated by the Chairman.
Section 2.11 INSPECTORS OF ELECTION
At all elections of directors, or in any other case in which inspectors
may act, two inspectors of election shall be appointed by the Chairman of the
meeting, except as otherwise provided by law. The inspectors of election shall
take and subscribe an oath faithfully to execute the duties of inspectors at
such meeting with strict impartiality, and according to the best of their
ability, and shall take charge of the polls and after the vote shall have taken
shall make a certificate of the result thereof. No director or candidate for
the office of director shall be appointed as an inspector.
Section 2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Secretary shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting either at a place within
in the city where the meeting is to be held, which place shall be specified in
the notice of meeting, or, if not so specified, at the place where the meeting
is to be held. The list also shall be produced and kept at the place of the
meeting during the whole time thereof and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the corporation, or to vote in person or by proxy at any meeting
of stockholders.
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ARTICLE III
DIRECTORS
---------
Section 3.1 POWERS
Subject to the provisions of the GCL and any limitations in the
Certificate of Incorporation relating to actions required to be authorized or
approved by the stockholders, the business affairs of the corporation shall be
managed by or under the direction of the Board of Directors.
Section 3.2 AUTHORIZED NUMBER
The number of directors of this Corporation shall be not less than one
(1) and not more than nine (9) until changed in accordance with the following
provision of this Section 3.2. The exact number so fixed may be changed from
time to time, within the limits specified in the Certificate of Incorporation,
by resolution adopted by the Board of Directors. Directors need not be
stockholders.
Section 3.3 ELECTION AND TENURE OF OFFICE
Subject to the provisions of the Certificate of Incorporation and
Section 3.4 of these Bylaws, directors shall be elected at the annual meeting
of stockholders. Directors SHALL hold office until the election and
qualification of their successors or until the earlier resignation or removal.
Section 3.4 VACANCIES
Subject to the provisions of the Certificate of Incorporation, newly
created directorships resulting from any increase in the authorized number of
directors, and any vacancies on the Board of Directors resulting from death,
resignation, disqualification or removal may be filled only by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in accordance
with the preceding sentence shall hold office until the next annual meeting of
stockholders, and until such director's successor shall have been duly elected
and qualified, subject to his or her earlier death, disqualification,
resignation or removal.
Section 3.5 RESIGNATION
3.5.1 Any directors may resign effective upon giving written notice to
the Chairman of the Board, the President, the Secretary or the Board of
Directors of the corporation. The notice shall be effective upon delivery
unless a later date is specified therein. If a resignation of a director is
effective at a future time, a successor may be elected
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to take office when the resignation becomes effective.
3.5.2 No reduction of the number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
Section 3.6 MEETINGS AFTER ANNUAL STOCKHOLDERS' MEETINGS
Immediately following each annual meeting of stockholders, the Board of
Directors shall hold a regular meeting at the place where said annual
meeting has been held or at such other place as shall be fixed by the Board of
Directors, to elect officers and to transact other proper business. Call and
notice of such regular meetings are hereby dispensed with.
Section 3.7 OTHER REGULATIONS
Regular meetings of the Board of Directors may be held at such times
and at such places within or without the State of Delaware as may be determined
from time to time by the Board of Directors. No notice need be given of such
regular meetings, except that notice shall be given to each director (as for a
special meeting) of the resolution establishing regular meeting dates, which
notice shall contain the date, time and place of the regular meetings.
Section 3.8 SPECIAL MEETINGS -- NOTICES
3.8.1 Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or the
President or any two directors.
3.8.2 Special meetings of the Board of Directors shall be held upon at
least four (4) days' notice by mail or 24 hours' notice delivered personally or
by telephone, telegram or other electronic communication. A notice need not
specify the purpose of any meeting of the Board of Directors.
3.8.3 Notice by mail shall be deemed given at the time a written notice
is deposited in the United States mails, first class postage prepaid, addressed
to the director at his address as it is shown upon the records of the
corporation, or, if it is not so shown on such records and is not readily
ascertainable, at the principal executive office of the corporation. Notice by
telegram shall be deemed given when it is actually transmitted by the telegram
company, addressed as in the preceding sentence. Notice by telephone, telecopy
or other electronic communication shall be deemed given when it is so
communicated to the director or to a person at the office of the director who
the person giving the notice has reason to believe will promptly communicate it
to the director.
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Section 3.9 TELEPHONIC MEETING
Members of the Board of Directors, or any committee designated
by the Board, may participate in a meeting of the Board or such committee by
means of conference telephone or similar communications equipment, by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this bylaw shall constitute presence in
person at such meeting.
Section 3.10 WAIVER OF NOTICE
Notice of a meeting need not be given to any director who signs
a written waiver of notice or a consent to holding the meeting or an approval
of the minutes thereof, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director or that the meeting is not lawfully called or convened.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 3.11 ACTION AT A MEETING
A majority of the authorized number of directors present in
person constitutes a quorum of the Board of Directors for the transaction of
business at a meeting. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present is the
act of the Board of Directors, unless a greater number is required by law, by
the Certificate of Incorporation or by the Bylaws.
Section 3.12 ADJOURNMENT
A majority of the directors present at a meeting, whether or
not a quorum is present, may adjourn the meeting to another time and place. If
the meeting is adjourned for more than 24 hours, at least two (2) days' notice
by mail or 24 hours' notice delivered personally or by telephone or telegraph,
stating the time and place at which the meeting will reconvene, shall be given
to each director who was not present at the time of the adjournment. Notice by
mail, telephone or telegraph shall be deemed given as provided in section 3.8.3.
Section 3.13 ORGANIZATION
Meetings of the Board of Directors shall be presided over by
the Chairman of the Board, if any, or in his absence by the President if he is
also a director, or in their absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
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Section 3.14 ACTION BY UNANIMOUS WRITTEN CONSENT
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, if all of the members of the Board of
Directors shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board of Directors. Such action by written consent shall
have the same force and effect as an unanimous vote of such directors.
Section 3.15 INTERESTED DIRECTORS
No contract or transaction between the corporation and one or
more of its directors or officers or between the corporation and any other
corporation, partnership, association or other organization in which one or
more of its directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if: (a) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less than a quorum; or
(b) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by a vote of the stockholders; or (c) the contract or transaction
is fair as to the corporation as of the time it is authorized, approved or
ratified by the Board of Directors, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
Section 3.16 COMPENSATION
The directors may be paid their expenses of attending each
meeting of the Board of Directors. In addition, the Board of Directors may from
time to time, in its discretion, pay to directors fixed compensation for
attendance at each meeting of the Board of Directors or may pay a stated fee
or other compensation for services as a director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor; Members of special or standing committees may
be allowed like reimbursement and compensation for attending committee
meetings.
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ARTICLE IV
COMMITTEES
----------
Section 4.1 COMMITTEES
The Board of Directors may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committee to consist
of one or more of the directors of the corporation. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent provided by law and to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it.
Section 4.2 COMMITTEE RULES
Unless the Board of Directors otherwise provides, each
committee designated by the Board of Directors may make, alter and repeal rules
for the conduct of its business. In the absence of such rules, each committee
shall conduct its business in the same manner as the Board of Directors
conducts its business pursuant to Article II of these Bylaws.
Section 4.3 COMMITTEE RECORDS
Each committee shall keep regular minutes of its meetings and
shall report the same to the Board of Directors when required.
ARTICLE V
OFFICERS
--------
Section 5.1 OFFICERS
The officers of the corporation shall be a Chairman of the
Board or a President or both, one or more Vice Presidents, a Secretary, a Chief
Financial Officer and such other officers with such titles as shall be
determined by the Board of Directors and with such duties
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as shall be delegated to them by the Board of Directors or any supervisory
officer. Any number of offices may be held by the same person.
Section 5.2 ELECTION, REMOVAL AND RESIGNATION
Officers shall be chosen by the Board of Directors and shall
serve and shall be subject to removal, with or without cause, at the pleasure
of the Board of Directors, subject to the rights, if any, of officers under
contracts of employment with the corporation. Any officer may resign at any
time upon written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is a party.
Section 5.3 CHAIRMAN OF THE BOARD
The Chairman of the Board, if there be such officer, shall, if
present, preside at all meetings of the Board of Directors and the stockholders
and shall exercise and perform such other powers and duties as may be assigned
from time to time to the Chairman of the Board by the Board of Directors.
Whenever there is no President of the corporation, the Chairman of the Board
shall have the powers and duties of the President.
Section 5.4 PRESIDENT
Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the general manager and chief executive officer
of the corporation and, subject to the control of the Board of Directors, shall
supervise, direct and control the business and affairs of the corporation. In
the absence of the Chairman of the Board or if there be none, he shall preside
at all meetings of the stockholders and, provided the President is also a
director, at all meetings of the Board of Directors. He shall have the general
powers and duties of management usually vested in the office of president of a
corporation and such other powers and duties as may be prescribed by the Board
of Directors or the Bylaws.
Section 5.5 VICE PRESIDENTS
The Vice Presidents shall have such powers and perform such
duties as from time to time may be prescribed for them by the Board of
Directors, the Chairman of the Board, the President or any other officer
supervising such Vice Presidents. In the absence or disability of the President
and Chairman of the Board, a Vice President designated by the Board of
Directors shall substitute for and assume the duties, powers and authority of
the President.
Section 5.6 SECRETARY AND ASSISTANT SECRETARY
5.6.1 The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders, shall record or cause to be
recorded all votes and minutes
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thereof, shall give notice of each meeting of the stockholders and Board of
Directors requiring notice and shall perform such other duties as may be
prescribed by the Board of Diretors, the chairman of the Board or President.
The Secretary shall keep in safe custody the seal of the corporation, and, when
authorized by the Board of Directors, shall affix the same to any instrument.
5.6.2 The Assistant Secretary shall perform such corporate
secretarial duties as may be prescribed by the Board of Directors, the Chairman
of the Board, the President or the Secretary, and in absence or disability of
the Secretary shall substitute for and assume the duties, powers and authority
of the Secretary.
Section 5.7 CHIEF AND SUBORDINATE FINANCIAL OFFICERS
5.7.1 The Chief Financial Officer shall keep and maintain or
cause to be kept and maintained adequate and correct accounts of the properties
and business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital and retained
earnings. The books of account shall be open to inspection by all directors at
all reasonable times. The Chief Financial Officer shall deposit or cause to be
deposited all monies and other valuables in the name and to the credit of the
corporation with such depositories as may be designated by the Board of
Directors. The Chief Financial Officer shall disburse or cause to be disbursed
the funds of the corporation as may be ordered by the Board of Directors. The
Chief Financial Officer shall supervise the subordinate financial officers.
5.7.2 The subordinate financial officers, which may be a
Treasurer, a Controller and one or more Assistant Treasurers and Assistant
Controllers, shall perform such duties and exercise such powers as shall be
delegated to them by the Board of Directors, the Chairman of the Board, the
President and the Chief Financial Officer.
Section 5.8 ADDITIONAL POWERS, SENIORITY AND SUBSTITUTION OF OFFICERS
In addition to the foregoing powers and duties specifically
prescribed for the respective officers, the Baord of Directors may from time to
time by resolution impose or confer upon any of the officers such additional
duties and powers as the Board of Directors may see fit and/or determine the
order of seniority among the officers. Any such resolution may be final,
subject only to further action by the Board of Directors, or the resolution may
grant such discretion, as the Board of Directors deems appropriate, to the
Chairman of the Board or to the President (or in his absence the Vice President
serving in his place) to impose or confer additional duties and powers and to
determine the order of seniority among officers. The Board of Directors, the
Chairman of the Board or the President may designate any officer or officers to
substitute for and assume the duties, powers and authority of any absent
officer or officers in any instances not provided for above.
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Section 5.9 COMPENSATION
The officers of this corporation shall recieve such
compensation as shall be fixed from time to time by the Board of Directors,
except that the Board of Directors may delegate to any officer or officers the
power to fix the compensation of any other officer or officers. No officer
shall be prevented from receiving compensation by reason of the fact that the
officer is also a director of the corporation.
Section 5.10 LOANS AND GUARANTEES
The corporation may lend money to, or guaranty any obligation
of, or otherwise assist any officer or other employee of the corporation of its
subsidiaries, including any officer or employee who is a director of the
corporation or its subsidiaries, whenever, in the judgment of a majority of the
disinterested directors (even though the disinterested directors may be less
than a quorum), such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured or secured in such manner as the
majority of disinterested directors (even if the disinterested directors are
less than a quorum) shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this section contained shall be
deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
ARTICLE VI
CORPORATE RECORDS AND AUTHORIZATIONS
------------------------------------
Section 6.1 RECORDS
6.1.1 The corporation shall keep, at its principal executive
office or at the office of its transfer agent or registrar, (a) adequate and
correct books and records of account, (b) minutes of the proceedings of the
stockholders, Board of Directors and committees of the Board of Directors, and
(c) a record of its shareholders giving the names and addresses of all
shareholders and the number and class of shares held by each.
6.1.2 Any records maintained by the corporation in the
regular course of its business, including its stock ledger, books of account
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs or any other information storage device,
provided that the records so kept can be converted into clearly legible form
within a reasonable time. The corporation shall so convert any records so kept
upon the request of any person entitled to inspect the same.
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Section 6.2 CHECKS, DRAFTS, ETC.
All checks, drafts, or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of, or payable to, the
corporation, shall be signed or endorsed by such person or persons and in such
manner as shall be determined from time to time by resolution of the Board of
Directors.
Section 6.3 EXECUTION OF CONTRACTS
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers or agent or agents to enter into any
contract or execute and instrument in the name of and on behalf of the
corporation. Such authority may be general, or confined to specific instances.
Unless so authorized by the Board of Directors, no officer, agent or employee
shall have any power or authority to, bind the corporation by any contract or
engagement, or pledge its credit or render it liable for any purpose or in any
amount; provided, however, that nothing contained in this section shall be
construed to prevent any officer of the corporation from performing his regular
duties in the ordinary course of business pursuant to the authority granted to
said officer by Article V of these Bylaws.
Section 6.4 VOTING OF SHARES OF OTHER CORPORATION
All shares of any other corporation standing in the name of this
corporation shall be voted, and all rights incidental thereto exercised, as
directed by written consent or resolution of the Board of Directors expressly
referring thereto. Such rights may be delegated by the Board of Directors to
the President or any Vice President, or any other person expressly appointed by
the Board of Directors. Such authority may be exercised by the designated
officers in person, or by any other person authorized so to do proxy or power
of attorney duly executed by such officers.
Section 6.5 DIVIDENDS
The Board of Directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and on
the terms and conditions provided by law and, subject to the Certificate of
Incorporation, subject to any contractual restrictions to which the corporation
is then subject. If a dividend is declared, the stock transfer books shall not
be closed, but a record date shall be set by the Board of Directors on which
???? the transfer agent or, where no transfer agent is appointed, the Secretary
will take a record of all stockholders entitled to the dividend without
actually closing the books for transfers of stock.
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ARTICLE VII
STOCK CERTIFICATES AND TRANSFER OF SHARES
-----------------------------------------
Section 7.1 STOCK CERTIFICATES
7.1.1 Every holder of stock shall be entitled to have a certificate
signed by or in the name of the corporation by the Chairman or Vice Chairman of
the Board of Directors, if any, or the President or a Vice President, and by
the Chief Financial Officer, Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, of the corporation, certifying the number
of shares owned by him in the corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be an officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
7.1.2 If the corporation is authorized to issue more than one class of
stock, or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class of stock; provided, however, that except as
otherwise provided in Section 202 of the GCL, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests, the powers, designations, preferences and relative,
participating, optional or other special rights or each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 7.2 TRANSFER ON THE BOOKS
Upon (a) the surrender to the Secretary or transfer agent of the
corporation of a certificate representing shares of stock in the corporation,
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer and (b) delivery to the corporation of evidence
sufficient to indicate that the transfer of such shares would not be in
violation of the Certificate of Incorporation or Bylaws, any legend appearing
on said certificate or any applicable law, it shall be the duty of corporation
to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
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Section 7.3 STOLEN, LOST OR DESTROYED CERTIFICATES
The Board of Directors or any officer designated by the Board of
Directors may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the corporation alleged
to have been stolen, lost or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate for shares so stolen, lost or
destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors or such officer, as a condition precedent to the
issuance thereof, may require the person claiming such stolen, lost or
destroyed certificate or certificates to give the corporation a bond or other
adequate security sufficient to indemnify it against claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
Section 7.4 TRANSFER AGENTS AND REGISTRARS
The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, who may be the same person, and
may be the Secretary of the corporation, or an incorporated bank or trust
company, either domestic or foreign, who shall be appointed at such times and
places as the requirements of the corporation may necessitate and the Board of
Directors may designate.
Section 7.5 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD
In order that the corporation may determine the stockholders entitled
to notice of or vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders
or adjournment thereof, shall, unless otherwise required by law, not be more
than sixty or less than ten days before the date of such meeting; (2) in the
case of determination of stockholders entitled to express consent to corporate
action in writing without a meeting, shall not be more than ten days from the
date upon which the resolution fixing the record date is adopted by the Board
of Directors; and (3) in the case of any other action, shall not be more than
sixty days prior to such other action. If no reocrd is fixed: (1) the record
date for determination stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with
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applicable law, or, if prior action by the Board of Directors is required by
law, shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action; and (3) the record
date for determining stockholders for any other purpose shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
ARTICLE VIII
CORPORATE SEAL
--------------
The corporate seal shall have the inscribed thereon the name of
the corporation, the year of its organization, the state of incorporation and
the words "Corporate Seal".
ARTICLE IX
AMENDMENTS TO BYLAWS
--------------------
Section 9.1 BY STOCKHOLDERS
The stockholders of the corporation may make or adopt
additional Bylaws and may adopt, amend, alter, repeal or rescind any provision
of these Bylaws upon the affirmative vote of a majority of all outstanding
shares entitled to vote at a duly held meeting at which a quorum is present or
represented by proxy.
Section 9.2 BY DIRECTORS
Subject to the provision of Section 9.1, the Board of Directors
may alter, amend, repeal or rescind any provision of these Bylaws or may adopt
new Bylaws.
Section 9.3 RECORDS OF AMENDMENTS
Whenever an amendment or new Bylaw is adopted, it shall be
filed in the book of minutes with the original Bylaws. If any Bylaw is
repealed, the fact of repeal and the date on which the repeal was enacted shall
be stated in said book.
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ARTICLE X
INTERPRETATION
--------------
Reference in these Bylaws to any provision of the GCL shall be
deemed to include all amendments thereof.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
--------------------------------------
EMPLOYEES AND OTHER AGENTS
--------------------------
Section 11.1 RIGHT TO INDEMNIFICATION. The corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person who was or is
made or is threatened to be made a party or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans (an "indemnitee"), against all
liability and loss suffered and expenses (including attorneys' fees) reasonably
incurred by such indemnitee. The corporation shall be required to indemnify an
indemnitee in connection with a proceeding (or part thereof) commenced by such
indemnitee only if the commencement of such proceeding (or part thereof) by the
indemnitee was authorized by the Board of Directors of the corporation.
Section 11.2 PREPAYMENT OF EXPENSES. The corporation shall pay
the expenses (including attorneys' fees) incurred by an indemnitee in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Article XI or otherwise.
Section 11.3 CLAIMS. If a claim for indemnification or payment
of expenses under this Article XI is not paid in full within sixty days after a
written claim therefor by the indemnitee has been received by the corporation,
the indemnitee may file suit to recover the unpaid amount of such claim and, if
successful in whole or part, shall be entitled to be paid the expense of
prosecuting such claim. In any such action the corporation shall have the
17
<PAGE> 87
burden of proving that the indemnitee was not entitled to the requested
indemnification or payment of expenses under applicable law.
Section 11.4 NONEXCLUSIVITY OF RIGHTS. The rights conferred on
any person by this Article XI shall not be exclusive of any other rights which
such person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 11.5 OTHER INDEMNIFICATION. The corporation's
obligation, if any, to indemnify any person who was or is serving at its
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such person may collect as indemnification from such
other corporation, partnership, joint venture, trust, enterprise or non-profit
enterprise.
18
<PAGE> 88
EXHIBIT E
OPERATING AGREEMENT
-------------------
<PAGE> 89
OPERATING AGREEMENT
THIS OPERATING AGREEMENT (this "Agreement") is made and entered into
this day of , 1996 by and among Crown NorthCorp,
Inc., a Delaware corporation ("Crown"), Tucker Holding Company, Ltd., an Ohio
limited liability company ("Tucker") and CSW Acquisition Corp., a Florida
corporation ("Buyer") to be effective as of , 1996 ("Effective
Date"). Crown and Tucker are sometimes collectively referred to herein as
Sellers.
BACKGROUND INFORMATION
----------------------
A. Sellers and Buyer are parties to a certain Stock Purchase Agreement
(the "SPA"), also effective as of the Effective Date, setting forth the terms
and conditions by which Buyer is acquiring from Sellers the Shares of CSW
Associates, Inc., a Delaware corporation ("CSW"). All capitalized terms not
specifically defined in this Agreement have the meanings ascribed to them in the
SPA.
B. As provided in the SPA, the Shares are to be held in escrow until
the earlier of (i) Buyer's receipt of approval from the FDIC to Buyer's
acquisition of the Shares or (ii) December 16, 1996.
C. The parties hereto desire to enter into this Agreement to set forth
the manner in which Buyer will operate CSW during the pendency of the escrow.
THEREFORE, the parties agree as follows:
ARTICLE I
OPERATION OF CSW
----------------
Section 1.01 GENERAL. From and after the Effective Date, Buyer, in its
capacity as the sole shareholder of CSW, shall have all incidents and
responsibilities of ownership of the Shares, including but not limited to:
(a) The right to appoint officers and directors of CSW;
(b) The ownership of and responsibility for all of the Shares; in turn,
CSW shall have the ownership of and responsibility for the assets and
liabilities as reflected on the Financial Statements;
<PAGE> 90
(c) The responsibility to require CSW to distribute all of its income
(including balances in Rentention Accounts) from the business operations of CSW
to Buyer and to require CSW to be responsible for all expenses or other
liabilites arising from or attributable to the business operations of CSW;
(d) The right to cause CSW to sell, transfer, compromise or otherwise
deal with or dispose of the assets and liabilities of CSW, save and except for
those assets and liabilities pertaining to FDIC Contract Nos. ###-##-#### (RTC
Atlanta) and FDIC RALA 92-03022-N-KF (collectively, the "FDIC Contracts"), which
FDIC Contracts shall be administered in the manner set forth in Section 1.02
hereof;
(e) The responsibility to require CSW to administer certain assets of
Crown as set forth on Attachment No. 1; and
(f) The responsibility to require CSW to conduct the business and
affairs of CSW in accordance with its certificate of incorporation, bylaws and
applicable law.
Section 1.02 ADMINISTRATION OF FDIC CONTRACTS. (a) Buyer acknowledges
that affiliates of the Buyer negotiated and entered into the FDIC Contracts and
that Buyer is familiar with the terms and conditions of the FDIC Contracts and
the course of dealings and past practices between the parties thereto.
(b) Throughout the pendency of the escrow described in Section 2.4 of
the SPA, Buyer will cause CSW to: (i) perform the obligations of Contractor
under the FDIC contracts as though the terms thereof bound Buyer directly; (ii)
operate and administer the FDIC Contracts according to their terms consistent
with those past practices of which Buyer is aware; (iii) maintain CSW's
corporate existence, with full power and authority to discharge its rights,
duties and obligations under the FDIC Contracts; and (iv) not transfer or assign
any of CSW's rights, duties or obligations under the FDIC Contracts or otherwise
take any actions which may cause the FDIC to enforce any contractual right it
may have against Sellers or Crown.
ARTICLE II
FDIC APPROVAL
-------------
Section 2.01 BUYER TO SEEK FDIC APPROVAL. Buyer, at its cost and
expense, shall promptly and diligently seek to obtain approval of the FDIC to
the acquisition of the Shares by Buyer.
2
<PAGE> 91
Section 2.02 ASSISTANCE OF CROWN. Crown understands that, as Buyer
pursues FDIC approval as provided in Section 2.01 hereof, Buyer or the FDIC may
find it necessary or appropriate for Crown make certain requests or
certifications with respect to the transfer of the Shares. Crown agrees to
cooperate in making such requests or certifications upon the reasonable request
of Buyer or FDIC provided such requests or certifications do not have the effect
of imposing unreasonable cost, liability or material expense upon Sellers or
Crown.
ARTICLE III
MISCELLANEOUS
-------------
Section 3.01 RELATIONSHIP OF SPA. The parties understand and agree that
this Agreement is intended to become an exhibit to the SPA and thereby
incorporated into the SPA. Any conflict between the terms and conditions of this
Agreement and the terms and conditions of the SPA shall be resolved in favor of
the SPA.
Section 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS. Without
limiting the generality of Section 3.01, the parties hereby restate, as though
fully rewritten herein, all of the representations, warranties and covenants
made to and for the benefit of each other in the SPA.
Section 3.03 NOTICES. Any notices, demand, request, instruction,
correspondence or other document to be given hereunder by any party hereto to
another shall be in writing and delivered personally, by courier service such as
Federal Express, or by other messenger or by U.S. registered or certified mail
(postage prepaid and return receipt requested), as follows:
CROWN: Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn.: Stephen W. Brown, Secretary
SERVICER: CSW Acquisition Corp.
1001 South Bayshore Drive
Suite 1200
Miami, Florida 33131
Attn.: Bradley S. Weiss, President
Section 3.04 GOVERNING LAW. The provisions of this Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
THE PARTIES TO THIS AGREEMENT (i) SUBMIT TO THE JURISDICTION OF THE STATE AND
FEDERAL COURTS OF THE STATE OF FLORIDA FOR PURPOSES OF ANY ACTION OR
3
<PAGE> 92
PROCEEDING HEREUNDER, (ii) AGREE THAT THE VENUE OF SUCH ACTION OR PROCEEDING MAY
BE LAID IN DADE COUNTY FLORIDA AND (iii) WAIVE ANY CLAIM THAT THE SAME IS AN
INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.
CROWN NORTHCORP, INC.
By:
--------------------------------
Name:
Title:
TUCKER HOLDING COMPANY, LTD.
By:
--------------------------------
Name:
Title:
CSW ACQUISITION CORP.
By:
--------------------------------
Name:
Title:
4
<PAGE> 93
ATTACHMENT NO. 1
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into this
day of , 1996 by and between Crown NorthCorp, Inc., a
Delaware corporation ("Crown" or "Manager") and CSW Acquisition Corp., a
Florida corporation ("CSWA") to be effective as of , 1996 ("Effective
Date").
BACKGROUND INFORMATION
----------------------
A. The Federal Home Loan Mortgage Corporation ("Freddie Mac") has
entered into one or more contracts with Crown in substantially the form
appearing on Exhibit A attached hereto and incorporated by reference herein
(collectively, the "Freddie Mac Contract") to provide certain loss mitigation
services with respect to certain delinquent loans owned by Freddie Mac. All
capitalized terms not specifically defined in this Agreement have the meanings
ascribed to them in the Freddie Mac Contract.
B. Attached hereto as Exhibit B and incorporated by reference herein is
a listing of certain loans subject to the Freddie Mac Contract (the "Loan
Servicing Portfolio").
C. Crown now desires to employ CSWA to service the Loan Servicing
Portfolio in the manner set forth below.
D. CSWA has agreed to service the Loan Servicing Portfolio upon and
subject to the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
ARTICLE I
GENERAL SCOPE OF CSWA'S DUTIES
------------------------------
Section 1.01 EFFECTIVE DATE; APPOINTMENT OF CSWA; STANDARD OF
PERFORMANCE.(a) Crown hereby appoints CSWA, as an independent contractor
pursuant to this Agreement, to service and manage the Loan Servicing Portfolio
from and after the Effective Date, and CSWA hereby accepts such appointment.
CSWA agrees that its servicing and management of the Loan Servicing Portfolio
shall be carried our in accordance with (i) applicable law, (ii) the express
terms of the Freddie Mac Contract and this Agreement, (iii) servicing standards
and asset management standards for the Loan Servicing Portfolio that are
customarily employed by prudent CSWA's servicing comparable assets for their own
account and (iv) reasonable directions given from time to time by Crown
consistent with items (i) through (iii) above.
<PAGE> 94
(b) CSWA'S DUTIES. Without limiting the generality of Section 1.01(a),
the parties hereto understand and agree that, with respect to the Loan Servicing
Portfolio, CSWA shall perform the obligations of Manager under Sections 1 and 2
of the Freddie Mac Contract as though the terms thereof bound CSWA directly.
(c) GUIDELINES; OUTSOURCING BOOK. In discharging its duties under this
Article I, CSWA shall materially comply with the Guidelines and the Outsourcing
Book, as each may be amended from time to time. Crown has delivered to CSWA the
most current copies of the Guidelines and the Outsourcing Book in Crown's
possession and CSWA acknowledges receipt thereof.
(d) COMMUNICATIONS WITH FREDDIE MAC. Set forth on Exhibit C is a list
of officers or employees of Crown, as such list may be amended from time to
time, who are authorized to act as servicing officers with respect to the
Freddie Mac Contract (each a "Crown Servicing Officer"). In discharging its
duties under this Agreement, CSWA shall coordinate and transmit through a Crown
Servicing Officer any and all reports, business plans, communications or
requests required under the Freddie Mac Contract for approval to Freddie Mac.
CSWA shall have no independent communications with Freddie Mac without the
written consent of Crown.
ARTICLE II
TERM OF AGREEMENT AND TERMINATION
---------------------------------
Section 2.01 TERM. This Agreement shall commence on the Effective Date
and shall terminate on the earliest to occur of the following dates (the
"Termination Date"):
(a) The last day of the month in which CSWA completes its duties with
respect to the Loan Servicing Portfolio;
(b) January 1, 1997, unless otherwise extended by mutual consent of the
parties;
(c) The effective date of a termination of the Freddie Mac Contract by
Freddie Mac pursuant to Section 3(b) of the Freddie Mac Contract;
(d) The effective date of a termination of this Agreement by Crown
pursuant to a CSWA Event of Default as set forth in Section 4.09 hereof; or
(e) At CSWA's option, upon the failure by Crown to timely deliver the
Servicing Fee to CSWA pursuant to Section 3.01(b) of this Agreement.
2
<PAGE> 95
Section 2.02 EFFECT OF TERMINATION. Upon the Termination Date, CSWA
shall deliver to Crown all books, records or files it possesses with respect to
the Loan Servicing Portfolio.
Section 2.03 CSWA'S REMEDY UPON THE TERMINATION OF THE FREDDIE MAC
CONTRACT. In the event that Freddie Mac shall terminate the Freddie Mac Contract
pursuant to Section 3(b) of that contract, CSWA shall be entitled to payment for
work completed in accordance with Article I hereof (computed in accordance with
Section 3.01(b) hereof) and to reimbursement for expenses (pursuant to Section
3.02 hereof), as of the effective date of the date of termination pursuant to
Section 3(b) of the Freddie Mac Contract.
ARTICLE III
SERVICING FEE AND FUNDING FOR CSWA'S EXPENSES
---------------------------------------------
Section 3.01 CURRENT FEE SCHEDULE. (a) The Freddie Mac Contract
includes, as Exhibit B thereto, a schedule of fees currently payable by Freddie
Mac (the "Current Fee Schedule"). Crown and CSWA understand and agree that
Freddie Mac may from time to time amend the Current Fee Schedule. Crown shall
promptly transmit to CSWA any amendments it receives to the Current Fee
Schedule, which amendments shall be effective upon CSWA's receipt.
(b) SERVICING FEE. For services under this Agreement, CSWA shall
receive a fee equal to 85% of Crown's gross billings to Freddie Mac with respect
to the Loan Servicing Portfolio, payable as and when Crown collects billings
from Freddie Mac. All payments that are not received by CSWA within ten (10)
business days of receipt by Crown shall bear interest at eighteen percent (18%)
per annum. CSWA shall have the right to inspect the books of Crown for the
purpose of reviewing the billings to Freddie Mac and the payments received from
Freddie Mac.
Section 3.02 EXPENSES. The parties understand and agree that CSWA may
incur out-of-pocket expenses in the manner set forth in Section 4 of the Freddie
Mac Contract. CSWA shall forward expense reimbursement requests to a Crown
Servicing Officer who shall promptly submit the same to Freddie Mac. Crown shall
forward reimbursements to CSWA as and when received from Freddie Mac.
ARTICLE IV
GENERAL OPERATIONS UNDER THE FREDDIE MAC CONTRACT
-------------------------------------------------
The following requirements of CSWA shall commence from and after the
Effective Date.
3
<PAGE> 96
Section 4.01 EMPLOYEES. CSWA shall perform the obligations of Manager
under Section 5 of the Freddie Mac Contract as though the terms thereof bound
CSWA directly.
Section 4.02 COMPLIANCE WITH LAW. CSWA shall perform the obligations of
Manager under Section 6 of the Freddie Mac Contract as though the terms thereof
bound CSWA directly, PROVIDED HOWEVER, that, in each case in which said Section
6 provides for a communication or notice to Freddie Mac, CSWA's communication or
notice shall instead be to Crown who shall then communicate the same to Freddie
Mac.
Section 4.03 INSURANCE. CSWA shall perform the obligations of Manager
under Section 7 of the Freddie Mac Contract as though the terms thereof bound
CSWA directly. CSWA shall cause Crown to be named a loss payee or additional
insured, as appropriate, on any insurance coverages set forth in said Section 7.
Section 4.04 INDEMNIFICATION. CSWA hereby indemnifies Crown in the same
manner and to the same extent as Crown indemnifies Freddie Mac pursuant to
Section 8 of the Freddie Mac Contract.
Section 4.05 CORPORATE RELATIONSHIP. CSWA hereby makes the same
representations, warranties and covenants to and for the benefit of Crown as
Crown has made to Freddie Mac pursuant to Section 9 of the Freddie Mac Contract
PROVIDED HOWEVER, that (i) Crown acknowledges that CSWA is a Florida corporation
and (ii) in each case in which said Section 9 provides for a communication or
notice to Freddie Mac, CSWA's communication or notice shall instead be to Crown.
Section 4.06 CONSTRUCTION OF AGREEMENT; FREDDIE MAC OWNERSHIP OF
DOCUMENTS, CONFIDENTIALITY AND SECURITY. CSWA shall be bound by and perform the
obligations of Manager under Sections 10 and 11 of the Freddie Mac Contract as
though the terms thereof bound CSWA directly. To the extent that such sections
provide for representations and warranties, CSWA hereby makes those
representations and warranties to and for the benefit of Crown.
Section 4.07 AUDIT. CSWA shall be bound by the provisions of Section 12
of the Freddie Mac Contract as though the terms thereof bound CSWA directly. In
addition thereto, Crown shall have the same right as Freddie Mac to audit the
books and records of CSWA.
Section 4.08 DEVELOPMENT OF SYSTEMS. CSWA hereby makes to and for the
benefit of Crown the same warranties Crown has made to Freddie Mac pursuant to
Section 13 of the Freddie Mac Contract.
Section 4.09 DEFAULT. (a) Any of the following acts or occurrences
shall constitute a
4
<PAGE> 97
"CSWA Event of Default" under this Agreement: (i) any failure on the part of the
CSWA to observe or perform in any material respect any covenants or agreements
on the part of CSWA in this Agreement (specifically including CSWA's agreement
to adhere to the requirements of Section 1.01) that continues unremedied for a
period of fifteen days after the date on which written notice of such failure
requiring the same to be remedied, shall have been given by Crown to CSWA; (ii)
any representation, warranty or statement of CSWA made in this Agreement or any
certificate, report or other writing delivered pursuant hereto shall prove to be
incorrect in any material respect as of the time made and, within fifteen days
after written notice thereof shall have been given to CSWA by Crown, the
circumstance or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured; (iii)
proceedings of any nature are commenced by or against the CSWA with respect to
bankruptcy, insolvency, readjustment of debt, marshaling of assets or similar
proceedings, provided, however, that if an involuntary proceeding is commenced
against CSWA, CSWA shall have ninety (90) days to discharge such involuntary
proceeding; or (iv) CSWA shall attempt to assign or otherwise transfer its
rights, duties and obligations under this Agreement without the express written
consent of Crown.
(b) If any CSWA Event of Default shall have occurred and not been cured
within the applicable grace period, if any, then Crown, by written notice to
CSWA, may terminate this Agreement on the date specified in such notice of
termination provided, however, that if CSWA is in the process of curing the CSWA
Event of Default, the fifteen (15) day grace period shall be extended for such
additional time, not to exceed an additional fifteen (15) days, as is necessary
in order for CSWA to cure the CSWA Event of Default.
Section 4.11 REPORTING; DATA FORMAT. In operating under this Agreement
and reporting to Crown, CSWA shall utilize Data Ease software specified by Crown
and shall otherwise provide reports, data, accountings in a manner fully
consistent with the current practices between Crown and CSW Associates, Inc.
Section 4.12 NOTICES. Any notices, demand, request, instruction,
correspondence or other document to be given hereunder by any party hereto to
another shall be in writing and delivered personally, by courier service such as
Federal Express, or by other messenger or by U.S. registered or certified mail
(postage prepaid and return receipt requested), as follows:
CROWN: Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn.: Stephen W. Brown, Secretary
5
<PAGE> 98
CSWA: CSW Acquisition Corp.
1001 South Bayshore Dr.
Suite 1200
Miami, Florida 33131
Attn.: Bradley S. Weiss, President
Section 4.13 GOVERNING LAW. The provisions of this Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
THE PARTIES TO THIS AGREEMENT (i) SUBMIT TO THE JURISDICTION OF THE STATE AND
FEDERAL COURTS OF THE STATE OF FLORIDA FOR PURPOSES OF ANY ACTION OR PROCEEDING
HEREUNDER, (ii) AGREE THAT THE VENUE OF SUCH ACTION OR PROCEEDING MAY BE LAID IN
DADE COUNTY FLORIDA AND (iii) WAIVE ANY CLAIM THAT THE SAME IS AN INCONVENIENT
FORUM.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date written above.
CROWN NORTHCORP, INC.
By:
---------------------------------------
Name:
Title:
CSW ACQUISITION CORP.
By:
---------------------------------------
Name:
Title:
6
<PAGE> 99
SCHEDULE OF EXHIBITS
Exhibit A Loss Mitigation Management Contract
between Crown NorthCorp, Inc. and
the Federal Home Loan Mortgage
Corporation
Exhibit B Itemization of Loan Servicing Portfolio
Exhibit C Loan Servicing Officers of Crown NorthCorp, Inc.
7
<PAGE> 1
Exhibit 10.38
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
___________, 1996, is by and among EDWIN M. ELLMAN, SELF DIRECTED INDIVIDUAL
RETIREMENT ACCOUNT #2 (the "Holder"), and CROWN NORTHCORP, INC., a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the Holder desires to purchase certain unregistered shares of
the Common Stock from one or more of Paul O. Koether, Paul O. Koether,
Individual Retirement Account, Natalie I. Koether, Natalie I. Koether,
Individual Retirement Account, Jennifer S. Koether, Jennifer S. Koether, Trust,
Pure World, Inc., T.R. Winston & Company, Inc., and Emerald Partners (the
"Sellers") on the date hereof; and
WHEREAS, the Company desires to encourage the Holder to purchase such
shares of the Common Stock by granting to the Holder certain registration rights
relating to such shares;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. The following terms shall have the following
meanings:
"CERTIFICATE OF INCORPORATION" means the Certificate of Incorporation
of the Company, as amended and as in effect on the date hereof.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company.
"COMMISSION" means the Securities and Exchange Commission or any
similar federal agency then having jurisdiction to enforce the Securities Act
and other federal securities laws.
"NASD" means the National Association of Securities Dealers, Inc. or
any successor corporation thereto.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof), or other entity of
any kind.
"REGISTRABLE SECURITIES," collectively, means (i) the Shares, (ii) any
shares of Common Stock hereafter distributed to the holders of the Registrable
Securities by the Company as a stock dividend or otherwise thereon, and (iii)
any equity securities of the Company convertible into, or
<PAGE> 2
exercisable or exchangeable for, any of the shares of Common Stock identified in
the foregoing clauses (i) through (ii); provided, however, that any such
securities shall cease to be Registrable Securities when (i) such securities
shall have been registered under the Securities Act, the Registration Statement
with respect to the sale of such securities shall have become effective under
the Securities Act, and such securities shall have been disposed of pursuant to
such effective registration statement, (ii) such securities shall have been
otherwise transferred, if new certificates or other evidences of ownership for
them not bearing a legend restricting further transfer and not subject to any
stop transfer order or other restrictions on transfer shall have been delivered
by the Company and subsequent disposition of such securities shall not require
registration or qualification of such securities under the Securities Act or any
state securities law then in force, or (iii) such securities shall cease to be
outstanding.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rule and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"SHARES" means the shares of Common Stock purchased by the Holder from
one or more of the Sellers on the date hereof.
"STOCK" means all share, options, warrants, general or limited
partnership interests, participations, or other equivalents (regardless of how
designated) of or in a corporation, partnership, or equivalent entity, whether
voting or nonvoting, including, without limitation, common stock, preferred
stock, or any other "equity security" (as such term is defined in Rule 3a11-1 of
the General Rules and Regulations promulgated by the Commission under the
Securities Exchange Act.
"SUBSIDIARY," with respect to any Person, means (a) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether at such time Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly, or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person, and (b) any partnership in which such Person and (b) any partnership in
which such Person and/or one or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits or capital
contribution) of more than 50% or shall have any interest in a general partner
of any such partnership.
"VOTING STOCK" means capital stock of any class or classes of the
Company, including, without limitation, the Common Stock, the holders of which
are entitled to participate generally
2
<PAGE> 3
in the election of the members of the Company's board of directors and any
securities of the Company convertible into, or exercisable or exchangeable for,
any such capital stock of the Company; provided, however, that "Voting Stock"
shall not include any such capital stock or securities of the Company to the
extent that (i) such capital stock or securities shall have been registered
under the Securities Act, if the registration statement with respect to the sale
of such capital stock or securities shall have become effective under the
Securities Act and such capital stock or securities shall have been disposed of
pursuant to such effective registration statement, (ii) such capital stock or
securities shall have been distributed pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, (iii) such capital stock and
securities shall have been otherwise transferred, new certificates or other
evidence of ownership for them not bearing any legend restricting further
transfer and not subject to any stop transfer order or other restrictions on
transfer shall been delivered by the Company and subsequent disposition of such
securities shall not require registration or qualification of such securities
under the Securities Act or any securities laws then in force, or (iv) such
capital stock or securities shall have ceased to be outstanding.
SECTION 2. REGISTRATION RIGHTS.
(a) INCIDENTAL REGISTRATION. If the Company at any time proposes to
file on its behalf and/or on behalf of any of its security holders (the
"registering security holders") a Registration Statement under the Securities
Act on any form (other than a Registration Statement on Form S-4 or S-8 or any
related small business form or any successor form for securities to be offered
in a transaction of the type referred to in Rule 145 under the Securities Act or
to employees of the Company pursuant to any employee benefit plan, respectively)
for the general registration of securities to be sold for cash with respect to
its Common Stock or any other class of equity security of the Company, it will
give written notice to all holders of Registrable Securities at least 45 days
before the initial filing with the Commission of such Registration Statement,
which notice shall set forth the intended method of disposition of the
securities proposed to be registered by the Company. The notice shall offer to
include in such filing the aggregate number of shares of Registrable Securities
as such holder may request.
Each holder of any Registrable Securities desiring to have Registrable
Securities registered under this Section 2(a) shall advise the Company in
writing within 10 days after the date of such receipt of such offer from the
Company, setting forth the amount of such Registrable Securities for which
registration is requested. The Company shall thereupon include in such filing
the number of shares of Registrable Securities for which registration is so
requested, subject to the next sentence, and shall use its reasonable commercial
efforts to effect registration under the Securities Act of such shares. If the
managing underwriter of a proposed public offering shall advise the Company in
writing that, in its opinion, the distribution of the Registrable Securities
requested to be included in the registration concurrently with the securities
being registered by the Company or such registering security holder would
materially and adversely affect the distribution of such securities by the
Company or such registering security holder, then all selling security holders
(other than the Company) shall reduce the amount of securities each intended to
3
<PAGE> 4
distribute through such offering on a pro rata basis (such event is hereinafter
referred to as a "Reduction Event").
Notwithstanding any provision of this Agreement to the contrary, the
Holder shall include shares of Registrable Securities in any registration of
Stock hereunder on a maximum of two occasions.
(b) REGISTRATION PROCEDURES. If the Company is required by the
provisions of Section 2(a) to use its reasonable commercial efforts to effect
the registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(i) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to cause such
Registration Statement to become and remain effective for a period of time
required for the disposition of such securities by the holders thereof, but not
to exceed 180 days;
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of any securities covered by such Registration Statement until
the earlier of such time as all of such securities have been disposed of in a
public offering or the expiration of 180 days;
(iii) furnish to such selling security holders such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents, as such selling security holders may reasonably request;
(iv) use its reasonable commercial efforts to register or
qualify the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United States and
Puerto Rico as each holder of such securities shall request (provided, however,
that the Company shall not be obligated to qualify as a foreign corporation to
do business under the laws of any jurisdiction in which it is not then qualified
or to file any general consent to service of process), and do such other
reasonable acts and things as may be required of it to enable such holder to
consummate the disposition in such jurisdiction of the Securities covered by
such Registration Statement;
(v) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities; and
(vi) otherwise use its reasonable commercial efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its security holders, as soon as
4
<PAGE> 5
reasonably practicable, but not less than 18 months after the effective date of
the Registration Statement, an earnings statement covering the period of at
least 12 months beginning with the first full month after the effective date of
such Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 2 in respect of the securities which
are to be registered at the request of any holder of Registrable Securities that
such holder shall furnish to the Company such information regarding the
securities held by such holder and the intended method of disposition thereof as
the Company shall reasonably request and as shall be required under the
Securities Act in connection with the action taken by the Company and that such
holder shall execute such agreements, instruments, and other documents in
connection with such registration (including, without limitation, an escrow
agreement relating to such securities) as the Company may reasonably request.
SECTION 3. REGISTRATION EXPENSES. All expenses incurred in complying
with Section 2 of this Agreement, including, without limitation, all
registration and filing fees (including all expenses incident to filing with the
NASD), printing expenses, fees and disbursements of counsel for the Company,
expense of any special audits incident to or required by such registration, time
charges of Company personnel, and expenses of complying with the securities or
blue sky laws of any jurisdictions pursuant to Section 2(b), shall be paid by
the Company, except that
(a) all such expenses in connection with any amendment or supplement to
the Registration Statement or prospectus filed more than 120 days after the
effective date of such Registration Statement because any holder of Registrable
Securities has not effected the disposition of the securities requested to be
registered shall be paid by such holder;
(b) the Company shall not be liable for any fees, discounts, or
commissions to any underwriter in respect of the securities sold by such holder
of Registrable Securities; and
(c) the Company shall not be liable for any fees or expenses of counsel
to selling security holders.
SECTION 4. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of any
registration of any Registrable Securities under the Securities Act pursuant to
this Agreement, the Company shall indemnify and hold harmless the holder of such
Registrable Securities, such holder's partners, their respective directors and
officers, and each other Person (including each underwriter) who participated in
the offering of such Registrable Securities and each other Person, if any, who
controls such holder or such participating person within the meaning of the
Securities Act, against any losses, claims, damages, or liabilities, joint or
several, to which such holder or any such director or officer or participating
person or controlling person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any alleged
5
<PAGE> 6
untrue statement of any material fact contained, on the effective date thereof,
in any Registration Statement under which such securities were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse such holder or such
director, officer, or participating person or controlling person for any legal
or any other expenses reasonably incurred by such Person in connection with
investigating or defending any such loss, claim, damage, or liability; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, or liability arises out of or is based upon
any alleged untrue statement or alleged omission made (x) in such Registration
Statement, preliminary prospectus, prospectus, or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter specifically for use therein, or (y) in
such Registration Statement, preliminary prospectus, or amendment or supplement
but corrected in such final prospectus if such final prospectus was not
delivered to the Person alleging such loss, claim, damage, or liability. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or such director, officer, or participating
person or controlling Person, and shall survive the transfer of such securities
by such holder.
(b) Each holder of any Registrable Securities, by acceptance thereof,
agrees to indemnify and hold harmless the Company, its directors and officers,
and each other Person, if any, who controls the Company within the meaning of
the Securities Act against any losses, claims, damages, or liabilities, joint or
several, to which the Company or any such director or officer or any such Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon information in writing provided
to the Company by such holder of such Registrable Securities specifically for
use in the following documents and contained, on the effective date thereof, in
any Registration Statement under which securities were registered under the
Securities Act at the request of such holder, any preliminary prospectus or
final prospectus contained therein, or any amendment or supplement thereto.
(c) If the indemnification provided for in this Section 4 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities, or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and the indemnified parties in connection with the actions which resulted
in such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, as well as the parties'
6
<PAGE> 7
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities, and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4(c) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not also guilty of such fraudulent misrepresentation.
SECTION 5. CERTAIN LIMITATIONS ON REGISTRATION RIGHTS. Notwithstanding
the other provisions of this Agreement, the Company shall not be obligated to
register the Registerable Securities of any holder if, in the opinion of Powell,
Goldstein, Frazer & Murphy or such other counsel to the Company reasonably
satisfactory to the holder and its counsel (or, if the holder has engaged an
investment banking firm, to such investment banking firm and its counsel), the
sale or other disposition of such holder's Registrable Securities, in the manner
proposed by such holder (or by such investment banking firm), may be effected
without registering such Registrable Securities under the Securities Act.
SECTION 6. MISCELLANEOUS
(a) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified, or supplemented, and
waivers or consents to departure from the provisions thereof may not be given,
without the prior written consent of the parties hereto.
(b) NOTICES. Any notice, demand, request, consent, approval,
declaration, or other communication hereunder to be made pursuant to the
provisions of this Agreement, shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or sent by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
(i) If to the Holder:
Edwin M. Ellman, Self Directed Individual Retirement Account #2
----------------------------------
----------------------------------
----------------------------------
(ii) If to the Company:
7
<PAGE> 8
Crown NorthCorp, Inc.
1251 Dublin Road
Columbus, Ohio 43215
Attn: Stephen W. Brown
Secretary
8
<PAGE> 9
With a copy to:
Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E.
Atlanta, Georgia 30302
Attn: Jonathan R. Shils, Esq.
(iv) If to any holder of Registrable Securities other than the Holder,
at its last known address appearing on the books of the Company maintained for
such purpose, or at such other address as may be substituted by notice given as
herein provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery, or other communication
hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) business days
after the same shall have been deposited in the United States mail.
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties hereto. This Agreement may be assigned by the Company to any successor
to the Company without the consent of the Holder. This Agreement may not
otherwise be assigned by the Company without the prior written consent of the
Holder, which consent shall not be unreasonably delayed or withheld. This
Agreement may not be assigned by the Holder without the prior written consent of
the Company, which consent may be granted or withheld in the Company's sole
discretion.
(d) HEADINGS. The headings in this Agreement are for convenience of
reference only, and shall not limit or otherwise affect the meaning thereof.
(e) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware, without regard to the provisions thereof relating to conflict
of laws.
(f) SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
(g) ENTIRE AGREEMENT. This Agreement represents the complete agreement
and understanding of the parties in respect of the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EDWIN M. ELLMAN, SELF DIRECTED
INDIVIDUAL RETIREMENT ACCOUNT #2
BY: Park National Bank, Trustee
By:__________________________
Name:
Title:
CROWN NORTHCORP, INC.
By:__________________________
Name:
Title:
10
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<ARTICLE> 5
<CIK> 0000915338
<NAME> CROWN NORTHCORP, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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<SECURITIES> 0
<RECEIVABLES> 4,090,625
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<CURRENT-ASSETS> 4,406,672
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<BONDS> 1,330,000
<COMMON> 82,500
0
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<OTHER-SE> 3,627,760
<TOTAL-LIABILITY-AND-EQUITY> 8,231,478
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